AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------
VACATION PROPERTIES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7011 52-2055247
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1355-B Lynnfield Road
Suite 245
Memphis, TN 38119
(901) 818-5445
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------
DAVID C. SULLIVAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
VACATION PROPERTIES INTERNATIONAL, INC.
1355-B Lynnfield Road
Suite 245
Memphis, TN 38119
(901) 818-5445
(Name and address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Bruce S. Mendelsohn, Esq. Peter S. Kolevzon, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P. Kramer, Levin, Naftalis & Frankel
1333 New Hampshire Avenue, N.W. 919 Third Avenue
Washington, D.C. 20036 New York, New York 10022
(202) 887-4000 (212) 715-9100
-----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
-----------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (1)(2) FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value
per share ........................ 6,679,584 $ 13.00 $86,834,592 $ 25,616.20
======================================================================================================================
</TABLE>
(1) Includes 871,250 shares that the Underwriters have the right to purchase to
cover over-allotments. See "Underwriting."
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 of Regulation C under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 12, 1998
P R O S P E C T U S
5,808,334 SHARES
[LOGO]
VACATION PROPERTIES INTERNATIONAL, INC.
COMMON STOCK
All of the 5,808,334 shares of Common Stock offered hereby are being
offered by the Company. Prior to this offering (the "Offering"), there has not
been a public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price. Application will be
made to have the Common Stock approved for listing on the New York Stock
Exchange under the symbol "VAC."
SEE "RISK FACTORS" COMMENCING ON PAGE 11 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- --------------------------------------------------------------------------------
Total (3) $ $ $
================================================================================
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting".
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to
purchase up to 871,250 additional shares of Common Stock solely to
cover over-allotments, if any. See "Underwriting." If the Underwriters
exercise such option in full, the Price to Public will total $ , the
Underwriting Discount will total $ and the Proceeds to Company will
total $ .
The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if accepted by them and subject to
certain conditions. It is expected that certificates for the shares of Common
Stock offered hereby will be available for delivery on or about , 1998 at the
office of Smith Barney Inc., 333 West 34th Street, New York, New York 10001.
------------
SALOMON SMITH BARNEY NATIONSBANC MONTGOMERY
SECURITIES LLC
FURMAN SELZ
, 1998
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
[PICTURES/GRAPHICS TO COME]
Aston(Reg. TM) and Aston Hotels & Resorts(Reg. TM) are registered tradenames and
trademarks of Aston Brands, LLC.
------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. SUCH
ACTIVITIES, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
Simultaneously with and as a condition to the closing of the Offering,
Vacation Properties International, Inc. will acquire, in separate combination
transactions (the "Combinations") in exchange for cash and shares of Common
Stock, all of the common stock and ownership interests of 13 vacation rental and
property management companies and one vacation rental and property management
software company (each, a "Founding Company" and, collectively, the "Founding
Companies"). Unless otherwise indicated, all references to the "Company" herein
include Vacation Properties International, Inc. and the Founding Companies, and
references to "VPI" mean Vacation Properties International, Inc. prior to the
closing of the Combinations. For more information about the Combinations, see
"Certain Transactions."
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and related notes thereto appearing elsewhere in this Prospectus. Unless
otherwise indicated, all share, per share and financial information in this
Prospectus: (i) has been adjusted to give effect to the Combinations and a
8,834.76-for-one stock split effected on March 9, 1998; (ii) assumes an initial
public offering price of $12.00 per share; and (iii) assumes no exercise of the
Underwriters' over-allotment option. See "Description of Capital Stock."
THE COMPANY
Upon consummation of the Offering, the Company will be the first national
provider of vacation condominium and home rentals in premier destination resorts
throughout the United States. Through the consolidation of leading vacation
rental and property management companies, the development of a national brand
and marketing initiative and best practices management systems, the Company
intends to offer vacationers a branded network of high quality, fully furnished,
privately-owned condominium and home rentals while offering property owners
superior management services designed to enhance their rental income. Currently,
most vacationers seeking to rent a condominium or home at a popular destination
resort must use a local vacation rental and property management firm to inquire
about availability and make reservations. Vacationers typically make rental
choices with limited information and, as a result, face great uncertainty
concerning the quality of their rental. To address this need, the Company
intends to provide vacationers with consistent quality and service, increased
information and easy access to a broad array of high quality condominium and
home rentals in premier destination resorts.
Upon consummation of the Offering, the Company will acquire the 14 Founding
Companies which manage approximately 9,200 condominiums and homes nationwide and
in Canada. These condominiums and homes are located in beach and island resorts
such as the Hawaiian Islands; Bethany Beach, DE; Nantucket, MA; the Outer Banks,
NC; Sanibel and Captiva Islands, FL; and St. Simons Island, GA; and mountain
resorts such as Aspen, Breckenridge and Telluride, CO; Park City, UT, and
Whistler, B.C. The Company also manages five hotels aggregating approximately
1,650 hotel rooms located primarily in the Hawaiian Islands.
The Company provides a wide range of services to both vacationers and
property owners. Because of the variety of the Company's resort locations
throughout the United States and Canada and the diversity of rental prices
throughout its rental pool, the Company is able to target a broad range of
vacationers, including families, couples and individuals. For vacationers, the
Company offers the convenience and accommodations of a condominium or home,
while providing many of the amenities and services of a hotel, generally at a
lower cost per person. Vacation condominium and home rentals generally offer
greater space and convenience than resort hotel rooms, including separate
living, sleeping and eating quarters. As a result, vacationers generally have
more privacy and greater flexibility in a vacation condominium or home. The
Company typically offers such services as convenient check-in and check-out,
frequent housekeeping and cleaning and emergency maintenance assistance. In
addition, in most of its markets, the Company provides specialized
3
<PAGE>
concierge-type services such as arranging golf tee times, purchasing ski lift
tickets and making restaurant reservations. For property owners, the Company
offers a comprehensive set of services, including marketing and rental services,
maintenance and security. The Company's primary source of revenue is property
rental fees, which are charged to the property owners as a percentage of the
vacationers' total rental price. Fee percentages for vacation condominiums and
homes range from approximately 3% to over 40% of rental rates for the various
Founding Companies depending on the type of services provided to the property
owner and the type of rental unit managed. On a pro forma basis for the year
ended December 31, 1997, the Company recognized $34.1 million of revenues from
property rental fees representing approximately 56% of the Company's total
revenue. In addition, in many markets, the Company provides traditional real
estate brokerage services for property owners seeking to sell their condominiums
and homes. The Company believes that a national brand and superior management
services, which are designed to enhance rental income for property owners, will
provide it with a competitive advantage in attracting additional high quality
condominiums and homes in its markets.
The vacation rental and property management industry is highly fragmented
and inefficient, with an estimated 3,000 vacation rental and property management
companies in the United States. Presently, most vacation rental condominiums and
homes are managed by and booked through local vacation rental and property
management firms, whose principal means of attracting property owners and
vacationers is by referral, word of mouth, limited local advertising and direct
mailings. The Company believes this presents a significant market penetration
opportunity for a well-capitalized company offering a large, national network of
high quality vacation condominiums and homes. The Company's objective is to
enhance its position as the leading national provider of premier destination
resort condominium and home rentals by:
o NATIONAL BRAND. Developing a national brand based on offering
vacationers a national network of high quality condominiums and homes
in premier destination resorts throughout the United States;
o SUPERIOR CUSTOMER SERVICE. Offering vacationers superior customer
service with the convenience and accommodations of a condominium or
home as well as many of the amenities and services of a hotel;
o INCREASED RENTAL INCOME. Enhancing value for condominium and home
owners with strategies designed to increase occupancy and rental rates
resulting in increased rental income;
o MANAGEMENT'S EXPERIENCE. Relying on the industry experience of its
senior management including three members who worked together at
Promus Hotel Corporation, one of whom David Sullivan, the Chairman and
Chief Executive Officer of the Company, was the former Chief Operating
Officer of Promus Hotel Corporation, as well as Michael Murphy, Senior
Vice President of Development of the Company, who has over 20 years
experience in the hotel and resort industries; and
o LOCAL EXPERTISE. Maintaining the local relationships and expertise of
the management teams of the Founding Companies, each of which has
extensive experience in their respective resort areas.
Management teams already in place from all of the Founding Companies will
become employees of the Company, bringing valuable industry relationships and
providing local market knowledge in each market in which the Company will
operate. The Founding Companies have an average of over 17 years of experience
in the industry. Additionally, officers and directors of the Company and the
former owners of the Founding Companies, and their respective affiliates will
own approximately 62% of the Common Stock of the Company upon completion of the
Offering.
4
<PAGE>
The Company believes it can achieve significant growth internally and
through an active acquisition program. The primary elements of the Company's
internal growth strategy include:
o NATIONAL MARKETING STRATEGY. Implementing a national marketing
strategy emphasizing; (i) cross-selling to existing customers, (ii)
bringing in new customers and (iii) increasing the use of marketing
channels such as the world wide web, travel agents and national print
media, which are difficult for local vacation rental and property
management companies to use in a cost-effective manner;
o CAPITALIZE ON TECHNOLOGY. Capitalizing on technology by utilizing the
technological expertise of First Resort Software, a Founding Company,
to create a comprehensive web site that includes all of the Company's
condominium, home and hotel rentals through which vacationers can
ultimately view photographs and detailed floor plans of the Company's
rental properties and homes and make reservations and payments;
o GROWTH WITHIN EXISTING MARKETS. Expanding its market share of
condominium, home and hotel room rentals in existing markets; and
o PROFIT MARGIN EXPANSION. Pursuing opportunities for profit margin
expansion via cost synergies and additional revenue sources including
the implementation of best practices achieved by tapping the industry
experience of the management teams in each of the Founding Companies.
The Company also intends to build a national market presence through
strategic acquisitions. The vacation rental and property management industry is
highly fragmented, which the Company believes provides significant opportunities
for consolidation. While the Company will seek to acquire the leading companies
in each new market, the Company also plans to pursue tuck-in acquisitions
through which it can expand its selection of condominiums and homes available
for rent in its existing markets. Many acquisition candidates utilize First
Resort's software, which the Company believes will enhance its ability to
integrate such companies upon acquisition. The Company believes that the
opportunity to join with VPI will be attractive to many vacation rental and
property management companies. The Company expects to offer acquisition
candidates: (i) affiliation with a national brand; (ii) the ability to
cross-sell to customers of other vacation rental and property management
companies; (iii) the ability to increase liquidity as a result of the Company's
financial strength as a public company; and (iv) the ability to increase
profitability as a result of the Company's centralization of certain
administrative functions and other economies of scale.
The Company intends to finance its acquisitions through internally
generated cash flow, borrowing from its credit facility and in certain instances
through the issuance of Common Stock. The Company intends to obtain a revolving
credit facility, under which capital will be available to pursue acquisitions.
The Company's executive offices are located at 1355-B Lynnfield Road, Suite
245, Memphis, Tennessee 38119, and its telephone number is (901) 818-5445.
5
<PAGE>
THE OFFERING
COMMON STOCK OFFERED BY THE
COMPANY................. 5,808,334 shares (1)
COMMON STOCK TO BE OUTSTAND
ING AFTER THE OFFERING 15,116,667 shares (2)
USE OF PROCEEDS.......... To pay the cash portion of the purchase price for
the Founding Companies and to repay debt assumed
in the Combinations. See "Use of Proceeds."
PROPOSED NEW YORK STOCK EX-
CHANGE SYMBOL........... VAC
- -----------
(1) Does not include up to 871,250 shares of Common Stock subject to
over-allotment options granted to the Underwriters. See "Underwriting."
(2) Excludes 1,814,000 shares of Common Stock reserved for issuance pursuant to
the Company's 1998 Long-Term Incentive Plan, of which options to purchase
1,595,000 shares will be granted by the Company concurrently with the
Offering at an exercise price equal to the initial public offering price
per share.
6
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
VPI will acquire the Founding Companies simultaneously with and as a
condition to the consummation of the Offering. For financial statement
presentation purposes, however, Hotel Corporation of the Pacific, Inc., known
primarily by its trade name, Aston Hotels & Resorts ("Aston Hotels & Resorts"),
one of the Founding Companies, has been designated as the "accounting acquiror."
The following summary unaudited pro forma combined financial data present
certain data for the Company as adjusted for: (i) the effects of the
Combinations on a historical basis; (ii) the effects of certain pro forma
adjustments to the historical financial statements; and (iii) the consummation
of the Offering and the application of the net proceeds therefrom. See the
Unaudited Pro Forma Combined Financial Statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA (1):
Revenues:
Property rental fees ............................................... $ 34,145
Service fees ....................................................... 12,856
Other .............................................................. 13,842
-----------
60,843
Operating expenses (2) .............................................. 30,438
-----------
Gross profit ........................................................ 30,405
General and administrative expenses (2) ............................. 13,136
Depreciation and amortization (3) ................................... 3,485
-----------
Income from operations .............................................. 13,784
Interest and other income, net ...................................... 246
-----------
Income before income taxes .......................................... 14,030
Provision for income taxes .......................................... 6,541
-----------
Net income .......................................................... $ 7,489
===========
Net income per share ................................................ $ 0.50
===========
Shares used in computing pro forma net income per share (4) ......... 15,116,667
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------
PRO FORMA AS
COMBINED (5) ADJUSTED (6)
-------------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital surplus
deficit (7) ....................... $ (60,567) $ 1,254
Total assets (8) .................... 115,504 115,504
Long-term debt ...................... 219 219
Stockholders' equity ................ 18,394 80,215
</TABLE>
- -----------
(1) The pro forma combined statement of operations data assume that the
Combinations and the Offering were consummated on January 1, 1997 and are
not necessarily indicative of the results the Company would have obtained
had these events actually then occurred or of the Company's future results.
During the period presented above, the Founding Companies were not under
common control or management and, therefore, the data presented may not be
comparable to or indicative of post-combination results to be achieved by
the Company. The pro forma combined statement of operations data are based
on preliminary estimates, available information and certain assumptions that
management deems appropriate and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus. Following the Combinations, the Company expects to realize
certain savings as a result of (i) volume purchasing and national contracts
for telecommunications, credit card fees, advertising, printing,
housekeeping supplies and other operating expenses and (ii) consolidation of
insurance, employee benefits and other general and administrative expenses.
The Company cannot quantify these savings accurately at this time. It is
anticipated that these savings will be substantially offset by the costs of
being a publicly traded company and the incremental costs related to the
Company's new management team. However, these costs, like the savings that
they offset, cannot be quantified accurately. Neither these anticipated
savings nor these anticipated costs have been included in the pro forma
combined financial information of the Company.
7
<PAGE>
(2) The pro forma combined statement of operations data include pro forma
reductions in salary, bonuses and benefits to the owners and certain key
employees of the Founding Companies to which they have agreed prospectively
(the "Compensation Differential") and excludes the effects of the exclusion
of certain non-operating assets and the assumption or retirement of certain
liabilities that will be retained by certain stockholders of the Founding
Companies. For the year ended December 31, 1997, the Compensation
Differential was approximately $2.6 million.
(3) Reflects amortization of the goodwill (which is not deductible for tax
purposes) to be recorded as a result of the Combinations over a 40-year
period for each of the Founding Companies other than First Resort, which
will be amortized over a 15-year period, and computed on the basis described
in the Notes to the Unaudited Pro Forma Combined Financial Statements.
(4) Includes (i) 6,173,703 shares to be issued to owners of the Founding
Companies; (ii) 3,134,630 shares issued to the management and founders of
VPI; and (iii) 5,808,334 shares representing the number of shares sold in
the Offering necessary to pay the cash portion of the consideration for the
Combinations, to repay debt assumed in the Combinations and to pay the
estimated underwriting discount and other Offering expenses. Excludes
options to purchase 1,595,000 shares to be issued concurrently with the
Offering at an exercise price equal to the initial public offering price.
See "Certain Transactions."
(5) The pro forma combined balance sheet data assume that the Combinations were
consummated on December 31, 1997. The pro forma combined balance sheet data
are based upon preliminary estimates, available information and certain
assumptions that management deems appropriate and should be read in
conjunction with the other financial statements and notes thereto included
elsewhere in this Prospectus.
(6) Adjusted for the sale of 5,808,334 shares of Common Stock offered hereby
(less estimated underwriting discount and offering expenses) and the
application of the net proceeds therefrom.
(7) Includes the cash portion of the consideration to be paid to the Founding
Companies and the amount of debt to be repaid from the net proceeds of the
Offering of $61.8 million and approximately $4.4 million representing
certain working capital adjustments from certain stockholders of the
Founding Companies in connection with the Combinations.
(8) Reflects (i) the creation of approximately $72.0 million of goodwill in
connection with the Combinations and (ii) a reduction of net assets of
approximately $10.7 million, including certain non-operating assets and the
assumption or retirement of certain liabilities that will be excluded from
the Combinations and retained by certain stockholders of the Founding
Companies.
8
<PAGE>
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
(IN THOUSANDS)
The following table presents summary data for each of the Founding
Companies (see "The Company" for the complete names of each Founding Company) on
a historical basis for the periods indicated. Gross profit and income from
operations for the Founding Companies for each of the years in the three year
period ended December 31, 1997 do not include adjustments for the Compensation
Differential. See Compensation Differential Table below.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
---------- ------------- ----------
<S> <C> <C> <C>
BEACH AND ISLAND RESORTS
Aston Hotels & Resorts (Hawaii)
Revenues ........................................... $19,048 $19,460 $19,554
Gross profit ....................................... 8,498 9,059 10,646
Income from operations ............................. 3,064 3,485 5,171
Maui Condominium and Home (Hawaii)
Revenues ........................................... $ 910 $1,222 $ 1,422
Gross profit ....................................... 560 864 1,056
Income from operations ............................. 29 45 77
Brindley & Brindley (Outer Banks, NC)
Revenues ........................................... $ 2,443 $2,950 $ 4,021
Gross profit ....................................... 138 342 993
Income (loss) from operations ...................... (322) 90 511
Coastal Resorts (Bethany Beach, DE)
Revenues ........................................... $ 1,902 $1,917 $ 3,615
Gross profit ....................................... 865 1,080 1,827
Income from operations ............................. 450 603 1,183
The Maury People (Nantucket, MA)
Revenues ........................................... $ 926 $ 988 $ 1,183
Gross profit ....................................... 758 801 972
Income from operations ............................. 362 135 290
Priscilla Murphy Realty (Sanibel and Captiva Islands,
FL)
Revenues ........................................... $ 4,316 $4,721 $ 4,740
Gross profit ....................................... 2,997 3,407 3,556
Income from operations ............................. 740 1,282 1,690
Trupp-Hodnett Enterprises (St. Simons Island, GA)
Revenues ........................................... $ 3,377 $3,431 $ 4,061
Gross profit ....................................... 1,742 1,779 2,223
Income from operations ............................. 45 126 199
MOUNTAIN RESORTS
Collection of Fine Properties (Breckenridge, CO)
Revenues ........................................... $ 3,500 $4,141 $ 4,303
Gross profit ....................................... 879 1,364 1,473
Income (loss) from operations ...................... (44) 416 580
Houston and O'Leary (Aspen, CO)
Revenues ........................................... $ 837 $ 829 $ 1,596
Gross profit ....................................... 387 220 1,102
Income (loss) from operations ...................... 97 (7) 780
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
------------ --------- ---------
<S> <C> <C> <C>
Jupiter Property Management (Park City, UT)
Revenues ..................................... $1,406 $3,143 $3,986
Gross profit (loss) .......................... (190) 892 1,385
Income (loss) from operations ................ (569) (435) (449)
Resort Property Management (Park City, UT)(1)
Revenues ..................................... $1,355 $1,630 $2,295
Gross profit ................................. 561 596 735
Income (loss) from operations ................ (3) 20 108
Telluride Resort Accommodations (Telluride, CO)
Revenues ..................................... $4,621 $4,750 $4,313
Gross profit ................................. 2,436 1,334 1,276
Income from operations ....................... 528 340 246
Whistler Chalets (Whister, BC, Canada)
Revenues ..................................... $2,925 $2,122 $2,098
Gross profit ................................. 1,083 652 670
Income from operations ....................... 40 227 238
SOFTWARE SALES AND SERVICES
First Resort (Aspen, CO)
Revenues ..................................... $2,207 $2,462 $2,864
Gross profit ................................. 780 986 1,160
Income from operations ....................... 377 467 743
</TABLE>
COMPENSATION DIFFERENTIAL
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
--------- ---------- ---------
<S> <C> <C> <C>
Aston Hotels & Resorts .................. $ 380 $ 282 $ 282
Maui Condominium & Home ................. 240 245 284
Brindley & Brindley ..................... 39 37 69
Coastal Resorts ......................... -- -- --
The Maury People ........................ 30 129 142
Priscilla Murphy Realty ................. 250 320 31
Trupp-Hodnett Enterprises ............... 954 850 1,143
Collection of Fine Properties ........... 64 74 94
Houston and O'Leary ..................... 160 178 58
Jupiter Property Management ............. 140 294 298
Resort Property Management(1) ........... 46 149 186
Telluride Resort Accommodations ......... 30 -- --
Whistler Chalets ........................ 33 34 35
First Resort ............................ 76 (53) (42)
------ ------ ------
$2,442 $2,539 $2,580
====== ====== ======
</TABLE>
- -----------
(1) Fiscal years presented are for the periods ending September 30, 1995, 1996
and 1997.
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RISK FACTORS
An investment in the shares of Common Stock offered by this Prospectus
involves a high degree of risk. In addition to the other information in this
Prospectus, the following risk factors should be considered carefully in
evaluating an investment in the Common Stock. This Prospectus contains certain
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of certain of the factors set forth in
the following risk factors and elsewhere in this Prospectus.
ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATION
VPI was founded in September 1997 but has conducted no operations and
generated no revenues to date. VPI has entered into agreements to acquire the
Founding Companies simultaneously with and as a condition to the closing of the
Offering. Prior to the closing of the Offering, each of the Founding Companies
has operated as separate independent entities. Currently, the Company has no
centralized financial reporting system and will initially rely on the existing
reporting systems of the Founding Companies. The pro forma combined financial
statements of the Founding Companies cover periods when the Founding Companies
and VPI were not under common control or management and, therefore, may not be
indicative of the Company's future financial or operating results. The Company's
senior management group has been assembled only recently, and there can be no
assurance that the management group will be able to integrate and manage
effectively the combined entity or effectively implement the Company's operating
and growth strategies. The inability of the Company to integrate successfully
the Founding Companies would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Business Strategy" and "-- Growth Strategy."
The Founding Companies offer a variety of different services to property
owners and vacationers, use different sales and marketing techniques to attract
new customers, utilize different fee structures and target different customer
segments. In addition, almost all of the Founding Companies operate in different
geographic markets with varying levels of competition, development plans and
local market dynamics. These differences increase the risk inherent in
successfully completing the integration of the Founding Companies.
RISKS ASSOCIATED WITH THE VACATION RENTAL AND PROPERTY MANAGEMENT INDUSTRY;
GENERAL ECONOMIC CONDITIONS
The Company's business, financial condition and results of operations will
be dependent upon various factors affecting the vacation rental and property
management industry. Adverse factors such as a reduction in demand for vacation
properties, particularly for beach and mountain resort properties, changes in
travel and vacation patterns, changes in governmental regulations or the tax
treatment of second homes and an oversupply of vacation properties could have a
material adverse effect on the Company's business, financial condition and
results of operations. Any downturn in the leisure travel and tourism industry
resulting from factors such as gasoline or airfare price increases, general
economic activities and inflation or deflation also could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, all of the Company's rental properties are located in
destination resort communities which are attractive to vacationers primarily for
their outdoor recreational opportunities. As a result, adverse weather
conditions or natural disasters, such as hurricanes, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The business of the Company is highly seasonal. The results of operations
of each of the Founding Companies have been subject to quarterly fluctuations
caused primarily by the seasonal variations in the vacation rental and property
management industry, with peak seasons dependent on whether the resort is
primarily a summer or winter destination. During 1997, the Company derived
approximately 43% of
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its gross profit in the first quarter and 23% of its gross profit in the third
quarter. Although the seasonality of the Company's revenues and earnings may be
partially mitigated by the geographic diversity of the Founding Companies and
companies that may be acquired in the future, there is likely to continue to be
a significant seasonal factor with respect to the Company's revenues and
earnings. The Company's quarterly results of operations may also be subject to
fluctuations as a result of the timing and cost of acquisitions, the timing of
real estate sales, changes in relationships with travel providers, extreme
weather conditions or other factors affecting leisure travel and the vacation
rental and property management industry. Unexpected variations in quarterly
results could also adversely affect the price of the Common Stock which in turn
could adversely effect the Company's proposed acquisition strategy. See
"Management's Discussion of Financial Condition and Results of Operations."
DEPENDENCE ON THIRD PARTIES
The properties managed by the Company are generally located in destination
resorts in which the development of new homes and condominiums, as well as
resort amenities such as golf courses and chair lifts, is dependent upon third
parties. As a result, the failure of such third parties to continue such
development or invest in resort facilities and amenities could have a material
adverse effect on the rental value of the Company's properties and,
consequently, on the Company's business, financial condition and results of
operations.
The Company also is dependent on travel agents, package tour providers and
wholesalers for a significant portion of its revenues. The Company estimates
that approximately 46% of its combined revenues for 1997 were derived from sales
made through or to travel agents, package tour providers and wholesalers. The
failure of travel agents, package tour and wholesalers providers to continue to
recommend or package the Company's vacation properties could have a material
adverse effect on the Company's business, financial condition and results of
operations.
FACTORS AFFECTING INTERNAL GROWTH
The Founding Companies have experienced revenue and earnings growth on a
pro forma combined basis over the past few years. There can be no assurance that
the Company will continue to experience internal growth comparable to these
levels, if at all. Factors affecting the ability of the Company to continue to
experience internal growth include, but are not limited to, the ability to
maintain existing relationships with property owners, expand the number of
properties under management and cross-sell among the Founding Companies, as well
as continued demand for such rentals. See "Business -- Business Strategy" and
"-- Growth Strategy."
RISKS OF GEOGRAPHIC CONCENTRATION OF OPERATIONS
Two of the Founding Companies manage properties at Hawaiian beach resorts,
and five of the Founding Companies manage properties at mountain resorts in
Colorado and Utah. For 1997, the Company derived approximately 35% of its
combined revenues from such Founding Companies located in Hawaii and
approximately 27% of its combined revenues from such Founding Companies located
in Colorado and Utah. Adverse events or conditions which affect those areas in
particular, such as economic recession, changes in regional travel patterns,
extreme weather conditions or natural disasters, would have a more significant
adverse effect on the operations of the Company, than if the Company's
operations were more geographically diverse.
RISKS ASSOCIATED WITH ACQUISITIONS
The Company intends to expand the markets it serves and increase the number
of properties it manages, in part through the acquisition of additional vacation
rental and property management companies. There can be no assurance that the
Company will be able to identify, acquire or profitably manage additional
businesses or successfully integrate acquired businesses into the Company
without substantial costs, delays or other operational or financial problems.
Increased competition for acquisition candidates may develop, in which event
there may be fewer acquisition opportunities available to the
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<PAGE>
Company, as well as higher acquisition prices. Further, acquisitions involve a
number of special risks, including the failure of acquired companies to achieve
anticipated results, diversion of management's attention, failure to retain key
personnel, risks associated with unanticipated events or liabilities and
amortization of acquired intangible assets, some or all of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Growth Strategy."
The Company intends to use shares of Common Stock to finance a substantial
portion of the consideration for future acquisitions. In the event that the
Common Stock does not maintain a sufficient market value, or potential
acquisition candidates are otherwise unwilling to accept shares of Common Stock
as part of the consideration for the sale of their businesses, the Company may
be required to utilize more of its cash resources, if available, in order to
implement its acquisition strategy. If the Company has insufficient cash
resources, its growth could be limited unless it is able to obtain additional
capital through debt or equity financings. Although the Company intends to
obtain a revolving credit facility, there can be no assurance that the Company
will be able to obtain this credit facility, or other financing it may need, on
terms it deems acceptable. If the Company is unable to obtain financing
sufficient for all of its desired acquisitions, it may be unable to implement
fully its acquisition strategy. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
MANAGEMENT OF GROWTH
The Company expects to grow internally and through acquisitions. The
Company expects to expend significant time and effort in expanding existing
businesses and in identifying, completing and integrating acquisitions. There
can be no assurance that the Company's systems, procedures and controls will be
adequate to support the Company's operations as they expand. Any future growth
also will impose significant added responsibilities on members of senior
management, including the need to identify, recruit and integrate new managers
and executives. There can be no assurance that such additional management will
be identified and retained by the Company. To the extent that the Company is
unable to manage its growth efficiently and effectively, or is unable to attract
and retain additional qualified management, the Company's business, financial
condition and results of operations could be materially adversely effected. See
"Business -- Business Strategy" and "Management."
RELIANCE ON KEY PERSONNEL
The Company's operations are dependent on the efforts and relationships of
David C. Sullivan, its Chairman and Chief Executive Officer, the other executive
officers of the Company and the senior management of the Founding Companies.
Furthermore, the Company will likely be dependent on the senior management of
any businesses acquired in the future. If any of these persons becomes unable to
continue in his or her role with the Company, or if the Company is unable to
attract and retain other qualified employees, the Company's business, financial
condition and results of operations could be materially adversely effected.
Although the Company or an individual Founding Company intends to enter into
employment agreements with and provide incentives intended to retain key
personnel, there can be no assurance that any individual will continue in his or
her present capacity with the Company or such Founding Company for any
particular period of time. See "Management."
SHORT TERM RENTAL AND PROPERTY MANAGEMENT CONTRACTS
The Company provides its rental and property management services to
property owners pursuant to management contracts which generally have one year
terms. The majority of such contracts contain automatic renewal provisions but
also allow property owners to terminate the contract at any time. In addition,
although most of the Company's contracts are exclusives, in certain geographic
markets, industry standards dictate that rental services be provided on a
non-exclusive basis. Non-renewal of a significant number of management contracts
or the inability of the Company to attract additional property owners would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Services Offered to Condominium and Home
Owners."
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<PAGE>
RISKS ASSOCIATED WITH HOMEOWNERS' ASSOCIATION MANAGEMENT CONTRACTS
The Company currently provides homeowners' association management services
at numerous condominium developments pursuant to contracts with the homeowners'
association present at such developments. The Company frequently provides rental
management services for a significant percentage of the condominiums within such
developments. Providing management services for homeowners' associations
frequently enables the Company to manage and control the front desk operations,
laundry facilities and other related services of the condominium developments.
Controlling these services often gives the Company a competitive advantage over
other vacation rental and property management companies in retaining the
condominiums it currently manages and in attracting new property owners. There
can be no assurance that a homeowners' association will not terminate its
management agreement with the Company. Termination of a management agreement by
a homeowners' association could result in the Company losing the control or
management of the front desk and related services, thereby eliminating its
competitive advantage and also possibly causing a reduction in the number of
properties under management and an increase in the expenses required to retain
and maintain the condominiums it manages at that site. Any such termination
could have a material adverse effect on the Company's business, financial
condition and results of operations.
COMPETITION
The vacation rental and property management industry is highly competitive
and has low barriers to entry. The industry has two distinct customer groups:
vacation property renters and vacation property owners. The Company competes for
vacationers and property owners primarily with local vacation rental and
property management companies located in the Company's markets. Some of these
competitors are affiliated with the owners or operators of resorts in which such
competitor provides its services. Certain of these competitors may have lower
cost structures and may be able to provide their services at lower rates. The
Company also competes for vacationers with large hotel and resort companies.
Many of these competitors are large companies with greater financial resources
than the Company, enabling them to finance acquisition and development
opportunities, pay higher prices for the same opportunities or develop and
support their own operations. In addition, many of these companies can offer
vacationers services not provided by vacation rental and property management
companies, and they may have greater name recognition among vacationers. If such
companies chose to compete in the vacation rental and property management
industry, such competition could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Competition."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the completion of the Combinations and the Offering, the
executive officers and directors of the Company, the founders of VPI and the
former stockholders of the Founding Companies and entities affiliated with them
will beneficially own approximately 62% of the outstanding shares of Common
Stock (approximately 58% if the Underwriters' over-allotment option is exercised
in full). These persons, if acting in concert, will be able to exercise control
over the Company's affairs, to elect the entire Board of Directors and to
control the disposition of any matter submitted to a vote of stockholders. See
"Principal Stockholders" and "Description of Capital Stock -- Common Stock and
Restricted Common Stock."
PORTION OF REVENUES DERIVED FROM REAL ESTATE SALES
Approximately 11% of the Company's revenues for 1997 on a combined basis
were derived from net real estate brokerage commissions. Any factors which
adversely affect real estate sales such as a downturn in general economic
conditions or changes in interest rates, the tax treatment of second homes or
property values could have a material adverse effect on the Company's business,
financial condition and results of operations.
GOVERNMENT REGULATION OF VACATION RENTAL AND PROPERTY MANAGEMENT INDUSTRY
The Company's operations are subject to various federal, state and local
laws and regulations, including (i) licensing requirements applicable to real
estate operations, (ii) laws and regulations relating to consumer protection and
(iii) local ordinances. Many states have adopted specific laws and regula-
14
<PAGE>
tions which regulate the Company's activities, such as real estate and travel
services provider license requirements; anti-fraud laws; telemarketing laws;
environmental laws; and labor laws. The Company believes that it is in material
compliance with all federal, state, local and foreign laws and regulations to
which it is currently subject. However, no assurance can be given that the cost
of qualifying under applicable regulations in all jurisdictions in which the
Company desires to conduct business will not be significant or that the Company
is in fact in compliance with all applicable federal, state, local and foreign
laws and regulations. Any substantial changes to existing laws and regulations
and/or failure to comply with applicable laws or regulations could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Governmental Regulation."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
The market price of the Common Stock may be adversely affected by the sale,
or availability for sale, of substantial amounts of Common Stock in the public
market following the Offering. The 5,808,334 shares of Common Stock being sold
in the Offering will be freely tradable unless acquired by affiliates of the
Company.
Upon the completion of the Offering, the holders of Common Stock who did
not purchase shares in the Offering will own 9,308,333 shares of Common Stock,
including (i) the stockholders of the Founding Companies who will receive, in
the aggregate, 6,173,703 shares in connection with the Combinations and (ii)
management and founders of VPI who own 3,134,630 shares. These shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and, therefore, may not be sold unless registered under the Securities
Act or sold pursuant to an exemption from registration, such as the exemption
provided by Rule 144. Furthermore, the stockholders who will receive these
shares have agreed with the Company not to sell, transfer or otherwise dispose
of any of these shares for one year following the closing of the Offering.
However, the stockholders who will receive these shares also have certain demand
and piggyback registration rights with respect to these shares.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock, or any securities convertible into or
exercisable or exchangeable for Common Stock, for a period of 180 days after the
date of this Prospectus without the prior written consent of Smith Barney Inc.
on behalf of the Underwriters. The holders of all shares outstanding prior to
the Offering and the stockholders of the Founding Companies who will receive
shares of Common Stock in exchange for their stock in the Founding Companies
have agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of one year from the date of this
Prospectus without the prior written consent of Smith Barney Inc. on behalf of
the Underwriters. The foregoing restrictions will not apply: (i) in the case of
the Company, to options or shares of Common Stock issued pursuant to the
Company's 1998 Long-Term Incentive Plan or in connection with acquisitions and
(ii) in the case of all holders shares of Common Stock disposed of as bona fide
gifts, subject in each case to any remaining portion of the one year or 180-day
period, as applicable to any shares so issued or transferred.
The Company plans to register an additional 3,000,000 shares of Common
Stock under the Securities Act after completion of the Offering for use by the
Company as consideration for future acquisitions. Upon such registration, these
shares will generally be freely tradable after issuance, unless the resale
thereof is contractually restricted or unless the holders thereof are subject to
the restrictions on resale provided in Rule 145 under the Securities Act. The
Company intends to contractually restrict the resale of these shares in
connection with future acquisitions accounted for using the purchase method of
accounting. The piggyback registration rights described above will not apply to
the registration statement to be filed with respect to these 3,000,000 shares.
See "Shares Eligible for Future Sale" and "Underwriting."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop and
continue subsequent to the Offering or that the market price of the Common Stock
will not decline below the initial public offering price. The initial
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<PAGE>
public offering price for the Common Stock will be determined by negotiation
between the Company and the representatives of the Underwriters and may bear no
relationship to the price at which the Common Stock will trade after the
Offering. See "Underwriting" for the factors to be considered in determining the
initial public offering price. After the Offering, the market price of the
Common Stock may be subject to significant fluctuations in response to numerous
factors, including variations in the annual or quarterly financial results of
the Company or its competitors, changes by financial research analysts in their
estimates of the earnings of the Company or the failure of the Company to meet
such estimates, conditions in the economy in general or in the vacation rental
and property management or leisure travel and tourism industries in particular,
unfavorable publicity or changes in applicable laws and regulations (or judicial
or administrative interpretations thereof) affecting the Company or the vacation
rental and property management industry. Moreover, from time to time, the stock
market experiences significant price and volume volatility that may affect the
market price of the Common Stock for reasons unrelated to the Company's
performance.
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the pro forma net tangible book value of
their shares of $ per share. In the event the Company issues additional Common
Stock in the future, including shares issued in connection with future
acquisitions, purchasers of Common Stock in the Offering may experience further
dilution. See "Dilution."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS
The Board of Directors of the Company is empowered to issue preferred stock
in one or more series without stockholder action. The existence of this
"blank-check" preferred stock could render more difficult or discourage an
attempt to obtain control of the Company by means of a tender offer, merger,
proxy contest or otherwise. Certain provisions of the General Corporation Law of
the State of Delaware (the "DGCL") may also discourage takeover attempts that
have not been approved by the Board of Directors. The Company's By-Laws contain
other provisions that may have an anti-takeover effect. See "Management --
Directors and Executive Officers" and "Description of Capital Stock."
FORWARD-LOOKING STATEMENTS
There are a number of statements in this Prospectus that address
activities, events or developments which the Company expects or anticipates will
or may occur in the future, including such matters as the Company's strategy for
internal growth and improved profitability, additional capital expenditures
(including the amount and nature thereof), acquisitions of assets and
businesses, industry trends and other such matters. These statements are based
on certain assumptions and analyses made by the Company in light of its
perception of historical trends, current business and economic conditions and
expected future development as well as other factors it believes are reasonable
or appropriate. However, whether actual results and developments will conform
with the Company's expectations and predictions is subject to a number of risks
and uncertainties, including the risk factors discussed in this Prospectus;
general economic, market or business conditions; the business opportunities (or
lack thereof) that may be presented to and pursued by the Company; changes in
laws or regulations and other factors, most of which are beyond the control of
the Company. Consequently, there can be no assurance that the actual results or
developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the Company or its business or operations.
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THE COMPANY
The Company will be the first national provider of vacation condominium and
home rentals at premier destination resorts throughout the United States.
Through the consolidation of leading vacation rental and property management
companies, the development of a national brand and marketing initiative and best
practices management systems, the Company intends to offer vacationers a branded
network of high quality, fully furnished, privately-owned condominium and home
rentals, while offering property owners superior management services designed to
enhance their rental income. Although it has conducted no operations to date,
the Company has entered into agreements to acquire, simultaneously with the
closing of the Offering, the Founding Companies which managed approximately
11,000 condominiums, homes and hotel rooms in eight states and Canada. The
Company's primary source of revenue is property rental fees, charged as a
percentage of vacationers' total rental price. Fee percentages for vacation
condominiums and homes range from approximately 3% to over 40% of rental prices
for the various Founding Companies depending on the type of services provided to
the property owner and the type of rental unit managed. December 31, 1997, the
Company generated total revenues of approximately $60.8 million which includes
$34.1 million of revenues from property rental fees. The following is a brief
description of each of the Founding Companies. Information presented regarding
the number of rental units is as of January 31, 1998.
BEACH AND ISLAND RESORTS
ASTON HOTELS & RESORTS. Aston Hotels & Resorts, founded in 1967, is the
largest condominium resort management company and one of the largest hotel
providers in the State of Hawaii. At a total of 29 resort properties located
primarily in Waikiki and on the islands of Maui, Hawaii and Kauai, Aston Hotels
& Resorts manages 4,772 rental units, including over 1,500 hotel rooms. Aston
Hotels and Resorts' revenue sources for 1997 were property management and
service fees (84%) and other services (16%). In addition to a wide range of
hotel rooms and hotel-style condominium units in Waikiki, the majority of Aston
Hotels and Resorts' units are resort-based condominium rentals situated near the
beach and offering a broad array of amenities, including pools, spas, tennis
courts and various other outdoor activities. Aston Hotels & Resorts offers a
variety of services, including homeowners' association management, housekeeping
and linen services, activities referrals, general maintenance and accounting
services. Aston Hotels and Resorts' revenues for 1997 were $19.6 million.
MAUI CONDOMINIUM AND HOME. Maui Condominium and Home Realty, Inc. ("Maui
Condominium and Home"), founded in 1988, is a leading provider of beach vacation
property rentals and management services in the Kihei and Wailea beach areas on
the Hawaiian island of Maui. Currently, Maui Condominium and Home manages 432
rental units at 20 different properties. Almost all of Maui Condominium and
Home's units are located in resort-style complexes with swimming pools, hot tubs
and convenient beach access. Maui Condominium and Home's principal revenue
sources for 1997 were property rental fees (90%) and service fees (10%). Maui
Condominium and Home offers a variety of services, including housekeeping
services, accounting services and assistance with refurbishing. Maui Condominium
and Home's revenues for 1997 were $1.4 million.
BRINDLEY & BRINDLEY. Brindley & Brindley Realty and Development, Inc. and
B&B On The Beach Inc. (collectively, "Brindley & Brindley"), founded in 1985, is
a leading provider of beach vacation property rentals, management services and
sales on the Outer Banks of North Carolina. Currently, Brindley & Brindley
manages 446 rental units. Located exclusively in Corolla, North Carolina,
Brindley & Brindley offers large, upscale homes well-suited for multiple or
extended families. Brindley & Brindley's principal revenue sources for 1997 were
property rental and service fees (90%) and net real estate brokerage commissions
(10%). Brindley & Brindley offers a variety of services, including general
maintenance, housekeeping and linen services. In addition to traditional
management services, Brindley & Brindley also offers pool/spa maintenance, small
appliance sales and other unique services to property owners. Brindley &
Brindley's revenues for 1997 were $4.0 million.
COASTAL RESORTS. Coastal Resorts Realty L.L.C. and Coastal Resorts
Management, Inc. (collectively, "Coastal Resorts"), founded in 1982, is a
leading provider of beach vacation property rentals, management services and
sales in the Bethany Beach area of Delaware. Bethany Beach is a popular beach
destination in the Mid-Atlantic region that offers full-scale resort facilities.
Currently, Coastal Resorts manages 549 rental
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units, including ocean side condominiums, townhome communities with resort
facilities and upscale free-standing homes. Coastal Resorts' revenue sources for
1997 were property rental and service fees (35%), net real estate brokerage
commissions (53%) and other (12%). Coastal Resorts offers a variety of services,
including housekeeping and maintenance services, 24 hour security and concierge
services. Coastal Resorts' revenues for 1997 were $3.6 million.
THE MAURY PEOPLE. The Maury People, Inc. ("The Maury People"), whose
predecessor was founded in 1969, is a leading provider of beach vacation
property rentals and sales on the island of Nantucket off the coast of
Massachusetts. Currently, The Maury People provides non-exclusive rental
services for approximately 1,200 rental homes ranging from in-town residences to
cottages and large, upscale ocean and harbor-front homes. The Maury People's
revenue sources for 1997 were net property rental and service fees (30%) and net
real estate brokerage commissions (70%). The Maury People is an exclusive
affiliate of Sotheby's International Realty. The Maury People's revenues for
1997 were $1.2 million.
PRISCILLA MURPHY REALTY. Priscilla Murphy Realty, Inc. and Realty
Consultants Inc. (collectively, "Priscilla Murphy Realty"), founded in 1972, is
a leading provider of beach vacation property rentals, management services and
sales on the Florida islands of Sanibel and Captiva. Currently, Priscilla Murphy
Realty manages 902 rental units. Most of Priscilla Murphy Realty's properties
are condominium units designed to accommodate a wide range of budgets, from
luxury, oceanfront three- and four-bedroom units to more modest single-bedroom
units located a short distance from the beach. Priscilla Murphy Realty's revenue
sources for 1997 were property rental and service fees (69%) and net real estate
brokerage commissions (31%). Priscilla Murphy Realty offers a variety of
services, including general maintenance and subcontracted housekeeping and linen
services. Priscilla Murphy Realty's revenues for 1997 were $4.7 million.
TRUPP-HODNETT ENTERPRISES. Trupp-Hodnett Enterprises, Inc. and THE
Management Company (collectively, "Trupp-Hodnett Enterprises"), founded in 1987,
is the leading provider of beach vacation property rentals, management services
and sales on the island of St. Simons, off the coast of Georgia. St. Simon's
Island is a relatively uncommercial resort community located midway between
Savannah, Georgia and Jacksonville, Florida and connected to the mainland by a
causeway. Currently, Trupp-Hodnett Enterprises manages 435 rental units, ranging
from moderately priced hotel rooms, homes and cottages in a variety of island
locations to spacious, luxurious oceanfront condominium units with on-site
management and access to swimming pools, spas, tennis courts and golf courses.
Trupp-Hodnett Enterprises' principal revenue sources for 1997 were property
rental and service fees (78%) and net real estate brokerage commissions (22%).
Trupp-Hodnett Enterprises offers a variety of services, including homeowner's
association management, guest amenities and general maintenance and
housekeeping. Trupp-Hodnett Enterprises' revenues for 1997 were $4.1 million.
MOUNTAIN RESORTS
COLLECTION OF FINE PROPERTIES. Collection of Fine Properties, Inc. and Ten
Mile Holdings, Ltd. (collectively, "Collection of Fine Properties"), founded in
1985, is a leading provider of vacation property rental and management services
in the mountain resort town of Breckenridge, Colorado. Currently, Collection of
Fine Properties manages 472 rental units. Most of the units are situated in
condominium complexes with front desks and spa facilities and many of them are
situated directly on the slopes with "ski-in ski-out" access. Collection of Fine
Properties' revenue sources for 1997 were property rental and service fees (87%)
and other services (13%). Collection of Fine Properties offers a variety of
services, including association management, general maintenance, housekeeping
and linen services and ski equipment rentals. Collection of Fine Properties'
revenues for 1997 were $4.3 million.
HOUSTON AND O'LEARY. Houston and O'Leary Company ("Houston and O'Leary"),
founded in 1986, is a leading provider of luxury vacation property rentals and
sales in the mountain resort town of Aspen, Colorado. Currently, Houston and
O'Leary provides non-exclusive rental services for 127 rental units. Houston and
O'Leary's rental and sale properties consist primarily of unique, free-standing
houses, ranging from smaller two-bedroom cottages located in Aspen proper to
10,000-plus square foot ranch-style houses overlooking Aspen. Houston and
O'Leary's principal revenue sources for 1997 were real
18
<PAGE>
estate brokerage commissions (73%), property rental fees (19%) and other
services (8%). Houston and O'Leary provides a concierge service which arranges
for a variety of services, including housekeeping and linen services, activities
referrals and general maintenance. Houston and O'Leary's revenues for 1997 were
$1.6 million.
JUPITER PROPERTY MANAGEMENT. Jupiter Property Management at Park City, Inc.
("Jupiter Property Management"), founded in 1976, is a leading provider of
vacation property rentals and management services in the Park City, Utah
mountain resort area. Park City will be the host of many of the premier events
of the 2002 Olympic Winter Games. Currently, Jupiter Property Management manages
306 rental units. While the majority of Jupiter Property Management's units are
condominiums situated in Park City proper, the company also offers a wide
selection of condominium units and luxury, free-standing homes in the upscale
Deer Valley resort area, adjacent to Park City. Jupiter Property Management's
revenue sources for 1997 were property rental and service fees (100%). Jupiter
Property Management offers a variety of services, including homeowners'
association management, housekeeping and linen services and spa maintenance.
Jupiter Property Management's revenues for 1997 were $4.0 million.
RESORT PROPERTY MANAGEMENT. Resort Property Management, Inc. ("Resort
Property Management"), founded in 1978, is a leading provider of vacation
property rentals and management services in the Park City, Utah mountain resort
area. Currently, Resort Property Management manages 326 rental units. Resort
Property Management offers a variety of free-standing homes and condominium
units at various resorts, including Deer Valley, throughout the Park City
region. A majority of Resort Property Management's condominium units are located
in the town of Park City and range from luxury, three-bedroom units in the
historic town center to smaller, more affordable units in older condominium
complexes. Resort Property Management's revenue sources for 1997 were property
rental and service fees (100%). Resort Property Management offers a variety of
services, including general maintenance, housekeeping and linen services and
complimentary firewood. Resort Property Management's revenues for 1997 were $2.3
million.
TELLURIDE RESORT ACCOMMODATIONS. Telluride Resort Accommodations, Inc.
("Telluride Resort Accommodations"), founded in 1985, is a leading provider of
vacation property rentals and property management services in the Telluride,
Colorado mountain resort area. Currently, Telluride Resort Accommodations
manages 447 rental units. Telluride Resort Accommodations' property offerings
range from smaller, one-bedroom units in town to large, luxury condominiums and
free-standing homes in Telluride's new Mountain Village. Telluride Resort
Accommodations' revenue sources for 1997 were property rental and service fees
(100%). Telluride Resort Accommodations offers a variety of services, including
general maintenance and housekeeping and linen services. Telluride Resort
Accommodation's revenues for 1997 were $4.3 million.
WHISTLER CHALETS. Whistler Chalets Ltd. ("Whistler Chalets"), founded in
1986, is a leading provider of vacation property rentals and management services
in the mountain resort village of Whistler, in British Columbia, Canada.
Currently, Whistler Chalets manages 444 rental units. Whistler Chalets offers a
variety of rental properties including condominium lodges, luxury townhomes and
chalets with village, slopeside, golf course and lakefront locations. Whistler
Chalets' revenue sources for 1997 were property rental and service fees (95%)
and other (5%). Whistler Chalets offers a variety of services, including
housekeeping and linen services, general maintenance, accounting services and
payment processing. Whistler Chalets' revenues for 1997 were $2.1 million.
SOFTWARE SALES AND SERVICES
FIRST RESORT. First Resort Software, Inc. ("First Resort"), founded in
1985, is the leading provider of software services to vacation rental and
property management companies. First Resort software allows vacation rental and
property management companies to computerize and link the three key areas of the
vacation rental and property management business: reservations, rental
management and owner accounting. First Resort also offers additional modules and
interfaces, including a work order generator, activities management system,
credit card interface and world wide web enabled reservations. Most purchasers
of First Resort software also enter into annual software service contracts.
Currently, First Resort has more than 650 clients. All First Resort software is
Year 2000 compliant. First Resort's revenue sources for 1997 were software sales
(46%), software service (49%) and other (5%). First Resort's revenues for 1997
were $2.9 million.
19
<PAGE>
THE COMBINATIONS
The aggregate purchase consideration being paid by VPI to acquire the
Founding Companies consists of approximately $61.8 million in cash and
retirement of debt, 6,173,703 shares of Common Stock, and the assumption of
$219,000 in outstanding indebtedness of the Founding Companies. The closing of
each Combination is subject to customary conditions. These conditions include,
among others, the accuracy on the closing date of the Combinations of the
representations and warranties made by the Founding Companies, their principal
stockholders and by the Company; the performance of each of their respective
covenants included in the agreements relating to the Combinations; and the
absence of any material adverse change in the business, financial condition or
results of operations of each Founding Company. No assurance can be given that
the conditions to the closing of all the Combinations will be satisfied or
waived or that each Combination will close. See "Certain Transactions."
The Company's executive offices are located at 1355-B Lynnfield Road, Suite
245, Memphis, TN 38119, and its telephone number is (901) 818-5445.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 5,808,334 shares
of Common Stock offered hereby (after deducting underwriting discounts and
commissions and estimated offering expenses), are estimated to be approximately
$ million ($ million if the Underwriters' over-allotment option is
exercised in full). Of the net proceeds, $61.8 million will be used to pay the
cash portion of the purchase price for the Founding Companies and to repay debt
assumed in the Combinations. Approximately $ million will be paid directly or
indirectly to former stockholders of the Founding Companies who will become
officers, directors, key employees or holders of more than 5% of the Common
Stock of the Company. See "Certain Transactions -- Organization of the Company."
If the Underwriters' over-allotment option is exercised in full,
approximately $ million of remaining net proceeds will be used for working
capital and other general corporate purposes, which are expected to include
future acquisitions. The Company has reviewed various strategic acquisition
opportunities and has held preliminary discussions with several of such
acquisition candidates. The Company currently has no agreements to effect any
acquisitions at this time. See "Certain Transactions -- Other Transactions."
Pending such uses, the net proceeds will be invested in short-term,
interest-bearing, investment grade securities.
The Company intends to finance its acquisitions through internally
generated cash flow, borrowing from its credit facility and in certain instances
through the issuance of Common Stock. The Company intends to obtain a commitment
for a revolving credit facility, under which capital will be available to pursue
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
DIVIDEND POLICY
The Company intends to retain all of its earnings, if any, to finance the
expansion of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying any cash dividends on its Common
Stock for the foreseeable future. In addition, it is expected that the Company's
credit facility will include restrictions on the ability of the Company to pay
dividends without the consent of the lender.
21
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and current maturities
of long-term obligations and the capitalization of the Company at December 31,
1997 (i) on a pro forma basis to give effect to the Combinations and (ii) as
further adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom. See "Use of Proceeds." This table should be
read in conjunction with the Unaudited Pro Forma Combined Financial Statements
of the Company and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------
PRO FORMA (1) AS ADJUSTED
--------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-term obliga-
tions ............................................................ $ -- $ --
======= =======
Long-term obligations, less current maturities .................... $ 219 $ 219
Stockholders' equity:
Preferred Stock: $0.01 par, 10,000,000 shares authorized; none is-
sued or outstanding ............................................ -- --
Common Stock: $0.01 par, 50,000,000 shares authorized; 9,308,333
shares outstanding, pro forma; and 15,116,667 shares outstand-
ing, pro forma as adjusted (2) ................................. 93 151
Additional paid-in capital ........................................ 13,616 75,379
Retained earnings ................................................. 4,685 4,685
------- -------
Total stockholders' equity ..................................... 18,394 80,215
------- -------
Total capitalization .......................................... $18,613 $80,434
======= =======
</TABLE>
- ----------
(1) Combines the respective accounts of VPI and the Founding Companies at
December 31, 1997 and gives effect to the reclassification of the Founding
Companies' common stock as additional paid-in capital.
(2) Includes 3,134,630 shares of Restricted Common Stock, including 484,202
shares issued to management and an aggregate of 2,650,428 shares issued to
Alpine Consolidated II, LLC and Capstone Partners, LLC and certain other
stockholders. See "Description of Capital Stock -- Common Stock and
Restricted Common Stock." Excludes 1,595,000 shares of Common Stock subject
to options to be granted concurrently with the Offering at an exercise price
equal to the initial public offering price. See "Management -- 1998
Long-Term Incentive Plan."
22
<PAGE>
DILUTION
The deficit in pro forma net tangible book value of the Company as of
December 31, 1997 was approximately $53.6 million, or approximately $(5.76) per
share of Common Stock. The pro forma net tangible book value per share
represents the Company's pro forma total tangible assets less its total
liabilities, divided by the number of shares of Common Stock to be outstanding
after giving effect to the Combinations. After giving effect to the sale of the
5,808,334 shares of Common Stock offered hereby, and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company, the Company's pro forma net tangible book value at December 31,
1997 would have been approximately $ , or approximately $ per share, based
on an assumed initial public offering price of $ per share. This represents
an immediate increase in pro forma net tangible book value of approximately
$ per share to existing stockholders and an immediate dilution of
approximately $ per share to new investors purchasing the shares in the
Offering. The following table illustrates this pro forma dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ........................ $
-------
Pro forma deficit in net tangible book value per share before the
Offering ............................................................ $(5.76)
Increase in pro forma net tangible book value per share attributable
to new investors ....................................................
------ -------
Pro forma net tangible book value per share after the Offering .........
Dilution in net tangible book value per share to new investors ......... $
=======
</TABLE>
The following table sets forth, on a pro forma combined basis to give
effect to the Combinations as of December 31, 1997, the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by existing stockholders and the new investors
purchasing shares of Common Stock from the Company in the Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED AVERAGE
------------------------ TOTAL PRICE
NUMBER PERCENT CONSIDERATION (1) PER SHARE
------------ --------- ------------------ ----------
<S> <C> <C> <C> <C>
Existing Shareholders ......... 9,308,333 61.6%
New Investors ................. 5,808,334 38.4
--------- -----
Total ......................... 15,116,667 100.0%
========== =====
</TABLE>
- ----------
(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity, including the stockholders' equity of the Founding
Companies, before the Offering, adjusted to reflect: (i) the payment of
$61.8 million in cash to the stockholders of the Founding Companies as part
of the consideration for the Combinations and to repay debt assumed in the
Combinations; and (ii) the transfer of certain non-operating assets to and
the assumption of or retirement of certain liabilities of certain
stockholders of the Founding Companies in the net amount of approximately
$10.7 million in connection with the Combinations; See "Use of Proceeds"
and "Capitalization."
23
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
VPI will consummate the Combinations with the Founding Companies
simultaneously with and as a condition to the consummation of the Offering. For
financial statement presentation purposes, however, Aston Hotels & Resorts, one
of the Founding Companies, has been designated as the "accounting acquiror." The
following selected historical financial data of Aston Hotels & Resorts as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1995, 1996 and 1997 have been derived from the audited financial
statements of Aston Hotels & Resorts, included elsewhere in this Prospectus. The
following selected historical financial data for Aston Hotels & Resorts as of
December 31, 1993, 1994 and 1995 and for the years ended December 31, 1993 and
1994 have been derived from unaudited financial statements of Aston Hotels &
Resorts, which have been prepared on the same basis as the audited financial
statements and, in the opinion of Aston Hotels & Resorts, reflect all
adjustments, consisting of normal recurring adjustments necessary for a fair
presentation of such data. The selected unaudited pro forma combined financial
data present data for the Company, adjusted for (i) the effects of the
Combinations on a historical basis; (ii) the effects of certain pro forma
adjustments to the historical financial statements described below; and (iii)
the consummation of the Offering and the application of the net proceeds
therefrom. See the Unaudited Pro Forma Combined Financial Statements and the
Notes thereto and the historical Financial Statements of Aston Hotels & Resorts
and certain of the Founding Companies and the Notes thereto included elsewhere
in the Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
ASTON HOTELS & RESORTS
Revenues .................................... $15,575 $20,421 $19,048 $19,460 $19,554
Operating expenses .......................... 9,924 12,406 10,550 10,401 8,908
------- ------- ------- ------- -------
Gross profit ................................ 5,651 8,015 8,498 9,059 10,646
General and administrative expenses ......... 3,651 5,444 5,434 5,574 5,475
------- ------- ------- ------- -------
Income from operations ...................... 2,000 2,571 3,064 3,485 5,171
Interest expense, net ....................... 93 246 771 342 86
------- ------- ------- ------- -------
Income from continuing operations ........... $ 1,907 $ 2,325 $ 2,293 $ 3,143 $ 5,085
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<S> <C>
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA (1):
Revenue:
Property rental fees .......................................... $ 34,145
Service fees .................................................. 12,856
Other ......................................................... 13,842
-----------
60,843
Operating expenses (2) .......................................... 30,438
-----------
Gross profit .................................................... 30,405
General and administrative expenses (2) ......................... 13,136
Depreciation and amortization (3) ............................... 3,485
-----------
Income from operations .......................................... 13,784
Interest and other income, net .................................. 246
-----------
Income before income taxes ...................................... 14,030
Provision for income taxes ...................................... 6,541
-----------
Net income ...................................................... $ 7,489
===========
Net income per share ............................................ $ 0.50
===========
Shares used in computing pro forma income per share (4) ......... 15,116,667
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
ASTON HOTELS & RESORTS COMBINED COMPANIES
DECEMBER 31, DECEMBER 31, 1997
---------------------------------------------------------------- --------------------------------
1993 1994 1995 1996 1997 PRO FORMA (5) AS ADJUSTED (6)
------------ ------------ ------------ ------------ ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital surplus
(deficit) (7) ............... $ (1,248) $ (3,919) $ (3,581) $ (1,933) $ (4,588) $ (60,567) $ 1,254
Total assets (8) .............. 5,310 9,373 13,904 13,470 15,062 115,504 115,504
Long-term debt ................ 1,844 2,396 2,133 2,816 2,804 219 219
Stockholders' equity (deficit) (395) (395) (395) 105 105 18,394 80,215
</TABLE>
- ----------
(1) The pro forma combined statement of operations data assume that the
Combinations and the Offering were consummated on January 1, 1997 and are
not necessarily indicative of the results the Company would have obtained
had these events actually then occurred or of the Company's future results.
During the period presented above, the Founding Companies were not under
common control or management and, therefore, the data presented may not be
comparable to or indicative of post-combination results to be achieved by
the Company. The pro forma combined statement of operations data are based
on preliminary estimates, available information and certain assumptions that
management deems appropriate and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus. Following the Combinations, the Company expects to realize
certain savings as a result of (i) volume purchasing and national contracts
for telecommunications, credit card fees, advertising, printing,
housekeeping supplies and other operating expenses and (ii) consolidation of
insurance, employee benefits and other general and administrative expenses.
The Company cannot quantify these savings accurately at this time. It is
anticipated that these savings will be substantially offset by the costs of
being a publicly traded company and the incremental costs related to the
Company's new management team. However, these costs, like the savings that
they offset, cannot be quantified accurately. Neither these anticipated
savings nor these anticipated costs have been included in the pro forma
combined financial information of the Company.
(2) The pro forma combined statement of operations data includes the
Compensation Differential and excludes the effect of the exclusion of
certain non-operating assets and the assumption or retirement of certain
liabilities that will be retained by certain stockholders of the Founding
Companies. For the year ended December 31, 1997, the Compensation
Differential was approximately $2.6 million.
(3) Reflects amortization of the goodwill (which is not deductible for tax
purposes) to be recorded as a result of the Combinations over a 40-year
period for each of the Founding Companies other than First Resort, which
will be amortized over a 15-year period, and computed on the basis described
in the Notes to the Unaudited Pro Forma Combined Financial Statements.
(4) Includes (i) 6,173,703 shares to be issued to owners of the Founding
Companies; (ii) 3,134,630 shares issued to the management and founders of
VPI; and (iii) 5,808,334 shares representing the number of shares sold in
the Offering necessary to pay the cash portion of the consideration for the
Combinations, to repay debt assumed in the Combinations and to pay the
estimated underwriting discount and other Offering expenses. Excludes
options to purchase 1,595,000 shares to be issued concurrently with the
Offering at an exercise price equal to the initial public offering price.
See "Certain Transactions."
(5) The pro forma combined balance sheet data assume that the Combinations were
consummated on December 31, 1997. The pro forma combined balance sheet data
are based upon preliminary estimates, available information and certain
assumptions that management deems appropriate and should be read in
conjunction with the other financial statements and notes thereto included
elsewhere in this Prospectus.
(6) Adjusted for the sale of 5,808,334 shares of Common Stock offered hereby
(less estimated underwriting discount and offering expenses) and the
application of the net proceeds therefrom.
(7) Includes the cash portion of the consideration to be paid to the Founding
Companies and the amount of debt to be repaid from net proceeds of the
Offering of $61.8 million and approximately $4.4 million representing
certain working capital adjustments from certain stockholders of the
Founding Companies in connection with the Combinations.
(8) Reflects (i) the creation of approximately $72.0 million of goodwill in
connection with the Combinations and (ii) a reduction of net assets,
including certain non-operating assets and the assumption of or retirement
of certain liabilities of approximately $10.7 million that will be excluded
from the Combinations and retained by certain stockholders of the Founding
Companies.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read with "Selected Financial Data" and
the Founding Companies' Financial Statements and related Notes thereto appearing
elsewhere in this Prospectus.
INTRODUCTION
The Company was established to become the first national provider of
vacation condominium and home rentals in premier destination resorts throughout
the United States. Through the consolidation of leading vacation rental and
property management companies, the development of a national brand and marketing
initiative and best practices management systems, the Company intends to offer
vacationers a branded network of high quality, fully furnished, privately-owned
condominium and home rentals while offering property owners superior management
services designed to enhance their rental income. Upon consummation of the
Offering, the Company will acquire the 14 Founding Companies which manage
approximately 11,000 condominiums, homes and hotel rooms nationwide and in
Canada. These condominiums and homes are located in beach and island resorts
such as the Hawaiian Islands; Bethany Beach, DE; Nantucket, MA; the Outer Banks,
NC; Sanibel and Captiva Islands, FL; and St. Simons Island, GA; and mountain
resorts such as Aspen, Breckenridge and Telluride, CO; Park City, UT; and
Whistler, B.C. Six of the Founding Companies also offer real estate brokerage
services. First Resort Software, one of the Founding Companies, is the leading
provider of integrated management services and reservations and accounting
software for the vacation rental and property management industry.
The Company's revenues are derived primarily from property rental fees on
vacation condominium and home rentals, and service fees from additional services
provided to vacationers and property owners. The Company receives property
rental fees when the properties are rented, which are generally a percentage of
the rental price of the vacation condominium or home ranging from approximately
3% to over 40% based upon the type of services provided by the Company to the
property owner and the type of rental unit managed. Revenues are recognized by
the Company on the property rental fees received from property owners, not on
the total rental price of the vacation condominium or home, and generally are
recognized ratably over the rental period. On a pro forma basis for the year
ended December 31, 1997, the Company recognized $34.1 million of property rental
fees representing 56% of the Company's total 1997 revenues. Additional services
provided to vacationers, such as reservations, housekeeping, trip cancellation
insurance and long-distance telephone, are charged separately and recorded as
service fees revenue by the Company. During 1997, the Company recognized $12.9
million of service fees, representing 21% of the Company's total 1997 pro forma
revenues. The Company's remaining $13.8 million of 1997 pro forma revenues are
derived from other sources, including management of homeowners' associations,
the sale and service of vacation rental and property management software, net
broker commissions on real estate sales, and a food & beverage facility. The
Company does not view the sources of other revenues as a significant area of
future growth, but only as a means to retain and increase the number of rental
units under Company management.
Operating expenses include direct compensation, telecommunications
expenses, housekeeping supplies, printing, marketing and food & beverage costs.
Compensation includes salary, wages, bonus and benefits for employees involved
with the rental or maintenance of the rental units, housekeeping, reservations,
marketing and the food & beverage facility. Telecommunications costs result
primarily from the cost of toll-free numbers maintained by each of the Founding
Companies, as well as the cost of telephone service provided by the Company to
property owners in certain markets. General and administrative expenses consist
primarily of salary, wages, bonus and benefits for owners as well as other
non-operations personnel, fees for professional services, depreciation, rent and
other general office expenses.
The Founding Companies have operated throughout the periods presented as
independent, privately-owned entities, and their results of operations reflect
varying tax structures (S Corporations or C Corporations) which have influenced
the historical level of owners' compensation. The owners and key employees of
the Founding Companies have agreed to certain, and in some cases substantial,
reductions in their salary, bonus and benefits in connection with the
Combinations (the "Compensation Differential"). The Compensation Differentials
for 1996 and 1997 were $2.5 million and $2.6 million, respectively, and have
been reflected as pro forma adjustments in the Unaudited Pro Forma Combined
Statement of Operations of the Company.
26
<PAGE>
Following the Combinations, the Company expects to realize certain savings
as a result of (i) volume purchasing and national contracts for
telecommunications, credit card fees, advertising, printing, housekeeping
supplies and other operating expenses and (ii) consolidation of insurance,
employee benefits and other general and administrative expenses. The Company
cannot quantify these savings accurately at this time. It is anticipated that
these savings will be partially offset by the costs of being a publicly traded
company and the incremental costs related to the Company's new management team.
However, these costs, like the savings that they offset, cannot be quantified
accurately. Neither these anticipated savings nor these anticipated costs have
been included in the pro forma combined financial information of the Company.
In July 1996, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 97 ("SAB 97") relating to business combinations
immediately prior to an initial public offering. SAB 97 requires that these
combinations be accounted for using the purchase method of acquisition
accounting. Under the purchase method, one of the companies must be designated
as the accounting acquiror. Aston Hotels & Resorts has been identified as the
accounting acquiror for financial statement presentation purposes. For the
remaining companies, $72.0 million, representing the excess of the fair value of
the Merger consideration received over the fair value of the net assets to be
acquired, will be recorded as "goodwill" on the Company's balance sheet.
Goodwill will be amortized as a non-cash charge to the income statement over a
40-year period for each of the Founding Companies other than First Resort, which
will be amortized over a 15-year period. The pro forma impact of this
amortization expense, which is non-deductible for tax purposes, is $2.0 million
per year on an after-tax basis. The amount of goodwill to be recorded and the
related amortization expenses will depend in part on the actual initial public
offering price of the shares of Common Stock offered hereby. See "Certain
Transactions -- Organization of the Company."
COMBINED FOUNDING COMPANIES
Results of Operations
The Founding Companies combined results of operations for the periods
presented do not represent combined results of operations presented in
accordance with generally accepted accounting principles, but are a summation of
the revenues and operating expenses of the individual Founding Companies on a
historical basis. The historical combined results of operations exclude the
effect of pro forma adjustments and may not be comparable to, and may not be
indicative of, the Company's post-combination results of operations because: (i)
the Founding Companies were not under common control or management during the
periods presented; (ii) the Company will incur incremental costs related to its
new corporate management team and the costs of being a publicly traded company;
and (iii) the combined data do not reflect potential benefits and cost savings
the Company expects to realize when operating as a combined entity.
The following table sets forth the combined results of operations of the
Founding Companies on a historical basis and as a percentage of revenues for the
periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1997
------------------------ ------------------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues ................... $53,766 100.0% $60,051 100.0%
Operating expenses ......... 30,390 56.5 30,977 51.6
------- ----- ------- -----
Gross profit ............... $23,376 43.5% $29,074 48.4%
======= ===== ======= =====
</TABLE>
Revenues. Revenues increased $6.3 million, or 11.7%, from $53.4 million in
1996 to $60.0 million in 1997, primarily due to an increase in property rental
and service fees resulting from a higher number of units under management and
higher average rental rates.
Operating Expenses. Operating expenses were flat year over year. As a
percentage of net revenues, operating expenses decreased from 56.5% in 1996 to
51.6% in 1997, primarily due to the increase in revenues, leverage from higher
average rental rates, and cost controls.
27
<PAGE>
Liquidity and Capital Resources
The Company is a holding company that conducts all of its operations
through its subsidiaries (the Founding Companies). Accordingly, the primary
internal source of the Company's liquidity is through the cash flows of its
subsidiaries. The Company generated cash flows from operating activities of
$11.5 million in 1997 primarily due to $11.2 million of net income from
continuing operations. Cash flows used in investing activities by the Company
was $8.9 million in 1997 and was primarily used for acquisition of assets,
repayments of advances of affiliates and purchase of property and equipment. The
Company's 1997 cash flows from financing activities totaled $917,000 which
included $6.1 million of distributions to shareholders and a $4.8 million net
advance from long-term debt. As of December 31, 1997, the Company had a working
capital deficit of $7.4 million and $14.0 million of outstanding long-term debt,
other long-term liabilities and net liabilities of discontinued operations.
After the consummation of the Combinations and the Offering, the Company
will have approximately $25.3 million in cash, cash equivalents and cash held in
trust, of which $15.6 million represents cash held in trust, and approximately
$219,000 of outstanding indebtedness. Certain assets, including real estate,
personal property, receivables and cash, that are not used in the operations of
certain Founding Companies will be excluded from the Combinations and retained
by the respective stockholders of such Founding Companies. Certain non-operating
assets and the assumption of certain debt, of approximately $10.7 million, will
be excluded from the combinations and retained by certain stockholders of the
Founding Companies. These exclusions have been reflected in the pro forma
balance sheet of the Company as of December 31, 1997.
The Company intends to obtain a revolving credit facility. It is
anticipated that the credit facility will require the Company to comply with
various restrictive loan covenants. The facility is intended to be used for
acquisitions, working capital and other general corporate purposes.
The Company anticipates that its cash flow from operations will provide
cash in excess of the Company's normal working capital needs, debt service
requirements and planned capital expenditures for the foreseeable future. The
Company made capital expenditures of approximately $1.4 million in 1997.
The Company intends to pursue attractive acquisition opportunities. The
timing, size or success of any acquisition effort and the associated potential
capital commitments are unpredictable. The Company expects to fund future
acquisitions primarily through a combination of cash flow from operations and
borrowings, including borrowings under the proposed credit facility, as well as
issue additional equity. The Company intends to register an additional 3,000,000
shares of its' Common Stock under the Securities Act for use by the Company as
consideration for future acquisitions.
ASTON HOTELS & RESORTS
Results of Continuing Operations
Aston Hotels & Resorts is the largest condominium resort management company
and one of the largest hotel providers in the state of Hawaii. Aston Hotels &
Resorts' principal revenue sources for 1997 were property rental fees (41%) and
service fees (43%). Aston Hotels & Resorts has decided to discontinue its hotel
leasing and operating business and such business is not reflected in the results
of continuing operations. Results of operations for the hotel leasing and
operating business are reflected as discontinued operations. The following table
sets forth the results of continuing operations for Aston Hotels & Resorts on a
historical basis and as a percentage of net revenues for the periods indicated.
28
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1995 1996 1997
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues .................................... $19,048 100.0% $19,460 100.0% $19,554 100.0%
Operating expenses .......................... 10,550 55.4 10,401 53.4 8,908 45.6
------- ----- ------- ----- ------- -----
Gross profit ................................ 8,498 44.6 9,059 46.6 10,646 54.4
General and administrative expenses ......... 5,434 28.5 5,574 28.6 5,475 28.0
------- ----- ------- ----- ------- -----
Operating income ............................ $ 3,064 16.1% $ 3,485 17.9% $ 5,171 26.4%
======= ===== ======= ===== ======= =====
Compensation Differential ................... $ 380 $ 282 $ 282
</TABLE>
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996
Revenues. Revenues were flat year over year.
Operating Expenses. Operating expenses decreased approximately $1.5
million, or 14.4%, from $10.4 million in 1996 to $8.9 million in 1997. As a
percentage of net revenues, operating expenses decreased from 53.4% in 1996 to
45.6% in 1997, primarily due to a reduction in salaries, bonuses, and
promotional and marketing expenses.
General and Administrative Expenses. General and administrative expenses in
total and as a percentage of revenues were relatively flat year over year.
Excluding the Compensation Differential of $282,000 in 1996 and 1997, operating
income increased from 17.9% to 19.4% in 1996 and from 26.4% to 27.9% in 1997.
TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1995
Revenues. Revenues increased $412,000, or 2.2%, from $19.0 million in 1995
to $19.5 million in 1996.
Operating Expenses. Operating expenses decreased $149,000, or 1.4%, from
$10.6 million in 1995 to $10.4 million in 1996. As a percentage of net revenues,
operating expenses decreased from 55.4% to 53.4%, primarily due to higher
revenues.
General and Administrative Expenses. General and administrative expenses
decreased $140,000, or 2.6%, from $5.4 million in 1995 to $5.6 million in 1996.
As a percentage of revenues, general and administrative expenses increased from
28.5% in 1995 to 28.6% in 1996, primarily due to higher revenues. Excluding the
Compensation Differential of $380,000 and $282,000 in 1995 and 1996,
respectively, operating income decreased from 18.1% to 17.6% in 1995 and from
17.9% to 19.4% in 1996.
Liquidity and Capital Resources
Aston Hotels & Resorts generated cash flows from operating activities of
$5.9 million in 1997 primarily due to $5.1 million of net income from continuing
operations. Cash flows used in investing activities by Aston Hotels & Resorts
was $1.9 million in 1997 and was primarily used for advances to affiliates. As
of December 31, 1997, advances to stockholder and affiliates totaled $9.5
million. Aston Hotels & Resorts' 1997 cash flows used in financing activities
totaled $4.6 million which included a $3.6 million distribution to a
stockholder and $744,000 in payments of other long-term obligations. As of
December 31, 1997, Aston Hotels & Resorts had a working capital deficit of $4.6
million, and $5.5 million of outstanding long-term debt, capital leases and net
liabilities of discontinued operations.
Aston Hotels & Resorts has provided guarantees for, or is the cosigner on,
personal debts of its principal stockholder. At December 31, 1997, the personal
debts totaled $17.4 million. In addition, Aston Hotels & Resorts' principal
stockholder has personally guaranteed certain of Aston Hotels & Resorts debt and
capital lease obligations. As of December 31, 1997, the guaranteed obligations
totaled $2.8 million.
29
<PAGE>
COLLECTION OF FINE PROPERTIES
Results of Operations
Collection of Fine Properties is a leading provider of vacation property
rentals and management services in the ski and mountain resort town of
Breckenridge, Colorado. Collection of Fine Properties' principal revenue source
for 1997 was property rental fees (82%). The following table sets forth the
combined results of operations for Collection of Fine Properties on a historical
basis and as a percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1996 1997
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues .................................... $3,500 100.0% $4,141 100.0% $4,303 100.0%
Operating expenses .......................... 2,621 74.9 2,777 67.1 2,830 65.8
------ ----- ------ ----- ------ -----
Gross profit ................................ 879 25.1 1,364 32.9 1,473 34.2
General and administrative expenses ......... 923 26.4 948 22.9 893 20.8
------ ----- ------ ----- ------ -----
Operating income ............................ $ (44) ( 1.3)% $ 416 10.0% $ 580 13.5%
====== ===== ====== ===== ====== =====
Compensation Differential ................... $ 64 $ 74 $ 94
</TABLE>
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996
Revenues. Revenues increased $162,000, or 3.9%, from $4.1 million in 1996
to $4.3 million in 1997, primarily due to an increase in property rental fees
resulting primarily from higher average rental rates.
Operating Expenses. Operating expenses remained relatively constant at $2.8
million. As a percentage of net revenues, operating expenses decreased from
67.1% in 1996 to 65.8% in 1997, primarily due to slightly higher revenues.
General and Administrative Expenses. General and administrative expenses
decreased $55,000, or 5.8%, from $948,000 in 1996 to $893,000 in 1997. As a
percentage of revenues, general and administrative expenses decreased from 22.9%
in 1996 to 20.8% in 1997. Excluding the Compensation Differential of $74,000 and
$94,000 in 1996 and 1997, respectively, operating income increased from 10.0% to
11.8% in 1996 and from 13.5% in 15.7% in 1997.
TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1995
Revenues. Revenues increased $641,000, or 18.3%, from $3.5 million in 1995
to $4.1 million in 1996, primarily due to an increase in management fees
resulting primarily from higher occupancy.
Operating Expenses. Operating expenses increased $156,000, or 6.0%, from
$2.6 million in 1995 to $2.8 million in 1996. As a percentage of revenues,
operating expenses decreased from 74.9% in 1995 to 67.1% in 1996, primarily due
to increased revenues.
General and Administrative Expenses. General and administrative expenses
increased $25,000, or 2.7%, from $923,000 in 1995 to $948,000 in 1996. As a
percentage of revenues, general and administrative expenses decreased from 26.4%
in 1995 to 22.9% in 1996 primarily due to increased revenues. Excluding the
Compensation Differential of $64,000 and $74,000 in 1995 and 1996, respectively,
operating income increased from (1.3)% to 0.6% in 1995 and from 10.0% to 11.8%
in 1996.
Liquidity and Capital Resources
Collection of Fine Properties generated cash flows from operating
activities of $783,000 in 1997 primarily due to $713,000 of net income. Cash
flows used in investing activities by Collection of Fine Properties was $136,000
in 1997 and was primarily used for the purchases of furniture and equipment.
Collection of Fine Properties' 1997 cash flows used in financing activities
totaled $598,000 which included repayments on their line of credit and notes
payable, and distributions to stockholders. As of
30
<PAGE>
December 31, 1997, Collection of Fine Properties had a working capital deficit
of $871,000 and had $299,000 of long-term debt outstanding. In addition, as of
December 31, 1997, Collection of Fine Properties had $653,000 of availability
under its line of credit.
PRISCILLA MURPHY
Results of Operations
Priscilla Murphy is a leading provider of beach vacation property rentals,
management services and sales on the Florida islands of Sanibel and Captiva.
Priscilla Murphy's principal revenue sources for 1997 were property rental fees
(53%) and net real estate brokerage commissions (31%). Priscilla Murphy was
acquired by its current owners in January 1997. The following table sets forth
the results of operations for Priscilla Murphy and its predecessor on a
historical basis and as a percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1996 1997
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues .................................... $4,316 100.0% $4,721 100.0% $4,740 100.0%
Operating expenses .......................... 1,319 30.6 1,314 27.8 1,184 25.0
------ ----- ------ ----- ------ -----
Gross profit ................................ 2,997 69.4 3,407 72.2 3,556 75.0
General and administrative expenses ......... 2,257 52.3 2,125 45.0 1,866 39.4
------ ----- ------ ----- ------ -----
Operating income ............................ $ 740 17.1% $1,282 27.2% $1,690 35.7%
====== ===== ====== ===== ====== =====
Compensation Differential ................... $ 250 $ 320 $ 31
</TABLE>
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996
Revenues. Revenues were relatively flat year over year.
Operating Expenses. Operating expenses decreased 130,000, or 9.9%, from
$1.3 million in 1996 to $1.2 million in 1997 primarily due to better cost
control measures since the acquisition resulting in lower salaries and benefits.
As a percentage of revenues, operating expenses decreased from 27.8% in 1996 to
25.0% in 1997, primarily due to lower costs.
General and Administrative Expenses. General and administrative expenses
decreased $259,000, or 12.2%, from $2.1 million in 1996 to $1.9 million in 1997.
As a percentage of revenues, general and administrative expenses decreased from
45.0% in 1996 to 39.4% in 1997. Excluding the Compensation Differential of
$320,000 and $31,000 in 1996 and 1997, respectively, operating income increased
from 27.2% to 33.9% in 1996 and from 35.7% to 36.3% in 1997.
TWELVE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1995
Revenues. Revenues increased $405,000, or 9.4%, from $4.3 million in 1995
to $4.7 million in 1996, primarily due to an increase in commissions on real
estate sales resulting from the increased number of vacation properties sold and
slightly higher property rental fees resulting primarily from higher average
rental rates.
Operating Expenses. Operating expenses were flat year over year. As a
percentage of revenues, operating expenses decreased from 30.6% in 1995 to 27.8%
in 1996, primarily due to higher revenues.
General and Administrative Expenses. General and administrative expenses
decreased $132,000, or 5.8%, from $2.3 million in 1995 to $2.1 million in 1996.
As a percentage of revenues, general and administrative expenses decreased from
52.3% in 1995 to 45.0% in 1996. Excluding the Compensation Differential of
$250,000 and $320,000 in 1995 and 1996, respectively, operating income increased
from 17.1% to 22.9% in 1995 and from 27.2% to 33.9% in 1996.
31
<PAGE>
Liquidity and Capital Resources
Priscilla Murphy generated cash flows from operating activities of $1.9
million in 1997 primarily due to $1.5 million of net income and $203,000 of
non-cash depreciation expense. Cash flows used in investing activities by
Priscilla Murphy was $5.8 million in 1997 and was used for the January, 1997
acquisition. Priscilla Murphy's 1997 cash flows from financing activities
totaled $4.9 million which included $5.8 million in bank financing for the
acquisition, offset by $1.2 million in long-term debt repayments. As of December
31, 1997, Priscilla Murphy had a working capital deficit of $42,000, and had
$3.9 million of long-term debt outstanding.
COASTAL RESORTS
Results of Operations
Coastal Resorts is a leading provider of beach vacation property rentals,
management services and sales in the Bethany Beach area of Delaware. Coastal
Resorts' principal revenue sources for 1997 were net real estate commissions
(53%) and property rental fees (25%). The following table sets forth the
combined results of operations for Coastal Resorts on a historical basis and as
a percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1997
----------------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues .................................... $1,917 100.0% $3,615 100.0%
Operating expenses .......................... 837 43.7 1,788 46.5
------ ----- ------ -----
Gross profit ................................ 1,080 56.3 1,827 50.5
General and administrative expenses ......... 477 24.9 644 17.8
------ ----- ------ -----
Operating income ............................ $ 603 31.5% $1,183 32.7%
====== ===== ====== =====
Compensation Differential ................... $ -- $ --
</TABLE>
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996
Revenues. Revenues increased $1.7 million, or 88.6%, from $1.9 million in
1996 to $3.6 million in 1997, primarily due to an increase in real estate
brokerage commissions resulting from the increased number of vacation properties
sold and increased services fees due to a higher number of properties under
management and higher occupancy.
Operating Expenses. Operating expenses increased $951,000, or 113.6%, from
$837,000 in 1996 to $1.8 million in 1997. As a percentage of revenues, operating
expenses increased from 43.7% in 1996 to 46.5% in 1997, primarily due to higher
property rental activities.
General and Administrative Expenses. General and administrative expenses
increased $167,000, or 35.0%, from $477,000 in 1996 to $644,000 in 1997. As a
percentage of net revenues, general and administrative expenses decreased from
24.9% in 1996 to 17.8% in 1997, primarily due to the significant increase in net
revenue in 1997. There were no Compensation Differentials in 1996 or 1997.
Liquidity and Capital Resources
Coastal Resorts generated cash flows from operating activities of $303,000
in 1997 primarily due to $1.1 million in net income offset by a $1.1 million
increase in receivables from related parties. Cash flows used in investing
activities by Coastal Resorts was $146,000 in 1997 and was primarily used to
purchase furniture and equipment. Coastal Resorts' 1997 cash flows from
financing activities totaled $40,000. As of December 31, 1997, Coastal Resorts
had a working capital surplus of $980,000 and had a $715,000 note payable to a
related party.
32
<PAGE>
TRUPP-HODNETT ENTERPRISES
Results of Operations
Trupp-Hodnett Enterprises is the leading provider of beach vacation
property rentals, management services and sales on the island of St. Simons, off
the coast of Georgia. Trupp-Hodnett Enterprises' principal revenue sources for
1997 were: property rental fees (69%) and real estate sales commissions (22%).
The following table sets forth the results of operations for Trupp-Hodnett
Enterprises on a historical basis and as a percentage of revenues for the
periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1997
----------------------- -----------------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues .................................... $3,431 100.0% $4,061 100.0%
Operating expenses .......................... 1,652 48.1 1,838 45.3
------ ----- ------ -----
Gross profit ................................ 1,779 51.9 2,223 54.7%
General and administrative expenses ......... 1,653 48.2 2,024 49.8
------ ----- ------ -----
Operating income ............................ $ 126 3.7% $ 199 4.9%
====== ===== ====== =====
Compensation Differential ................... $ 850 $1,143
</TABLE>
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996
Revenues. Revenues increased $630,000, or 18.4%, from $3.4 million in 1996
to $4.1 million in 1997, primarily due to an increase in real estate brokerage
commissions resulting from the increased number of vacation properties sold and
an increase in property rental fees resulting primarily from higher average
rental rates.
Operating Expenses. Operating expenses increased $186,000, or 11.3%, from
$1.7 million in 1996 to $1.8 million in 1997. As a percentage of revenues,
operating expenses decreased from 48.1% in 1996 to 45.3% in 1997, primarily due
to higher revenues and higher average rental rates.
General and Administrative Expenses. General and administrative expenses
increased $371,000, or 22.4%, from $1.7 million in 1996 to $2.0 million in 1997.
As a percentage of revenues, general and administrative expenses increased from
48.2% in 1996 to 49.8% in 1997. Excluding the Compensation Differential of
$850,000 and $1.1 million in 1996 and 1997, respectively, operating income
increased from 3.7% to 28.4% in 1996 and from 4.9% to 33.0% in 1997.
Liquidity and Capital Resources
Trupp-Hodnett Enterprises generated cash flows from operating activities of
$314,000 in 1997 primarily due to $186,000 of net income and non-cash
depreciation expense of $85,000. Cash flows used in investing activities by
Trupp-Hodnett Enterprises was $74,000 in 1997 and was primarily used for the
purchase of property and equipment. Trupp-Hodnett Enterprises' 1997 cash flows
used in financing activities totaled $91,000 which included borrowings and
repayments to banks and distributions to shareholders. As of December 31, 1997,
Trupp-Hodnett Enterprises had a working capital surplus of $265,000, and had no
long-term debt outstanding. In addition, Trupp-Hodnett Enterprises had $130,000
in unused lines of credits.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The business of the Founding Companies is highly seasonal. The results of
operations of each of the Founding Companies have been subject to quarterly
fluctuations caused primarily by the seasonal variations in the vacation rental
and property management industry, with peak seasons dependent on whether the
resort is primarily a summer or winter destination. During 1997, the Company
derived approximately 43% of its gross profits in the first quarter and 23% of
its gross profits in the third quarter. Although the seasonality of the
Company's revenues and earnings may be partially mitigated by
33
<PAGE>
the geographic diversity of the Founding Companies and companies that may be
acquired in the future, there is likely to continue to be a significant seasonal
factor with respect to the Company's revenues and earnings. The Company's
quarterly results of operations may also be subject to fluctuations as a result
of the timing and cost of acquisitions, the timing of real estate sales, changes
in relationships with travel providers, extreme weather conditions or other
factors affecting leisure travel and the vacation rental and property management
industry. Unexpected variations in quarterly results could also adversely affect
the price of the Common Stock which in turn could adversely effect the Company's
proposed acquisition strategy.
INFLATION
Inflation did not have a significant effect on the combined results of
operations of the Founding Companies for 1995, 1996 or 1997.
34
<PAGE>
BUSINESS
GENERAL
Upon consummation of the Offering, the Company will be the first national
provider of vacation condominium and home rentals in premier destination resorts
throughout the United States. Through the consolidation of leading vacation
rental and property management companies, the development of a national brand
and marketing initiative and best practices management systems, the Company
intends to offer vacationers a branded network of high quality, fully furnished,
privately-owned condominium and home rentals while offering property owners
superior management services designed to enhance their rental income. Currently,
most vacationers seeking to rent a condominium or home at a popular destination
resort must use a local vacation rental and property management firm to inquire
about availability and make reservations. Vacationers typically make rental
choices with limited information and, as a result, face great uncertainty
concerning the quality of their rental. To address this need, the Company
intends to provide vacationers with consistent quality and service, increased
information and easy access to a broad array of high quality desirable
condominium and home rentals in premier destination resorts.
Upon consummation of the Offering, the Company will acquire the 14 Founding
Companies which manage approximately 9,200 condominiums and homes nationwide and
in Canada. These condominiums and homes are located in beach and island resorts
such as the Hawaiian Islands; Bethany Beach, DE; Nantucket, MA; the Outer Banks,
NC; Sanibel and Captiva Islands, FL; and St. Simons Island, GA; and mountain
resorts such as Aspen, Breckenridge and Telluride, CO; Park City, UT, and
Whistler, B.C. The Company also manages five hotels aggregating approximately
1,650 hotel rooms located primarily in the Hawaiian Islands.
The Company provides a wide range of services to both vacationers and
property owners. Because of the variety of the Company's resort locations
throughout the United States and Canada and the diversity of rental prices
throughout its rental pool, the Company is able to target a broad range of
vacationers, including families, couples and individuals. For vacationers, the
Company offers the convenience and accommodations of a condominium or home,
while providing many of the amenities and services of a hotel, generally at a
lower cost per person. Vacation condominium and home rentals generally offer
greater space and convenience than resort hotel rooms, including separate
living, sleeping and eating quarters. As a result, vacationers generally have
more privacy and greater flexibility in a vacation condominium or home. The
Company typically offers such services as convenient check-in and check-out,
frequent housekeeping and cleaning and emergency maintenance assistance. In
addition, in most of its markets, the Company provides specialized
concierge-type services such as arranging golf tee times, purchasing ski lift
tickets and making restaurant reservations. For property owners, the Company
offers a comprehensive set of services, including marketing and rental services,
maintenance and security.
The Company's primary source of revenue is property rental fees, which are
charged to the property owners as a percentage of the vacationers' total rental
rate. Fee percentages for vacation condominiums and homes range from
approximately 3% to over 40% of rental rates for the various Founding Companies
depending on the type of services provided to the property owner and the type of
rental unit managed. On a pro forma basis for the year ended December 31, 1997,
the Company recognized $34.1 million of revenues from property rental fees. In
addition, in many markets, the Company provides traditional real estate
brokerage services for property owners seeking to sell their condominiums and
homes. The Company believes that a national brand and superior management
services, which are designed to enhance rental income for property owners, will
provide it with a competitive advantage in attracting additional high quality
condominiums and homes in its markets.
INDUSTRY OVERVIEW
Destination resort vacationers primarily have three alternatives for
overnight accommodations: commercial lodging establishments, time share resorts
and privately owned vacation condominiums and homes. Commercial lodging consists
principally of hotels and motels in which a room is rented on a nightly or
weekly basis. Vacation ownership or timeshare interests are purchased by the
vacationer and typically entitle the buyer to use a furnished vacation residence
at a particular resort generally for a
35
<PAGE>
one-week period each year, in perpetuity. Lastly, privately-owned vacation
condominiums and homes are typically second homes available for rent by property
owners seeking incremental income. The domestic vacation rental and property
management industry in 1996 generated over $10 billion in total revenues,
yielding over $2.5 billion in management fees from over 20 million vacation
condominium and home rentals. Industry revenues grew 8.7% from 1995 to 1996, and
the Company believes that this growth has been, and will continue to be, driven
by two primary factors: the growth in the leisure travel and tourism industry,
which reflected a 16.5% increase in revenues from 1995 to 1996, and the
increasing number of vacationers seeking to rent vacation condominiums and
homes.
For many vacationers, particularly those with families, a lengthy stay at a
quality commercial lodging establishment can be expensive. Vacation condominium
and home rentals generally offer families greater space and convenience than a
resort hotel room, including separate living, sleeping and eating quarters. As a
result, families generally have more privacy and greater flexibility in a
vacation condominium or home. Furthermore, with full kitchens available in most
properties, vacationers can also save on dining costs in a vacation condominium
or home rental. In addition, vacation condominium and home rentals frequently
include access to private yards, swimming pools, tennis courts and other
recreational facilities, and generally offer a greater variety of locations,
accommodations and price ranges within a market to meet a vacationer's desires.
Vacation property rentals are also a less expensive and more flexible
alternative to timeshare interests. Unlike vacation property rentals, timeshare
interests require the purchase of an ownership interest in a vacation residence
and continuing annual maintenance payments. A timeshare owner has the right to
use the same vacation residence for the same length of time each year. Subject
to availability and the payment of a membership fee and a variable exchange fee
to join a timeshare exchange program, a timeshare owner may request that his
timeshare interval be exchanged for a timeshare interval at another
participating resort. Owners are generally limited to timeshare intervals at
participating resorts and to those units which have been assigned an equal or
lower rating by the exchange program based on the location, size and quality of
the unit, the quality of the resort and the time of year requested.
Most vacation condominiums and homes are second homes owned by individuals
who reside in different locations and are unable to easily manage the rental
process. Vacation rental and property management companies facilitate the rental
process by handling all interaction with vacationers, including accepting
reservations, rental payments and security deposits; operating check-in and
check-out locations; and arranging for inspections, security and maintenance.
The publishing of catalogs, print advertising and other marketing activities of
a successful vacation rental and property management company also can enhance
the vacation condominium or home's occupancy rate and increase rental income to
the property owner.
The vacation rental and property management industry is highly fragmented,
with an estimated 3,000 vacation rental and property management companies in the
United States. Presently, most vacation rental condominiums and homes are
managed by and booked through local vacation rental and property management
firms, whose principal means of attracting property owners and vacationers is by
referral, word of mouth, limited local advertising and direct mailings. There is
no central reservations service for vacationers or travel agents to obtain
information regarding condominium or home rental opportunities at popular
destination resorts across the country or for booking such rentals once a
destination is selected. As a result, the Company believes the vacation rental
and property management industry is highly inefficient and presents a
significant market opportunity for a well-capitalized company offering a large,
national network of high quality vacation condominiums and homes with superior
levels of customer service.
BUSINESS STRATEGY
The Company's objective is to enhance its position as the leading national
provider of premier destination resort condominium and home rentals by pursuing
the following business strategies:
DEVELOP A NATIONAL BRAND IN PREMIER DESTINATION RESORT CONDOMINIUM AND HOME
RENTALS. The Company intends to create the first national brand in vacation
condominium and home rentals. To date, there has been no national brand for
vacation condominium and home rentals, no industry standards for
36
<PAGE>
quality and a general lack of access to reliable information regarding rental
opportunities for vacationers. By providing a national network of high quality
condominiums and homes in premier destination resorts throughout the United
States, the Company intends to increase the information available to vacationers
and develop a brand which provides greater confidence and ease to vacationers in
making their rental arrangements. In order to ensure high quality, the Company
intends to implement a comprehensive quality assurance program which includes
the company-wide rating of individual condominiums and homes to assure
vacationers that rental accommodations will meet their expectations, as well as
customer satisfaction surveys and follow-up calls.
OFFER VACATIONERS SUPERIOR CUSTOMER SERVICE. Management believes that
maintaining superior levels of customer service is critical to developing a
reputation for high quality condominiums and homes and attracting new customers.
Vacationers typically rent vacation condominiums and homes for greater space and
flexibility, but these customers also frequently desire many of the amenities
and services of hotel accommodations. As a result, the Company emphasizes
customer service by offering conveniently located check-in locations, efficient
check-in and check-out procedures, extended front desk hours, a commitment to
clean units and access to emergency contact and maintenance personnel. The
Company also strives to offer maximum flexibility to meet the varied needs of
its vacationers and in most markets can arrange for services such as golf tee
times, rental bicycles, ski lift tickets, grocery delivery or restaurant
reservations. By offering the convenience and accommodations of a condominium or
home while providing many of the amenities and services of a hotel, the Company
believes it will continue to strengthen the loyalty of its existing customers
and attract new vacationers into the vacation condominium and home rental
market.
ENHANCE VALUE FOR CONDOMINIUM AND HOME OWNERS. Through effective national
marketing, a recognized brand and implementation of strategies designed to
increase occupancy and rental rates, the Company plans to enhance the rental
income for vacation condominium and home owners. Since substantially all of the
condominiums and homes managed by the Company are second homes with absentee
owners, the Company offers a range of high quality vacation rental and property
management services designed to meet the broad real estate needs of these
owners. In most markets, the Company will assume broad responsibility for the
condominium or home, from marketing and handling all aspects involved in renting
the individual condominium or home to managing the common properties and
homeowners' association. In addition, the Company provides owners with concise,
timely and accurate monthly statements and payments for the rental and
management of their condominiums and homes. The Company believes that its
reputation for high quality, comprehensive management services will be a key
competitive advantage in increasing the number of condominiums and homes under
its management within its existing markets.
CAPITALIZE ON THE EXPERIENCE OF SENIOR MANAGEMENT. The Company intends to
capitalize on the industry experience of members of its senior management. David
C. Sullivan, the Chairman and Chief Executive Officer is the former Chief
Operating Officer of Promus Hotel Corporation, where he was primarily
responsible for the creation and expansion of the Hampton Inn, Homewood Suites
and Embassy Suites lines. Jeffery M. Jarvis, Senior Vice President and Chief
Financial Officer, is the former Vice President, Controller and Principal
Accounting Officer of Promus Hotel Corporation and Jules S. Sowder, Senior Vice
President of Marketing, is the former Vice President of Marketing of Promus
Hotel Corporation. In addition, W. Michael Murphy will serve as Senior Vice
President of Development. Mr. Murphy has over 20 years experience in the hotel
and resort industries, with particular experience in planning and development.
MAINTAIN LOCAL RELATIONSHIPS AND EXPERTISE. The management teams of the
Founding Companies each have extensive experience in their respective resort
areas, and many of the individuals are very active in the local community. The
Company believes that the management teams have a valuable understanding of
their respective markets and businesses and have developed strong local
relationships. These relationships are critical in attracting additional
condominiums and homes for rental and enable the Company to provide additional
concierge-type services to its vacationers. Accordingly, the Company intends to
operate with a decentralized management strategy and allow local managers to
utilize their knowledge and expertise about the condominiums and homes available
for rent, the offerings of local competitors and the desires of vacationers in
their areas to provide superior customer service.
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<PAGE>
GROWTH STRATEGY
The Company intends to enhance its position as the leading national
provider of vacation condominium and home rentals in premier destination resorts
by pursuing the following growth strategies:
IMPLEMENT A NATIONAL MARKETING STRATEGY. The Company intends to implement a
national marketing program designed to increase vacationer awareness of its
rental condominiums and homes and establish a nationally recognized high quality
name and image, while promoting the unique characteristics of its individual
resorts. In addition, the Company will market to existing customers of the
Founding Companies to capitalize on cross-selling opportunities and increase
customer loyalty. Through its collection of approximately 11,000 beach and
mountain resort rental properties and the databases of customer information
maintained by the Founding Companies, the Company intends to offer customers of
each Founding Company similar properties and services in its other resorts. The
Company believes the integrated marketing efforts of the Founding Companies will
increase customer awareness of the Company's condominiums and homes, lead to an
increased demand for the Company's rentals and result in higher occupancy and
rental rates for its condominium and home owners. The Company also believes that
the anticipated increase in rental income for owners will ultimately be a
competitive advantage in attracting new property owners.
CAPITALIZE ON TECHNOLOGY. Management believes that investment in technology
will be critical in building its national brand and will create a significant
competitive advantage. The Company intends to utilize the technological
expertise of First Resort, a Founding Company, to enhance the ease and
convenience for vacationers of accessing information and making reservations for
vacation rentals. The Company's strategy is to create a comprehensive web site
that presents all of the Company's condominium, home and hotel room rentals,
including photographs and detailed floor plans, and allows vacationers to make
reservations and payments. Several of the Founding Companies already provide
photographs and rate and availability information for condominiums and homes
over the world wide web, and the Company intends to leverage these capabilities
to implement a central reservation system with world wide web functionality. In
addition to facilitating the ability to provide one-stop shopping, the Company
intends to link the Founding Companies' and future acquired companies' databases
in order to enhance its cross-selling and direct marketing efforts.
INCREASED USE OF ADDITIONAL MARKETING CHANNELS. Currently, most vacationers
locate vacation condominiums and homes through referrals, word-of-mouth, limited
local advertising and direct mailings. The Company believes there are
significant opportunities to expand the use of additional marketing channels.
The Company intends to capitalize on its extensive market presence by increasing
the use of other marketing channels such as the world wide web, travel agents
and national print media, which are difficult for local vacation rental and
property management companies to use in a cost-effective manner. Given the
Company's size and presence in premier destination resorts, the Company believes
it will be an attractive partner to travel agents, tour package operators and
other travel providers. These relationships should be a significant source of
new customers and, in particular, will be a valuable marketing channel for
off-peak seasons. Lastly, the Company plans to focus greater marketing efforts
on European and other international travelers through a more extensive use of
international print media, wholesalers and packaged tour companies.
EXPAND MARKET SHARE OF CONDOMINIUM AND HOME RENTALS IN EXISTING MARKETS. A
key element of the Company's growth strategy is to increase its selection of
condominium and homes in order to expand its market share and strengthen the
local brands of each of the Founding Companies. The Company intends to attract
new property owners by achieving high occupancy rates through effective national
marketing, cross-selling and by offering additional incentives to property
owners, such as participation in a rental exchange program. In addition, in
order to capture a higher portion of the rental business from new condominiums
and homes being built in its markets, the Company will focus on building and
strengthening its relationships with both local and national developers as well
as real estate brokerage companies.
PURSUE OPPORTUNITIES FOR PROFIT MARGIN EXPANSION VIA COST SAVINGS AND
ADDITIONAL REVENUE SOURCES. Through the implementation of best practices, the
Company believes there are numerous opportunities to improve the margins of the
Founding Companies. First, the Company will strive to im-
38
<PAGE>
prove the efficiency of certain basic services such as reservations,
housekeeping and laundry. The Company also believes that larger inventories of
condominiums and homes in its markets will provide certain economies of scale in
advertising, check-in locations management, housekeeping and other services. In
addition, several of the Founding Companies have developed unique additional
revenue opportunities, such as assisting property owners in refurbishing their
properties, offering trip cancellation insurance and charging fees for certain
concierge-type services, several of which are adaptable at other Founding
Companies. The Company believes that enhanced efficiency and economies of scale
will reduce overall operating costs and allow the Company to achieve increased
margins by spreading operating and corporate overhead costs over a larger
revenue base.
BUILD NATIONAL MARKET PRESENCE THROUGH STRATEGIC ACQUISITIONS. The vacation
rental and property management industry is highly fragmented, with over 3,000
geographically dispersed companies in the United States. The Company believes
that such fragmentation provides significant opportunities for consolidation.
The Company intends to aggressively pursue both domestic and international
acquisitions in order to gain a presence in additional premier destination
resort locations as well as expand its market share in existing resorts. The
Company will seek companies with strong reputations and a commitment to high
quality condominiums and homes and customer service. While the Company will seek
to acquire the leading companies in each new market, the Company also plans to
pursue tuck-in acquisitions through which it can expand its selection of
condominiums and homes available for rent in its existing markets. Many
acquisition candidates utilize First Resort's software, which the Company
believes will enhance its ability to integrate such companies upon acquisition.
The Company expects to offer acquisition candidates: (i) affiliation with a
national brand; (ii) the ability to cross-sell to customers of other vacation
rental and property management companies; (iii) the ability to increase
liquidity as a result of the Company's financial strength as a public company;
and (iv) the ability to increase profitability as a result of the Company's
centralization of certain administrative functions and other economies of scale.
MARKETS
The Company currently manages condominiums and homes in many popular beach
and mountain resorts in the United States and Canada. Through the implementation
of its acquisition strategy, the Company plans to establish an international
network of vacation condominiums and homes in every major type of premier
destination resort market, including beach, mountain, golf and tennis resorts.
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The following table sets forth certain information regarding the Founding
Companies as of January 31, 1998 with the exception of First Resort:
<TABLE>
<CAPTION>
DATE NUMBER OF NUMBER OF
FOUNDED (1) CONDOMINIUMS(2) HOMES TOTAL UNITS
------------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
BEACH AND ISLAND RESORTS
HAWAII
Aston Hotels & Resorts ............ 1967 4,771 1 4,772
Maui Condominium and Home ......... 1988 430 2 432
THE OUTER BANKS, NC
Brindley & Brindley ............... 1985 49 397 446
BETHANY BEACH, DE
Coastal Resorts ................... 1982 545 4 549
NANTUCKET, MA
The Maury People(3) ............... 1969 -- 1,200 1,200
SANIBEL AND CAPTIVA ISLANDS, FL
Priscilla Murphy Realty ........... 1972 669 233 902
ST. SIMONS ISLAND, GA
Trupp-Hodnett Enterprises ......... 1987 381 54 435
MOUNTAIN RESORTS
BRECKENRIDGE, CO
Collection of Fine Properties ..... 1985 462 10 472
ASPEN, CO
Houston and O'Leary(3) ............ 1986 7 120 127
PARK CITY, UT
Jupiter Property Management ....... 1976 297 9 306
PARK CITY, UT
Resort Property Management ........ 1978 280 46 326
TELLURIDE, CO
Telluride Resort Accommodations ... 1985 433 14 447
WHISTLER, B.C., CANADA
Whistler Chalets .................. 1986 432 12 444
----- ----- ------
Total ............................ 8,756 2,102 10,858 (2)
===== ===== ======
</TABLE>
- ----------
(1) Includes predecessor entities.
(2) Includes 1,545 hotel rooms at Aston Hotels & Resorts, 33 hotel rooms at
Collection of Fine Properties and 33 hotel rooms at Trupp-Hodnett
Enterprises.
(3) Houston and O'Leary and The Maury People are the only Founding Companies
which have non-exclusive rental agreements for their rental properties.
SERVICES OFFERED
SERVICES OFFERED TO VACATIONERS. The Company provides services to
vacationers during all stages of the rental transaction from the selection and
reservation of a condominium or home to the vacationers' arrival and throughout
their stay. To make the selection and reservation process as simple and
convenient as possible, the Company currently provides vacationers with catalogs
containing color photographs and descriptions of available condominiums or
homes, and reservations are taken over the phone by reservation agents at each
of its resort communities who are familiar with the specific condominiums
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and homes available. Many of the Founding Companies use a rating system to
ensure that vacationers' expectations are met by the condominium or home
selected and several of the Founding Companies also have world wide web sites
where vacationers can obtain price and availability information.
For the vacationers' arrival, the Company offers conveniently located
check-in and check-out locations, many of which are located on-site at the front
desk of the Company's condominium properties. Off-site check-in locations are
typically conveniently located and easily accessible in their respective resort
communities. In most destination resort communities, the Company maintains more
than one conveniently located check-in facility. During their stay, vacationers
at most locations are offered frequent cleaning and housekeeping services and
access to emergency contact and maintenance personnel. In most locations, the
Company offers more specialized "concierge" services such as bicycle and ski
equipment rentals, ski lift tickets sales, shuttles to ski areas, golf tee times
and restaurant reservations. The Company typically receives a fee for the
provision of such services.
SERVICES OFFERED TO CONDOMINIUM AND HOME OWNERS. The Company provides
condominium and home owners a wide range of high-quality vacation rental and
property management services designed to meet their broad real estate needs. In
most markets, the Company will assume complete responsibility for the
condominium or home, including marketing, renting and maintaining the specific
property as well as providing security and managing the common properties and
homeowners' association. The Company currently engages in extensive marketing
activities, including direct catalog mailings to prior and prospective
vacationers and direct solicitations of travel agents, wholesalers and package
tour operators. The Company also handles all interaction with vacationers,
including accepting rental payments and security deposits, operating check-in
and check-out locations and offering linen, housekeeping and other services.
Property owners are paid rental income each month for rental activity in the
preceding month and are given a concise, timely and accurate monthly statement
which details the rental activity and management of their condominiums and
homes.
Property maintenance services are provided by both Company employees and
third party independent contractors. Services are either regularly scheduled, or
provided on an "as needed" basis, depending on the service and the location. In
most markets, after each annual or semi-annual inspection, the Company makes
recommendations to property owners for maintenance, refurbishments and
renovations necessary to maintain the quality of their condominiums and homes.
In several of its destination resort markets, the Company provides professional
interior design and refurbishment services to property owners to assist with the
upkeep and appearance of their condominiums and homes. The Company includes
routine maintenance services, such as replacing light bulbs or broken china, as
part of an all inclusive commission structure in certain locations. In other
markets, the Company collects fees from property owners for maintenance services
through service and maintenance agreements and fee for service arrangements.
For owners desiring to sell their vacation condominium or home, many of the
Founding Companies provide traditional real estate brokerage services, including
listing and showing the property. In 1997, net real estate sales commissions
represented approximately 11% of combined revenues. The relative amount of such
revenue varies by Founding Company but is more significant in those markets
where the Company primarily offers free-standing homes, rather than
condominiums, such as Aspen and Nantucket. The Company believes that the
provision of real estate brokerage services provides it with a competitive
advantage in identifying and securing properties for its rental management
services and allowing it to meet all of the needs of vacation property owners.
MARKETING
The marketing efforts of traditional vacation rental and property
management companies, including the Founding Companies, are primarily through
word of mouth referrals from satisfied customers (both vacationers and property
owners), print advertising primarily in local newspapers and regional magazines
and direct mail solicitations and catalogs sent to prior customers. Potential
customers call as a result of a referral or in response to an advertisement or
other promotion and are assisted by reservation agents in selecting the
appropriate vacation property and making the reservation. In addition to these
efforts, several of the Founding Companies also market their rental inventories
to travel agents, tour
41
<PAGE>
package operators and other travel providers. Tour package operators typically
combine transportation to a destination resort with the Company's vacation
condominiums and homes and a car rental. Tour packages are distributed almost
exclusively through travel agents. The Company markets to travel agents and
package tour operators primarily through advertisements in trade publications,
such as the Hotel and Travel Index, and attendance at national and regional
travel industry trade shows. Several of the Founding Companies also have sites
on the world wide web. They are actively updated to increase the probability of
meeting vacationers' search criteria for lodging in their destination resort
communities. Vacation rentals for those companies attributable to initial
contacts through their web sites have increased significantly over the past
three years. The Company estimates that combined revenues for 1997 were derived
50% from traditional direct marketing, 30% from package tour operators and
wholesalers, 16% from travel agents and 4% from world wide web contacts
The Company believes that a national marketing campaign should increase the
effectiveness of the Founding Companies and companies to be acquired in the
future, and expand the universe of potential customers for each resort location
in which the Company operates. The Company plans to leverage the reputations of
the Founding Companies to establish a nationally recognized high quality brand.
The extensive databases regarding previous and potential vacationers maintained
by the Founding Companies will be used to aggressively cross-sell vacation
opportunities in other destination resorts through direct solicitations. Similar
condominiums and homes and services in other leading markets will be offered to
customers of each Founding Company.
The Company also intends to capitalize on its extensive market presence and
increase its use of the world wide web, travel agents and the print media. The
Company plans to leverage the technology and expertise of First Resort to create
a central reservations system easily accessible on the world wide web which
vacationers ultimately can use to view photographs and detailed floor plans of
the condominiums and homes, and make reservations and payments. The Company also
believes that the Company's extensive national selection of vacation
condominiums and homes will make it an attractive partner to travel agents, tour
package operators and other travel providers. These relationships should be a
significant source of new customers and, in particular, will be a valuable
marketing channel for off-peak seasons. Lastly, the Company plans to focus
greater marketing efforts on European and other international travelers through
a more extensive use of international print media, wholesalers and packaged tour
companies.
TECHNOLOGY
First Resort, one of the Founding Companies, is the leading provider of
integrated management, reservations and accounting software for the vacation
rental and property management industry. Ten of the Founding Companies and over
650 other vacation rental and property management companies use First Resort's
software programs. First Resort's software programs were developed to overcome
problems encountered by rental property managers in attempting to utilize
software programs developed for the hotel industry. First Resort's basic
software allows vacation rental and property management companies to automate
and computerize their reservations, billings, rental management and accounting
tasks. Vacation rental and property management companies can use the software to
generate current rates on individual condominium and homes and call up specific
descriptions of those condominiums and homes for potential customers. The
software also allows companies to generate monthly revenue reports for property
owners and to coordinate maintenance and housekeeping schedules. First Resort
also offers additional modules and interfaces, including a work order generator,
activities management system, credit card interface and world wide web enabled
reservations. While the Company plans to use First Resort's resources and
expertise to enhance the technological capabilities of the other Founding
Companies, First Resort will continue to market its software products to
independent vacation rental and property management companies and provide
service and technical support.
The Company intends to rely extensively on the products and management
expertise of First Resort to implement its technology strategy. Management
believes that investment in technology will be critical in building a national,
branded vacation rental and property management company for premier destination
resorts and will be a significant competitive advantage in the future. The
Company plans to utilize
42
<PAGE>
First Resort software to implement a central reservations system with world wide
web functionality to allow vacationers to make their rental arrangements at any
of the Company's properties. First Resort also is developing a JAVA
Client/Server based graphical reservations application that will allow users of
its software to completely integrate their reservations systems with the world
wide web, as well as a JAVA Client/Server based version of all of its existing
software applications. First Resort's software also will allow the Company to
quickly link the Founding Companies' and future acquired companies' databases.
The Company intends to develop proprietary data mining tools in order to enhance
its cross-selling and direct marketing efforts.
COMPETITION
The vacation rental and property management industry is highly competitive
and has low barriers to entry. The industry has two distinct customer groups:
vacation property renters and vacation property owners. The Company believes
that the principal competitive factors in attracting vacation property renters
are: (i) market share and visibility; (ii) quality, cost and breadth of services
and properties provided; and (iii) long-term customer relationships. The
principal competitive factors in attracting vacation property owners are: (i)
the ability to generate higher rental income and (ii) comprehensive management
services at competitive prices. The Company competes for vacationers and
property owners primarily with approximately 3,000 owner-operated companies that
typically operate in a limited geographic area. Some of the Company's
competitors are affiliated with the owners or operators of resorts in which such
competitor provides its services. Certain of these smaller competitors may have
lower overhead cost structures and may be able to provide their services at
lower rates.
The Company also competes for vacationers with large hotel and resort
companies. Many of these competitor companies have greater financial resources
than the Company enabling them to finance acquisition and development
opportunities, to pay higher prices for the same opportunities or to develop and
support their own operations. In addition, many of these companies can offer
vacationers services not provided by vacation rental and property management
companies, and they may have greater name recognition among vacationers. These
companies might be willing to sacrifice profitability to capture a greater
portion of the market for vacationers or pay higher prices than the Company for
the same acquisition opportunities. Consequently, the Company may encounter
significant competition in its efforts to achieve its internal and acquisition
growth objectives as well as its operating strategies focused on increasing the
profitability of the Founding Companies and subsequently acquired companies.
EMPLOYEES
Upon consummation of the Offering, the Company will have approximately
1,300 employees. The Company relies significantly on temporary employees to meet
peak season demands. In the course of performing service and maintenance work,
the Company also utilizes the services of independent contractors. The Company
believes its relationships with its employees and independent contractors are
good.
LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the ordinary
course of business. The Company believes that none of these actions will have a
material adverse effect on its business, financial condition or results of
operations.
FACILITIES
All of the Company's facilities will be leased although two of the Founding
Companies, Collection of Fine Properties and Whistler Chalets, currently own
their facilities. Prior to the Combinations, these Founding Companies are
transferring ownership of their facilities and certain other properties to their
stockholders or to entities controlled by their stockholders who will enter into
leases with the Company for such facilities. The Company intends whenever
possible to require acquired companies that own facilities to also transfer
those facilities to their owners prior to acquisition. The Company currently has
43
<PAGE>
57 leased and owned properties consisting principally of offices, maintenance,
laundry and storage facilities, of which 50 of these are leased under leases
with remaining terms from two months to ten years. Some of the facilities
currently operated by the Company are, or will be after the Combinations, leased
from related parties. See "Certain Transactions -- Leases of Facilities."
GOVERNMENTAL REGULATION
The Company's operations are subject to various federal, state and local
laws and regulations, including (i) licensing requirements applicable to real
estate operations and (ii) laws and regulations relating to consumer protection.
On a federal level, the Federal Trade Commission has taken the most active
regulatory role through the Federal Trade Commission Act, which prohibits unfair
or deceptive acts or competition in interstate commerce. Other federal
legislation to which the Company is or may be subject includes the Real Estate
Settlement Procedures Act, the Fair Debt Collection Practices Act, the
Interstate Land Sales Full Disclosure Act, Telephone Consumer Protection Act,
Telemarketing and Consumer Fraud and Abuse Prevention Act, Fair Housing Act and
the Civil Rights Acts of 1964 and 1968. Many state and local regulations
governing real estate services require permits and licenses to be held by
individuals. In some cases, a required permit or license held by a single
individual may be sufficient to authorize specified activities for all the
Company's employees who work in the state or county that issued the permit or
license. In addition, certain international laws and regulations may also be
applicable to the Company's international operations. The Company believes that
it is in material compliance with all federal, state, local and foreign laws and
regulations to which it is currently subject.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the Company's
directors, executive officers and certain key employees, and those persons who
will become directors and executive officers of the Company upon consummation of
the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- ----- --------------------------------------------------
<S> <C> <C>
David C. Sullivan ............... 58 Chairman and Chief Executive Officer, Director
Jeffery M. Jarvis ............... 42 Senior Vice President and Chief Financial Officer
W. Michael Murphy ............... 52 Senior Vice President, Development
Jules S. Sowder ................. 41 Senior Vice President, Marketing
Luis Alonso ..................... 33 CEO-Collection of Fine Properties; Director
Park Brady ...................... 50 President-Telluride Resort Accommodations;
Director
Douglas R. Brindley ............. 40 President-Brindley & Brindley; Director
Paul T. Dobson .................. 43 Vice President-Maui Condominium and Home;
Director
Sharon Benson Doucette .......... 60 President-The Maury People; Director
Joshua M. Freeman ............... 33 President-Coastal Resorts; Director
Evan H. Gull .................... 51 Vice President-First Resort; Director
Charles O. Howey ................ 70 Chairman-Priscilla Murphy Realty; Director
Heidi O'Leary Houston ........... 45 President-Houston and O'Leary; Director
Daniel L. Meehan ................ 48 President-Resort Property Management; Director
J. Patrick McCurdy .............. 50 President-Whistler Chalets; Director
Andre S. Tatibouet .............. 57 CEO-Aston Hotels & Resorts; Director
Hans F. Trupp ................... 58 Chairman-Trupp-Hodnett Enterprises; Director
Michael D. Rose ................. 56 Director
Elan J. Blutinger ............... 43 Director
D. Fraser Bullock ............... 43 Director
Leonard A. Potter ............... 36 Advisory Director
</TABLE>
DAVID C. SULLIVAN will become the Chairman and Chief Executive Officer and
a director of the Company upon the consummation of the Offering. From April 1995
to December 1997, Mr. Sullivan was the Executive Vice President and Chief
Operating Officer, and a director, of Promus Hotel Corporation, a publicly
traded hotel franchisor, manager and owner of hotels whose brands include
Hampton Inn, Homewood Suites and Embassy Suites. From 1993 to 1995, Mr. Sullivan
was the Executive Vice President and Chief Operation Officer of the Hotel
Division of The Promus Companies Incorporated ("PCI"). He was the Senior Vice
President of Development and Operations of the Hampton Inn/Homewood Suites Hotel
Division of PCI from 1991 to 1993. From 1990 to 1991, Mr. Sullivan was the Vice
President of Development of the Hampton Inn Hotel Division of PCI.
JEFFERY M. JARVIS will become Senior Vice President and Chief Financial
Officer of the Company upon the consummation of the Offering. From April 1995 to
January 1998, Mr. Jarvis was the Vice President, Controller and Principal
Accounting Officer of Promus Hotel Corporation. From September 1994 to April
1995, Mr. Jarvis was the Director of Special Projects for PCI. He was the
Director of Finance of Harrah's St. Louis Riverport from June of 1994 to
September 1994, and was the Assistant Controller of PCI from 1992 to 1994. From
1979 to 1992, Mr. Jarvis was a Senior Audit Manager of Arthur Andersen LLP.
W. MICHAEL MURPHY will become the Senior Vice President of Development of
the Company upon the consummation of the Offering. Mr. Murphy was President of
Footprints International, a company involved in the planning of resort
properties in the Bahamas, from 1996 to 1997. From 1994 to 1996, he
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<PAGE>
was a Senior Managing Director of Geller & Co., a Chicago-based hotel advisory
and asset management firm. Prior to joining Geller & Co. he acted as a hotel
consultant from 1992 to 1994. Mr. Murphy was a founding partner of the hotel
investment firm of Moeckel Murphy (1990-1992) and a founding general partner of
Metric Partners (1981-1990), a real estate investment company that was a joint
venture between the partners of The Fox Group and Metropolitan Life Insurance
Company. Prior to that time, he was the Director of Real Estate for Holiday
Inns, Inc. from 1973 to 1981.
JULES S. SOWDER will become the Senior Vice President of Marketing of the
Company upon the consummation of the Offering. Ms. Sowder was Vice President of
Marketing for Promus Hotel Corporation from 1995 to January 1998. From 1993 to
1995, she served as the Vice President of Marketing for the Hampton Inn division
of Promus Hotel Corporation. She served as Director of Marketing for the Hampton
Inn division from 1990 to 1993. Ms. Sowder has been recognized by Travel Agent
Magazine as one of the Top 10 most successful women in the hotel industry.
LUIS ALONSO will become a director of the Company after the consummation of
the Offering. Mr. Alonso has served as the Chief Executive Officer and President
of Collection of Fine Properties since January 1997, when Tyra Management
Company and two other management companies merged into the newly formed
Collection of Fine Properties. Mr. Alonso was the President of Tyra Management
Company from 1985 until the merger. Mr. Alonso is a member of the Breckenridge
Town Council and is Vice Chairman of the Breckenridge Central Reservation Board.
PARK BRADY will become a director of the Company after the consummation of
the Offering. Mr. Brady is a founder of Telluride Resort Accommodations, and has
served as the President and a director of the company since June 1997. He has
served as Director of Sales and Marketing for Telluride Resort Accommodations
from 1989 to 1994, and as General Manager from 1987 to 1989. From 1994 to 1997,
Mr. Brady developed real estate projects in the Telluride area. Mr. Brady is a
former member of the Telluride Town Council and is also former Chairman of the
Telluride Chamber Resort Association.
DOUGLAS R. BRINDLEY will become a director of the Company after the
consummation of the Offering. Mr. Brindley and his wife Betty Shotton Brindley
are co-founders of both B&B On The Beach, Inc. and Brindley & Brindley Realty &
Development, Inc. Mr. Brindley is a director and President of both companies.
PAUL T. DOBSON will become a director of the Company after the consummation
of the Offering. Mr. Dobson is a co-founder of Maui Condominium and Home and has
served as the company's Vice President since 1991. Mr. Dobson is the current
President of the Vacation Rental Managers Association, a trade organization
representing over 300 vacation rental and property management companies in North
America.
SHARON BENSON DOUCETTE will become a director of the Company after the
consummation of the Offering. Ms. Doucette has been the President and/or
Treasurer of The Maury People since its incorporation in 1990. Prior to that
time, Ms. Doucette was a partner in and subsequently the sole proprietor of a
predecessor real estate company, beginning in the late 1970s.
JOSHUA M. FREEMAN will become a director of the Company after the
consummation of the Offering. Mr. Freeman has served since 1996 as President and
Managing Member of Coastal Resorts Realty L.L.C. and as President and a director
of Coastal Resorts Management, Inc. Mr. Freeman has served as the President and
Chief Operating Officer of Carl M. Freeman Associates, Inc., a real estate
development and management company, since 1992.
EVAN H. GULL will become a director of the Company after the consummation
of the Offering. Mr. Gull is a co-founder of First Resort and is currently a
director and the Vice President of Software Development, a position he has held
since April 1995. Mr. Gull was the Chief Operating Officer of the company from
1993 to 1995. He also served as the Department Manager for Sales and
Administration during that same time period. He is the principal developer of
First Resort's software products.
CHARLES O. HOWEY will become a director of the Company after the
consummation of the Offering. Mr. Howey has served as Chairman of Priscilla
Murphy Realty since January 1997. Mr. Howey has also been President of C.O.
Management Services, a regional property management company, since the 1950's.
He is the founder and past president of Howey & Associates, Inc., an independent
insurance agency.
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<PAGE>
HEIDI O'LEARY HOUSTON will become a director of the Company after the
consummation of the Offering. Ms. Houston formed Houston and O'Leary in 1986 and
has served as President and principal broker since the company's formation.
DANIEL L. MEEHAN will become a director of the Company after the
consummation of the Offering. Mr. Meehan is the co-founder and has served as
President of Resort Property Management since 1982. Mr. Meehan has over 23 years
of experience in the property management industry, the last 19 of them in Park
City.
J. PATRICK MCCURDY will become a director of the Company after the
consummation of the Offering. Mr. McCurdy has served as the President and
Secretary of Whistler Chalets, since he founded the company in 1986. Mr. McCurdy
is a director and a former Vice-President of the Vacation Rental Managers
Association.
ANDRE S. TATIBOUET will become a director of the Company after the
consummation of the Offering. Mr. Tatibouet has been the Chairman and Chief
Executive Officer of Aston Hotels & Resorts since 1969. Mr. Tatibouet is a
director of the Hawaii Hotel Association, the Hawaii Visitors Bureau and the
American Hotel & Motel Association.
HANS F. TRUPP will become a director of the Company after the consummation
of the Offering. Mr. Trupp has served as the Chairman of Trupp-Hodnett
Enterprises since 1987. He was also Chairman of Trupp-McGinty Realty, Inc. from
1984 to 1987 and Trupp McGinty Realtors/Insurers, which was formed in 1978.
MICHAEL D. ROSE will become a director of the Company after the
consummation of the Offering. Mr. Rose served as Chairman of the Board of Promus
Hotel Corporation from April 1995 to December 1997. From June 1995 to December
1996, he was Chairman of the Board of Harrah's Entertainment, Inc. Prior to
that, Mr. Rose served as Chairman of the Board (1989-1995) and President
(1989-1991) of PCI and Chairman of the Board (1984-1990) and President
(1988-1990) of Holiday Corporation. Mr. Rose is also a director of Ashland,
Inc., Darden Restaurants, Inc., First Tennessee National Corporation, General
Mills, Inc., Promus Hotel Corporation and Stein Mart, Inc.
ELAN J. BLUTINGER has been a director of the Company since its formation in
September 1997. He is a co-founder and Managing Director of Alpine Consolidated
II, LLC, a consolidator of highly fragmented businesses. He was a co-founder of
Travel Services International, Inc. and is currently a director of the company
and Chairman of its Compensation Committee. From 1996 until December 1997, he
was a co-founder and Managing Director of Alpine Consolidated LLC. From 1987
until its acquisition in 1995, he was the Chief Executive Officer of Shoppers
Express, which became "OnCart" in 1997, an electronic retailing service in the
grocery industry, and served as a director until December 1997. From 1983 until
its acquisition in 1986 by IDI, Mr. Blutinger was Chief Executive Officer of
DSI, a pioneer in wholesale software distribution. Mr. Blutinger is an investor
in Capstone Partners, LLC.
D. FRASER BULLOCK has been a director of the Company since its formation in
September 1997. Mr. Bullock is a Managing Director of Alpine Consolidated II,
LLC. He was a co-founder of Travel Services International, Inc. and is currently
a director of the company and Chairman of its Audit Committee. From its
inception in 1994 to 1996, he was the President and Chief Operating Officer of
VISA Interactive, a wholly-owned subsidiary of VISA International. In 1993, Mr.
Bullock became the President and Chief Operating Officer of U.S. Order, Inc., a
provider of remote electronic transaction processing, until it was acquired by
VISA International in 1994. From 1991 to 1992, Mr. Bullock was the Senior Vice
President of U.S. Order, Inc. From 1986 to 1991, he was the Chief Financial
Officer and Executive Vice President of World Corp., Inc., a holding company
with various operating subsidiaries including World Airways, Inc. Mr. Bullock
was a founding partner of Bain Capital, a Manager of Bain and Company, and a
founder of MediVision, Inc., a consolidation of eye surgery centers.
LEONARD A. POTTER has been a director of the Company since its formation in
September 1997. After the Offering, he will be an Advisory Director to the
Board. Mr. Potter is a co-founder and Managing Director of Capstone Partners,
LLC, a venture firm specializing in consolidation transactions. He was a
co-founder of Travel Services International, Inc. and is currently an advisory
director to its board of
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directors. Capstone Partners, LLC was a co-sponsor of Staffmark, Inc., a
consolidation of six staffing service companies in September 1996 with a
simultaneous initial public offering. Prior to forming Capstone Partners, LLC in
April 1996, Mr. Potter was an attorney at Morgan, Lewis & Bockius LLP for more
than five years practicing in the areas of mergers and acquisitions and
securities law. While at Morgan, Lewis & Bockius he represented a number of
public companies in connection with their creation and subsequent implementation
of consolidation strategies similar to the Company's, including U.S. Office
Products, F.Y.I., Inc. and Cotelligent Group.
BOARD OF DIRECTORS
BOARD COMMITTEES. The Company expects that the Board of Directors will
establish an Executive Committee, Audit Committee and a Compensation Committee,
effective upon the closing of the Offering. The Executive Committee will be
granted such authority as may be determined from time to time by a majority of
the Board of Directors. The Audit Committee will review the results and scope of
the audit and other services provided by the Company's independent accountants.
The Compensation Committee will approve salaries and certain incentive
compensation for management and key employees of the Company and will administer
the 1998 Long-Term Incentive Plan.
DIRECTOR COMPENSATION. Directors who are also employees of the Company or
one of its subsidiaries will not receive additional compensation for serving as
directors. Each director who is not an employee of the Company or one of its
subsidiaries will receive $2,000 for attendance at each Board of Directors
meeting and $1,000 for each committee meeting (unless held on the same day as a
Board of Directors meeting). In addition, under the Company's 1998 Long-Term
Incentive Plan, each non-employee director will automatically receive an option
to acquire 10,000 shares of Common Stock upon such person's initial election as
a director and, subject to a certain exception, an annual option to acquire
5,000 shares at each annual meeting of the Company's stockholders thereafter at
which such director is re-elected or remains a director. See "-- 1998 Long-Term
Incentive Plan." Directors also will be reimbursed for out-of-pocket expenses
incurred in attending meetings of the Board of Directors or committees thereof,
in their capacity as directors.
The Advisory Director will attend meetings of the Board of Directors,
consult with officers and directors of the Company and provide guidance, but not
direction, concerning management and operation of the Company's business. The
Advisory Director is not a director of the Company and, accordingly, will not
have a right to vote as a director.
All officers serve at the discretion of the Board of Directors.
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE
The Company was incorporated in September 1997, has conducted no operations
and generated no revenues to date and did not compensate any of its executive
officers for services rendered in 1997. The Company anticipates that during 1998
its most highly compensated executive officers will be Messrs. Sullivan, Jarvis,
Murphy and Ms. Sowder. The Company will grant Messrs. Sullivan, Jarvis, Murphy
and Ms. Sowder options to purchase 100,000, 50,000, 50,000 and 25,000 shares of
Common Stock, respectively, at the initial public offering price per share.
These options will vest in equal installments on each of the four anniversaries
of the date of the consummation of the Offering.
Messrs. Sullivan, Jarvis, Murphy and Ms. Sowder have entered into
employment agreements with the Company, effective upon the consummation of the
Offering, providing for annual base salaries of $200,000, $150,000, $150,000 and
$125,000, respectively. Each of these agreements are for a term of three years
(the "Initial Term"). In addition, certain executive officers of the Founding
Companies, including each representative of the Founding Companies serving as a
director of the Company, other than Messrs. Brady, Freeman and Howey, will enter
into employment agreements for an Initial Term of three years, effective upon
the consummation of the Offering. Unless terminated or not renewed by the
Company or the employee, the term will continue after the Initial Term on a
year-to-year basis on the same terms and conditions existing at the time of
renewal. Each employment agreement will contain a covenant not to compete (the
"Covenant") with the Company for a period of two years immediately following
termi-
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<PAGE>
nation of employment or, in the case of a termination by the Company without
cause in the absence of a change in control, for a period of one year following
termination of employment. Under the Covenant, the executive officer generally
is prohibited from: (i) engaging in any hotel management or non-commercial
property management, rental or sales business in direct competition with the
Company within defined geographic areas in which the Company or its subsidiaries
does business; (ii) enticing a managerial employee of the Company away from the
Company; (iii) calling upon any person or entity which is, or has been, within
one year prior to the date of termination, a customer of the Company; or (iv)
calling upon a prospective acquisition candidate which the employee knew was
approached or analyzed by the Company, for the purpose of acquiring the entity.
The Covenant may be enforced by injunctions or restraining orders and shall be
construed in accordance with the changing location of the Company.
Each of these employment agreements will provide that, in the event of a
termination of employment by the Company without cause during the Initial Term
the employee will be entitled to receive from the Company an amount equal to his
or her then current salary for the remainder of the Initial Term or for one
year, whichever is greater. In the event of a termination of employment without
cause after the Initial Term of the employment agreement, the employee will be
entitled to receive an amount equal to his or her then current salary for one
year. In the event of a change in control of the Company (as defined in the
agreement) during the Initial Term, if the employee is not given at least five
days' notice of such change in control and the successor's intent to be bound by
such employment agreement, the employee may elect to terminate his or her
employment and receive in one lump sum three times the amount he or she would
receive pursuant to a termination without cause during the Initial Term. The
employment agreements also state, that in the event of a termination without
cause by the Company or a change in control, the employee may elect to waive the
right to receive severance compensation and, in such event, the noncompetition
provisions of the employment agreement will not apply. In the event the employee
is given at least five days' notice of such change in control, the employee may
elect to terminate his or her employment agreement and receive in one lump sum
two times the amount he or she would receive pursuant to a termination without
cause during the Initial Term. In such an event, the noncompetition provisions
of the employment agreement would apply for two years from the effective date of
termination.
Each Agreement and Plan of Organization also contains a covenant
prohibiting the former owners of the Founding Companies from competing with the
Company for a period of three years following the consummation of the Offering.
These noncompetition provisions will not apply with respect to a former owner of
a Founding Company who has entered into an employment agreement with the Company
in the event the former owner is terminated without cause and elects to waive
the right to receive severance compensation.
1998 LONG-TERM INCENTIVE PLAN
No stock options were granted to, or exercised by or held by any executive
officer in 1997. In March 1998, the Board of Directors and the Company's
stockholders approved the Company's 1998 Long-Term Incentive Plan (the "Plan").
The purpose of the Plan is to provide a means by which the Company can attract
and retain executive officers, employee directors, other key employees,
non-employee and advisory directors and consultants of and other service
providers to the Company and its subsidiaries and to compensate such persons in
a way that provides additional incentives and enables such persons to acquire or
increase a proprietary interest in the Company. Individual awards under the Plan
may take the form of one or more of: (i) either incentive stock options ("ISOs")
or non-qualified stock options ("NQSOs"); (ii) stock appreciation rights
("SARs"); (iii) restricted or deferred stock; (iv) dividend equivalents; (v)
bonus shares and awards in lieu of Company obligations to pay cash compensation;
(vi) non-employee directors' deferred shares; and (vii) other awards the value
of which is based in whole or in part upon the value of the Common Stock.
The Plan will generally be administered by a committee (the "Committee"),
which will initially be the Compensation Committee of the Board of Directors,
except that the Board of Directors will itself perform the Committee's functions
under the Plan for purposes of grants of awards to non-employee
49
<PAGE>
directors, and may perform any other function of the Committee as well. The
Committee generally is empowered to select the individuals who will receive
awards and the terms and conditions of those awards, including exercise prices
for options and other exercisable awards, vesting and forfeiture conditions (if
any), performance conditions, the extent to which awards may be transferable and
periods during which awards will remain outstanding. Awards may be settled in
cash, shares, other awards or other property, as determined by the Committee.
The Company has reserved 1,814,000 shares of Common Stock for use in
connection with the Plan. The maximum number of shares of Common Stock that may
be subject to outstanding awards under the Plan will not exceed 12% of the
aggregate number of shares of Common Stock outstanding, minus the number of
shares previously issued pursuant to awards granted under the Plan. Shares of
Common Stock which are attributable to awards which have expired, terminated or
been canceled or forfeited are available for issuance or use in connection with
future awards.
The Plan provides for: (i) the automatic grant to each non-employee
director and advisory director (a "Non-Employee Director") serving at the
commencement of the Offering of an option to purchase 10,000 shares; and
thereafter (ii) the automatic grant to each Non-Employee Director of an option
to purchase 10,000 shares upon such person's initial election as a director or
appointment as an advisory director. In addition, the Plan provides for an
automatic annual grant to each Non-Employee Director of an option to purchase
5,000 shares at each annual meeting of stockholders following the Offering;
provided, however, that if the first annual meeting of stockholders following a
person's initial election as a non-employee director or appointment by the Board
as an advisory director is within three months of the date of such election or
appointment, such person will not be granted an option to purchase 5,000 shares
of Common Stock at such annual meeting. These options will have an exercise
price per share equal to the fair market value of a share at the date of grant.
Options granted under the Plan will expire at the earlier of 10 years from the
date of grant or one year after termination of service as a director or advisory
director, and options will be immediately exercisable. In addition, the Plan
permits Non-Employee Directors to elect to receive, in lieu of cash directors'
fees, shares, or credits representing "deferred shares" that may be settled at
future dates, as elected by the Non-Employee Directors. The number of shares or
deferred shares received will be equal to the number of shares which, at the
date the fees would otherwise be payable, will have an aggregate fair market
value equal to the amount of such fees. At the commencement of the Offering, the
Non-Employee Directors will be Messrs. Blutinger, Brady, Bullock, Freeman,
Howey, Potter and Rose.
The Plan will remain in effect until terminated by the Board of Directors.
The Plan may be amended by the Board of Directors without the consent of the
stockholders of the Company, except that any amendment, although effective when
made, will be subject to stockholder approval if required by any federal or
state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted. The
number of shares reserved or deliverable under the Plan, the annual
per-participant limits, the number of shares subject to options automatically
granted to non-employee directors and the number of shares subject to
outstanding awards are subject to adjustment in the event of stock splits, stock
dividends and other extraordinary corporate events.
In connection with the Offering, options in the form of NQSOs to purchase a
total of 400,000 shares of Common Stock of the Company will be granted to
management of the Company, including 100,000 shares to Mr. Sullivan, 50,000
shares to Mr. Jarvis, 50,000 shares to Mr. Murphy, 25,000 shares to Ms. Sowder,
an aggregate of 250,000 shares to Alpine Consolidated II, LLC and Capstone
Partners, LLC and an aggregate of 945,000 shares to the employees of the Company
and the Founding Companies. Each of the foregoing option grants will have an
exercise price equal to the initial public offering price per share in the
Offering, and will vest as to 25% each on the date that is 12 months, 24 months,
36 months and 48 months after the closing of the Offering. Unvested options
generally will be forfeited upon a termination of employment that is voluntary
by the participant. Upon a change of control of the Company (as defined in the
Plan), vesting will be accelerated. The options generally will expire on the
earlier of 10 years after the date of grant or three months after termination of
employment (immediately in the event of a termination for cause), unless
otherwise determined by the Committee.
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CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
VPI was formed in September 1997. VPI was initially capitalized by Alpine
Consolidated II, LLC, of which Elan J. Blutinger and D. Fraser Bullock, each a
Director of the Company, are Managing Directors, and Capstone Partners, LLC, of
which Leonard A. Potter, an Advisory Director of the Company, is a Managing
Director. As a result of a 8,834.76-for-one stock split effected in the form of
a stock dividend on March 9, 1998, the 300 shares of Common Stock initially
issued by VPI will aggregate 2,650,428 shares on the closing of the Offering.
In November and December of 1997 and January of 1998, the Company issued a
total of 487,369 shares of Common Stock (post-split) at $.01 per share to
various directors and members of management, including the following
individuals: Mr. Sullivan -- 289,202 shares, Mr. Jarvis -- 40,000 shares, Ms.
Sowder -- 25,000 shares, Mr. Dobson -- 2,000 shares, and Mr. Brindley -- 1,167
shares. The Company also issued 84,467 shares of Common Stock at $.01 per share
to certain consultants to the Company during the same period.
VPI Funding, LLC ("VPIF"), a Delaware limited liability company, has agreed
to lend to VPI from time to time an amount equal to the legal, accounting and
other transactional costs, expenses and disbursements incurred by VPI in
connection with the Combinations and the Offering. The member managers of VPIF
are Alpine Consolidated II, LLC and Capstone Partners, LLC. Any amounts loaned
by VPIF to VPI with respect to the foregoing will be repaid without interest by
the Company from the gross proceeds of the offering at the time of the
Combinations. As of March 6, 1998, VPIF had loaned $1.0 million to VPI.
The aggregate consideration to be paid by VPI in the Combinations consists
of (i) approximately $61.8 million in cash and assumed indebtedness (ii)
6,173,703 shares of Common Stock. The Company also will assume an aggregate of
$219,000 of indebtedness of the Founding Companies in connection with the
Combinations. The consideration to be paid for each of the Founding Companies
was determined through arm's-length negotiations between VPI and representatives
of each Founding Company. The factors considered by the Company in determining
the consideration to be paid included, among others, the historical operating
results, the net worth, the amount and type of indebtedness and the future
prospects of the Founding Companies. Each Founding Company was represented by
independent counsel in the negotiation of the terms and conditions of the
Combinations.
The aggregate consideration to be paid by VPI for each of the Founding
Companies by the Company are as follows:
<TABLE>
<CAPTION>
SHARES OF
COMPANY CASH COMMON STOCK
- ----------------------------------------- -------------------- -------------
<S> <C> <C>
Aston Hotels & Resorts .................. $ 29,500,000 1,708,333
Brindley & Brindley ..................... 2,000,000 195,000
Coastal Resorts ......................... -- 816,667
Collection of Fine Properties ........... 4,850,000 404,167
First Resort ............................ 2,854,800 290,767
Houston and O'Leary ..................... 2,470,000 248,167
Jupiter Property Management ............. 1,257,000 104,750
Maui Condominium and Home ............... 1,375,000 166,667
The Maury People ........................ 2,000,000 150,000
Priscilla Murphy Realty ................. 5,500,000 (1) 1,093,333
Resort Property Management .............. 1,200,000 108,333
Telluride Resort Accommodations ......... 3,013,762 125,103
Trupp-Hodnett Enterprises ............... 5,000,000 627,833
Whistler Chalets ........................ 800,000 134,583
------------ ---------
$ 61,820,562 6,173,703
============ =========
</TABLE>
- ----------
(1) Represents estimated amount of indebtedness of Priscilla Murphy Realty to be
retired at the time of the Combinations.
The above table does not include debt of approximately $219,000 that will
be assumed by VPI.
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<PAGE>
The purchase price of certain of the Founding Companies will be increased
by working capital adjustments based on cash and receivable balances as of March
31, 1998 of the respective Founding Companies. In addition, net assets of
approximately $10.7 million, including certain non-operating assets and the
assumption or retirement of certain liabilities will be excluded from the
Combinations and retained by certain former stockholders of the Founding
Companies.
The closing of each of the Combinations is subject to customary conditions.
These conditions include, among others, the accuracy on the closing date of the
representations and warranties made by the Founding Companies, their principal
stockholders and by the Company; the performance of each of their respective
covenants included in the agreements relating to the Combinations; and the
nonexistence of a material adverse change in the business, financial condition
or results of operations of each Founding Company. There can be no assurance
that the conditions of the Combinations will be satisfied or waived or that the
agreements relating to the Combinations will not be terminated prior to
consummation. If any of the Combinations is terminated for any reason, the
Company likely will not consummate the Offering on the terms described herein.
Pursuant to the agreements to be entered into in connection with the
Combinations, substantially all of the stockholders of the Founding Companies
have agreed not to compete with the Company for three years, commencing on the
date of closing of the Offering.
In connection with the Combinations, and as consideration for their
interests in the Founding Companies, certain executive officers, directors and
holders of more than 5% of the outstanding shares of Common Stock of the
Company, together with their spouses and trusts for the benefit of their
immediate families will receive, directly or indirectly, cash and shares of
Common Stock of the Company as follows:
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
-------------------- -------------
<S> <C> <C>
Luis Alonso .................... $ 1,455,000 121,250
Park Brady ..................... 304,763 31,041
Douglas R. Brindley ............ 2,000,000 195,000
Paul T. Dobson ................. 687,500 83,334
Sharon Benson Doucette ......... 2,000,000 150,000
Joshua M. Freeman .............. -- 803,519
Evan H. Gull ................... 1,057,333 88,111
Charles O. Howey ............... 2,145,000 (1) 426,401
Heidi O'Leary Houston .......... 2,470,000 248,167
Daniel L. Meehan ............... 1,200,000 98,333
J. Patrick McCurdy ............. 800,000 134,583
Andre S. Tatibouet ............. 20,930,000 1,708,333
Hans F. Trupp .................. 1,000,000 386,692
</TABLE>
- ----------
(1) Represents estimated amount of the pro rata portion of indebtedness of
Priscilla Murphy Realty to be retired at the time of the Combinations.
LEASES OF FACILITIES
BRINDLEY & BRINDLEY. During 1995, 1996 and 1997, Brindley & Brindley leased
office space and facilities for its property management and real estate
brokerage activities from Douglas R. Brindley and his wife, Betty Shotton
Brindley, pursuant to two oral agreements, each on a month-to-month basis. The
aggregate annual rent paid by Brindley & Brindley to the Brindleys was $63,800,
$70,800 and $103,500 in 1995, 1996 and 1997, respectively. Brindley & Brindley
entered into two written lease agreements with the Brindleys for these
facilities that commenced on January 1, 1998. The terms of these leases expire
December 31, 2002, with options to extend for two 5-year periods at the end of
the lease periods and provide for aggregate annual rental payments of
approximately $133,500.
COASTAL RESORTS. Coastal Resorts leases office space and facilities under
three separate lease agreements from Carl M. Freeman Associates, Inc. ("CMFA").
Joshua M. Freeman is the President and a stockholder of CMFA, and his father is
the controlling stockholder of CMFA. The aggregate annual rent paid by Coastal
Resorts to CMFA under these leases was approximately $69,000 and $77,000 in 1996
and 1997, respectively. The leases terminate on December 31, 1998, December 31,
1999 and May 21, 2002.
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<PAGE>
COLLECTION OF FINE PROPERTIES. The Company has adopted a policy that,
wherever possible, it will not own any real property. Therefore, the Company has
required two Founding Companies that own real property, Collection of Fine
Properties and Whistler Chalets, to agree to transfer such real property to
their stockholders or to entities controlled by their stockholders prior to the
Combinations. Accordingly, certain office space owned by Collection of Fine
Properties will be distributed to an entity or entities controlled by the
stockholders thereof, including Luis Alonso, prior to the Combinations and then
leased to the Company. Lease agreements for these properties will be entered
into prior to the Combinations. The leases for such property will provide for
aggregate annual rentals of approximately $73,000.
THE MAURY PEOPLE. It is presently contemplated that in early 1999, The
Maury People will transfer its offices to new facilities owned by a trust of
which Sharon Doucette is the primary beneficiary. The lease for the new
facilities will begin in April 1999 and terminate on March 31, 2004, with one
option to extend for an additional five years. The annual base rental payments
on the lease will be $185,400 for the first year, and increase each year
thereafter by the amount of increase, if any, in the Consumer Price Index,
subject to a 6% annual ceiling on increases.
PRISCILLA MURPHY REALTY. Priscilla Murphy Realty has leased office space
and facilities since August 25, 1997, from trusts affiliated with Charles O.
Howey, under three separate lease agreements. The aggregate rent paid in 1997 by
Priscilla Murphy Realty to Mr. Howey's affiliated trusts under these lease
agreements was approximately $45,000. Two of the leases terminate on June 30,
2001 and the remaining lease terminates on December 31, 2002. Priscilla Murphy
Realty entered into a fourth lease with the same trusts on January 28, 1998, to
rent an additional office property for an annual rent payment of $12,000. This
lease also terminates on December 31, 2002.
RESORT PROPERTY MANAGEMENT. Resort Property Management plans to move into
new office space that is owned by Daniel L. Meehan and his wife, Kimberlie
Meehan, in June 1998. It is anticipated that the term of the lease will be for
ten years with two options to extend the lease for five years each and that the
estimated annual rent for the new facilities will be approximately $100,000,
with annual increases equal to the increase in the Consumer Price Index. A lease
agreement will be entered into prior to the Combinations.
TRUPP-HODNETT ENTERPRISES. Trupp-Hodnett Enterprises leases office space
and facilities that are co-owned by Hans F. Trupp for its management and real
estate brokerage activities, under four separate lease agreements. Trupp-Hodnett
Enterprises made aggregate annual rent payments of $57,313, $92,713 and $109,513
for these properties in 1995, 1996 and 1997, respectively. Two of the leases
terminate on December 31, 2009, one terminates on December 31, 2008 and the
fourth terminates on April 30, 2007.
WHISTLER CHALETS. Office space owned by Whistler Chalets will be
distributed to an entity controlled by J. Patrick McCurdy prior to the
Combinations and then leased to the Company. The lease for such property will
have a term of 5 years, with 3 renewal options of 5 years each, and will provide
for annual rentals of approximately $30,000. The lease agreement will be entered
into prior to the Combinations.
MANAGEMENT AGREEMENTS
ASTON HOTELS & RESORTS. Since 1994, Aston Hotels & Resorts has managed two
hotels owned by Andre S. Tatibouet. The aggregate management fees received by
Aston Hotels & Resorts for the management of these properties were $243,000,
$501,000 and $506,000 in 1995, 1996 and 1997, respectively. The management
agreements for these hotels terminate on December 31, 2003. In addition Aston
Hotels & Resorts currently is a party to two lease and management agreements for
two hotels dated February 1, 1996 and February 21, 1991, respectively. Prior to
the Combinations, Aston Hotels & Resorts will transfer the lease and management
agreements to AST Holdings, Inc. and simultaneously enter into management
agreements with AST Holdings, Inc. to manage these properties. AST Holdings,
Inc. is owned by Mr. Tatibouet.
COLLECTION OF FINE PROPERTIES. Prior to the Combinations, Collection of
Fine Properties will distribute to Luis Alonso and another stockholder eight
condominiums currently owned and managed by Collection of Fine Properties.
Subsequently, Collection of Fine Properties will manage these properties,
pursuant to its standard management agreement.
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TRUPP-HODNETT ENTERPRISES. Pursuant to an agreement dated January 1, 1994,
Trupp-Hodnett Enterprises provides management services for a 74-room hotel that
is co-owned by Hans F. Trupp, for $42,000 a year. The management agreement
terminates on December 31, 1999. Trupp-Hodnett Enterprises also manages several
vacation condominiums owned or co-owned by Mr. Trupp pursuant to its standard
management agreement. Trupp-Hodnett Enterprises has received aggregate property
management fees related to Mr. Trupp's ownership of these properties of $53,480,
$48,390 and $44,233 for 1995, 1996 and 1997, respectively.
WHISTLER CHALETS. Prior to the Combinations, Whistler Chalets will
distribute to J. Patrick McCurdy six vacation condominiums currently owned and
managed by Whistler Chalets. Subsequently, Whistler Chalets will manage these
properties, together with one additional vacation condominium owned by Mr.
McCurdy that it currently manages, pursuant to its standard management
agreement. Additionally, Whistler Chalets paid management fees to Whistler
Blackcomb Central Reservations, Inc. ("Whistler Blackcomb") for the management
services of Mr. McCurdy in the amount of $513,900, $537,176 and $29,600 for
1995, 1996 and 1997, respectively. Mr. McCurdy is the President and owner of
Whistler Blackcomb. As of December 31, 1997, Whistler Chalets was indebted to
Whistler Blackcomb in the amount of $471,811 for unpaid management fees. These
fees will be paid prior to the Combinations. No management fees will be payable
to Whistler Blackcomb after the Combinations.
OTHER TRANSACTIONS
ASTON HOTELS & RESORTS. Since July 22, 1997, Aston Hotels & Resorts has
provided administrative services to AST International, LLC. ("AST
International"), an entity controlled by Andre S. Tatibouet, under an oral
agreement, and will continue to perform these services after the Combinations
under a written agreement. AST International has been billed $419,730 by Aston
Hotels & Resorts for its services since July 22, 1997.
Aston Hotels & Resorts receives sales representation and accounting
services from HCP, Inc. ("HCP"), a company owned by Mr. Tatibouet. Aston Hotels
& Resorts paid HCP $390,000, $481,000 and $476,000 in 1995, 1996 and 1997,
respectively, for these services. This arrangement will not continue after the
Combinations.
Under the terms of an oral agreement, Aston Hotels & Resorts provides
management and clerical personnel for AST Development, Inc. ("AST Development")
in return for consulting and support services. AST Development is owned by Mr.
Tatibouet. The costs incurred by Aston Hotels & Resorts relative to AST
Development were $125,000, $125,000 and $126,000 for 1995, 1996 and 1997,
respectively. This agreement will continue in a limited form pursuant to a
written agreement after the Combinations.
Aston Hotels & Resorts has oral consulting agreements with Mr. Tatibouet's
wife and Mr. Tatibouet's mother, who received annual aggregate compensation from
Aston Hotels & Resorts of $229,000, $221,000 and $232,000 in 1995, 1996 and
1997, respectively. These agreements will not continue after the Combinations.
Additionally, Aston Hotels & Resorts has executed three promissory notes, each
payable to Mr. Tatibouet's wife, in the aggregate amount of $285,000. These
notes are each dated December 31, 1997, and each comes due on February 28, 1999.
These notes will be paid prior to the Combinations.
Mr. Tatibouet currently owes Aston Hotels & Resorts an aggregate amount of
$7.3 million. In addition, the Coral Reef Hotel, the Waikiki Beachside Hotel,
Aston International and HCP, Inc., all entities owned or controlled by Mr.
Tatibouet, in the aggregate owe Aston Hotels & Resorts a total of $1,797,243. No
interest is being charged on these receivables, of which $4 million will remain
outstanding after the Combinations. The remaining $4 million balance will bear
interest at the Prime Rate less 0.5, with a minimum of 6% and maximum of 10%, to
be paid within ten years. Additionally, as of December 31, 1997, Aston Hotels &
Resorts had guaranteed or cosigned on personal debts and obligations of Mr.
Tatibouet in the aggregate amount of $17,374,000. The Company will be released
from liability on these debts or they will be repaid prior to, or as soon as
practicable after, the Combinations.
Aston Hotels & Resorts leased storage space from a limited partnership,
Waikiki International Plaza in which Mr. Tatibouet and Aston Hotels & Resorts
are each general partners with respective 45% and 5% partnership interests. The
leased storage space was sold to an unrelated third party in December 1997. The
aggregate annual rent paid by Aston Hotels & Resorts to Waikiki International
Plaza was $128,000, $114,000 and $110,000 in 1995, 1996 and 1997, respectively.
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BRINDLEY & BRINDLEY. Brindley & Brindley receives real estate sales
commissions from Outer Banks Ventures, Inc. ("Outer Banks Ventures") pursuant to
an exclusive listing agreement giving Brindley & Brindley the right to sell all
land developed by the company. Douglas R. Brindley is the Vice President of
Outer Banks Ventures and his father is the owner and President of Outer Banks
Ventures. Brindley & Brindley received commissions from Outer Banks Ventures in
the amount of $7,200, $23,800 and $69,800 in 1995, 1996 and 1997, respectively.
COASTAL RESORTS. Coastal Resorts purchased all the assets of Interstate
Realty Co., Inc. ("Interstate Realty") from CMF Properties, Inc. ("CMF
Properties") on December 30, 1996 for $759,000. Coastal Resorts purchased all
the outstanding stock of Sea Colony Management, Inc., a wholly owned subsidiary
of CMF Properties on December 30, 1996 for $132,000. CMF Properties was a
majority owned subsidiary of CMFA. These acquisitions were financed by loans
from CMFA to Coastal Resorts in the aggregate amount of $675,000 which were paid
in full on January 13, 1998.
On December 31, 1997, Coastal Resorts sold the service mark "Sea Colony" to
Sea Colony Development Corporation, Inc. ("Sea Colony Development") for $115,000
and a ten year license to use the service mark at no charge under the terms of a
license agreement. Sea Colony Development is owned by Joshua M.
Freeman.
Pursuant to an exclusive listing agreement with Sea Colony Development
dated January 1, 1997, Coastal Resorts receives a real estate sales commission
of 6.5% of the purchase price of each new home sold at the Sea Colony
condominium community in Bethany Beach, Delaware. Under the agreement, Coastal
Resorts is also required to develop a marketing plan, at its own expense, to
promote home sales in the Sea Colony community. Coastal Resorts earned
commissions in the amount of $1,244,000 for 1997. As of December 31, 1997,
Coastal Resorts had a net receivable from Sea Colony Development of $673,707,
consisting of a receivable of $1,244,000 for home sales commissions and a
payable of $570,435 for commissions, marketing and advertising expenses paid by
Sea Colony Development on behalf of Coastal Resorts. This agreement terminates
on December 31, 1999.
Pursuant to an agreement dated January 1, 1997, Coastal Resorts receives
sales commissions of 6% for selling properties developed by Cove Resort Limited
Partnership ("Cove Resort"). CMFA is the general partner and a 70% owner of Cove
Resort. Under the agreement, Coastal Resorts is also required to develop a
marketing plan, at its own expense, to promote home sales in The Cove community.
Coastal Resorts was paid $18,750 under this agreement in 1997. The agreement
terminates on December 31, 1999.
Coastal Resorts has a management agreement with CMF Fitness, Inc. ("CMF
Fitness") dated June 1, 1996, to manage the Sea Colony Fitness Center for $5,834
a month. CMF Fitness is a wholly owned subsidiary of CMFA. CMF Fitness paid
Coastal Resorts $40,838 and $70,000 in 1996 and 1997, respectively, under the
agreement. The agreement terminates on the earlier of (i) December 31 of the
year in which the last new home in the Sea Colony development is sold or (ii)
December 31, 2005.
Pursuant to an agreement with Sea Colony Water Company, L.L.C. ("Sea Colony
Water") dated January 1, 1997, Coastal Resorts was appointed exclusive agent for
and manager of the Sea Colony Water Plant. Sea Colony Water is a wholly owned
subsidiary of CMFA. Under the terms of the agreement, Coastal Resorts is
entitled to retain all revenue collected by the water plant, less costs and
expenses and certain payments to Sea Colony Water. Coastal Resorts received net
revenues of $143,488 in 1997 from its management of the water plant. This
agreement terminates on December 31, 2001 or upon the sale of the water plant.
Coastal Resorts has also entered into an agreement with Sea Colony Water dated
January 1, 1997 to provide construction supervision services for an upgrade to
the water plant for two years. Coastal Resorts' fee for the services is the
direct costs it incurs plus 5%. Coastal Resorts did not receive any payments
under this agreement in 1997.
Pursuant to an agreement with CMF Paymaster, Inc. ("Paymaster") dated
January 1, 1997, Paymaster provides administrative services relating to payroll
and employee benefit matters to Coastal Resorts, at a cost of $2 per pay period
per employee. Paymaster is indirectly owned by Mr. Freeman. Coastal Resorts did
not make any payments to Paymaster under this agreement in 1997. This agreement
terminates on December 31, 1999.
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COLLECTION OF FINE PROPERTIES. Pursuant to an oral agreement, Collection of
Fine Properties performs accounting and bookkeeping services for L&D Development
Company ("L&D Development"). Luis Alonso owns 30% of L&D Development. The annual
amounts paid to Collection of Fine Properties from L&D Development were $60,000,
$57,000 and $75,000 in 1995, 1996 and 1997, respectively.
Collection of Fine Properties has a mortgage note for $125,000 as of
December 31, 1997 at an interest rate of the Prime Rate plus 0.5%, which is
guaranteed by Mr. Alonso and others and will be assumed prior to the
Combinations by them.
In addition, as of December 31, 1997, the Company had receivables in the
amount of $633,509 from Mr. Alonso and persons affiliated with him.
FIRST RESORT. First Resort purchased the rights to software designed by
Evan H. Gull under the terms of a purchase agreement dated January 1, 1987. The
agreement gave Mr. Gull the right to receive royalty payments through 1997. The
royalties paid by First Resort to Mr. Gull were $61,800 , $57,040 and $24,307 in
1995, 1996 and 1997, respectively.
HOUSTON AND O'LEARY. Effective as of January 1, 1998 a stockholder of
Houston and O'Leary redeemed his stock and took on certain liabilities of
Houston and O'Leary in return for receiving certain assets of Houston and
O'Leary, including several notes receivable to Houston & O'Leary from the
stockholder and Heidi O'Leary Houston, in the aggregate amount of $297,000.
PRISCILLA MURPHY REALTY. Charles O. Howey loaned $200,000 to Priscilla
Murphy Realty on December 31, 1997 at an interest rate of 7.95%. As of December
31, 1997, the balance on this loan was $150,000. The note does not have a set
maturity date. As of December 31, 1997, Priscilla Murphy Realty also was
indebted to C.O. Condominium Corporation for $2,063,000 under the terms of a
promissory note issued to C.O. Condominium Corporation, dated January 3, 1997.
The interest rate on the note is 7.95%. C.O. Condominium Corporation is owned by
Mr. Howey.
RESORT PROPERTY MANAGEMENT. Daniel L. Meehan loaned Resort Property
Management $50,000 on May 25, 1997 and $60,000 on September 29, 1997, both loans
at an interest rate of 9.5%. The loans were both paid on November 10, 1997. Mr.
Meehan also maintains a bank revolving credit agreement for $250,000 at a 10.25%
interest rate, under which he draws funds which he loans to Resort Property
Management for cash flow purposes. Resort Property Management makes interest and
principal payments on the loan directly to the bank. At the present time, the
balance on the revolving credit is zero.
TELLURIDE RESORT ACCOMMODATIONS. Park Brady will enter into a consulting
agreement with the Company, effective upon the consummation of the Offering.
The term of the agreement shall be for one year, during which time Mr. Brady
will provide up to ten hours of consulting services per week for a nominal
consideration.
TRUPP-HODNETT ENTERPRISES. In 1997, Trupp-Hodnett Enterprises sold a
building, the related land (with a total book value of $135,000) and the related
$124,000 mortgage note payable to the stockholders of Trupp-Hodnett Enterprises,
including Hans F. Trupp, for $11,000 in cash.
WHISTLER CHALETS. As of December 31, 1997, Res - Resort Services Inc.
("Resort Services") was indebted to Whistler Chalets in the amount of $83,639
for various expenses paid by Whistler Chalets on behalf of Resort Services.
Resort Services is owned by J. Patrick McCurdy. Mr. McCurdy is currently
indebted to Whistler Chalets in the amount of $144,426 for advances against his
management fees and expenses. Both of these debts will be paid prior to the
Combinations.
PUT-CALL AGREEMENT
The Company has entered into a put-call agreement with Scottsdale Resort
Accommodations, L.L.C. ("Scottsdale Resort Accommodations") and its stockholders
(the "Stockholders") dated December 22, 1997. The Stockholders are stockholders
of Telluride Resort Accommodations. Pursuant to the agreement, if Scottsdale
Resort Accommodations achieves earnings before incomes taxes of $300,000 for a
trailing twelve-month period, the Stockholders can require the Company to
purchase the outstanding stock of Scottsdale Resort Accommodations.
Conversely, the Company has the right to purchase the
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outstanding stock of Scottsdale Resort Accommodations if Scottsdale Resort
Accommodations achieves earnings before income taxes of $500,000 for a similar
period. The purchase price will be seven times Scottsdale Resort Accommodations'
earnings before income taxes for the relevant twelve-month period, to be paid in
Common Stock of the Company, unless the Stockholders elect to receive up to 50%
of the purchase price in cash.
COMPANY POLICY
In the future, any transactions with officers, directors and holders of
more than 5% of the Common Stock will be approved by a majority of the Board of
Directors, including a majority of the disinterested members of the Board of
Directors.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company, after giving effect to the
Combinations and the Offering, by: (i) each person known to beneficially own
more than 5% of the outstanding shares of Common Stock; (ii) each of the
Company's directors and persons who have consented to be named as directors
("named directors"); (iii) each named executive officer; and (iv) all executive
officers, directors and named directors as a group. All persons listed have an
address in care of the Company's principal executive offices and have sole
voting and investment power with respect to their shares unless otherwise
indicated.
<TABLE>
<CAPTION>
PERCENTAGE OWNED
----------------------------
NAMES AND ADDRESS BEFORE
OF BENEFICIAL OWNER SHARES OFFERING AFTER OFFERING
- ------------------------------------------------ ------------ ---------- ---------------
<S> <C> <C> <C>
David C. Sullivan ....................... 289,202 3.1% 1.9%
Jeffery M. Jarvis ....................... 40,000 * *
W. Michael Murphy ....................... 40,000 * *
Jules S. Sowder ......................... 25,000 * *
Luis Alonso ............................. 121,250 1.3 *
Park Brady .............................. 31,041 * *
Douglas R. Brindley (1) ................. 196,167 2.1 1.3
Paul T. Dobson .......................... 85,334 * *
Sharon Benson Doucette .................. 150,000 1.6 1.0
Joshua M. Freeman (2) ................... 803,519 8.6 5.3
Evan H. Gull ............................ 88,111 * *
Charles O. Howey (3) .................... 426,401 4.6 2.8
Heidi O'Leary Houston ................... 248,167 2.7 1.6
Daniel L. Meehan ........................ 98,333 1.1 *
J. Patrick McCurdy ...................... 134,583 1.4 *
Andre S. Tatibouet ...................... 1,708,333 18.4 11.3
Hans F. Trupp ........................... 386,692 4.2 2.6
Michael D. Rose (4) ..................... 41,667 * *
Elan J. Blutinger (5) ................... 1,898,776 20.4 12.6
D. Fraser Bullock (5) ................... 1,898,776 20.4 12.6
Alpine Consolidated, LLC ................ 1,898,776 20.4 12.6
Capstone Partners, LLC (6) .............. 949,388 10.2 6.3
All Directors and Executive Officers as a
Group (20 persons) ..................... 7,760,797 82.9% 51.3%
</TABLE>
- ----------
* Less than 1.0%
(1) Includes 97,500 shares owned by Betty Shotton Brindley, his spouse.
(2) Includes 477,750 shares owned by CMF Coastal Resorts L.L.C., in which Mr.
Freeman has a 98% membership interest.
(3) Includes 98,400 shares beneficially owned by Dolores Howey, his spouse.
(4) Includes 41,667 shares which Mr. Rose will purchase in the Offering at the
initial offering price.
(5) Includes for each of Messrs. Blutinger and Bullock 250,000 shares which may
be acquired upon the exercise of options and 1,732,109 shares held by
Alpine Consolidated II, LLC., Elan J. Blutinger and D. Fraser Bullock as
Managing Directors of Alpine Consolidated II, LLC.
(6) Includes 83,333 shares which may be acquired upon the exercise of options.
Leonard A. Potter, an Advisory Director, is a Managing Director of Capstone
Partners, LLC.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $.01 per share of which 3,134,630 shares shall be
designated restricted stock (the "Restricted Common Stock"), and 10,000,000
shares of undesignated preferred stock, par value $.01 per share (the "Preferred
Stock"). After giving effect to the Combinations and the completion of the
Offering, the Company will have outstanding 15,116,667 shares of Common Stock
(of which 3,134,630 are shares of Restricted Common Stock) and no shares of
Preferred Stock. See "Shares Eligible for Future Sale."
The following statements are brief summaries of certain provisions with
respect to the Company's capital stock contained in its Certificate of
Incorporation and By-Laws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. The following is
qualified in its entirety by reference thereto.
COMMON STOCK AND RESTRICTED COMMON STOCK
All of the rights, privileges and obligations of the Common Stock and
Restricted Common Stock are the same, except for voting rights. The holders of
Common Stock are entitled to one vote for each share on all matters voted upon
by stockholders, including the election of directors. The holders of Restricted
Common Stock are entitled to one half of one vote for each share held on all
matters. Subject to the rights of any then outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to such dividends as may be
declared in the discretion of the Board of Directors out of funds legally
available therefor. See "Dividend Policy." Holders of Common Stock are entitled
to share ratably in the net assets of the Company upon liquidation after payment
or provision for all liabilities and any preferential liquidation rights of any
Preferred Stock then outstanding. The holders of Common Stock have no preemptive
rights to purchase shares of stock of the Company. Shares of Common Stock are
not subject to any redemption provisions and are not convertible into any other
securities of the Company, except as provided in the following paragraph. All
outstanding shares of Common Stock are, and the shares of Common Stock to be
issued pursuant to the Offering will be upon payment therefor, fully paid and
non-assessable.
Each share of Restricted Common Stock will automatically convert to Common
Stock on a share for share basis: (a) in the event of a disposition of such
share of Restricted Common Stock by the holder thereof (other than a disposition
which is a distribution by a holder to its partners or beneficial owners or a
transfer to a related party of such holder (as defined in Sections 267, 707, 318
and/or 4946 of the Code)); (b) in the event any person acquires beneficial
ownership of 15% or more of the outstanding shares of Common Stock of the
Company; (c) in the event any person offers to acquire 15% or more of the
outstanding shares of Common Stock of the Company; or (d) in the event a
majority of the aggregate number of votes which may be voted by the holders of
outstanding shares of Common Stock and Restricted Stock entitled to vote and
approve such conversion. At December 31, 2000, the Company may elect to convert
any outstanding shares of Restricted Common Stock into shares of Common Stock in
the event 80% or more of the outstanding shares of Restricted Common Stock have
been converted into shares of Common Stock.
The Company will apply for listing of the Common Stock on the New York
Stock Exchange under the symbol "VAC".
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors in one or more series. Subject to the provisions of the Company's
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series and to provide for or change the voting powers, designations, preferences
and relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether
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<PAGE>
dividends are cumulative), dividend rates, terms of redemption (including
sinking fund provisions), redemption prices, conversion rights and liquidation
preferences of the shares constituting any series of the Preferred Stock, in
each case without any further action or vote by the stockholders. The Company
has no current plans to issue any shares of Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.
STATUTORY BUSINESS COMBINATION PROVISION
Upon the consummation of the Offering, the Company will be subject to the
provisions of Section 203 of the DGCL ("Section 203"). Section 203 provides,
with certain exceptions, that a Delaware corporation may not engage in any of a
broad range of business combinations with a person or an affiliate or associate
of such person, who is an "interested stockholder" for a period of three years
from the date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the Board of Directors of the corporation
before the person becomes an interested stockholder; (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans); or (iii) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by the holders of at least 66% of the corporation's outstanding
voting stock at an annual or special meeting, excluding shares owned by the
interested stockholder. Under Section 203, an "interested stockholder" is
defined as any person who is (i) the owner of 15% or more of the outstanding
voting stock of the corporation or (ii) an affiliate or associate of the
corporation and who was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder.
The Company's stockholders, by adopting an amendment to the Certificate of
Incorporation, may elect not to be governed by Section 203, which election would
be effective 12 months after such adoption. The provisions of Section 203 could
delay or frustrate a change in control of the Company, deny stockholders the
receipt of a premium on their Common Stock and have an adverse effect on the
Common Stock. The provisions also could discourage, impede or prevent a merger
or tender offer, even if such event would be favorable to the interests of
stockholders.
LIMITATION ON DIRECTORS' LIABILITIES
Limitation on Liability. Pursuant to the Company's Certificate of
Incorporation and as permitted by Section 102(b)(7) of the DGCL, directors of
the Company are not liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty, except for liability in connection with a
breach of duty of loyalty, for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, for dividend
payments or stock repurchases that are illegal under Delaware law or for any
transaction in which a director has derived an improper personal benefit.
Indemnification. To the maximum extent permitted by law, the Certificate of
Incorporation provides for mandatory indemnification of directors and officers
of the Company against any expense, liability and loss to which they become
subject, or which they may incur as a result of having been a director or
officer of the Company. In addition, the Company must advance or reimburse
directors and officers for expenses incurred by them in connection with certain
claims.
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<PAGE>
ADVANCE NOTICE REQUIREMENTS FOR DIRECTOR NOMINEES.
The Company's By-Laws establish an advance notice procedure with regard to
the nomination of candidates for election as directors at any meeting of
stockholders called for the election of directors. The procedure provides that a
notice relating to the nomination of directors must be timely given in writing
to the Chairman of the Board of Directors of the Company prior to the meeting.
To be timely, notice relating to the nomination of directors must be delivered
not less than 90 days prior to any such meeting of stockholders called for the
election of directors.
Notice to the Company from a stockholder who proposes to nominate a person
at a meeting for election as a director must be accompanied by each proposed
nominee's written consent and contain the name, address and principal occupation
of each proposed nominee. Such notice must also contain the total number of
shares of capital stock of the Company that will be voted for each of the
proposed nominees, the name and address of the notifying stockholder and the
number of shares of capital stock of the Company owned by the notifying
stockholder.
Although the Company's By-Laws do not give the Board of Directors any power
to approve or disapprove stockholder nominations for the election of directors
or of any other business desired by stockholders to be conducted at an annual or
any other meeting, the Company's By-Laws (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of business
at a particular meeting if the proper procedures are not followed or (ii) may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
the Company, even if the conduct of such solicitation or such attempt might be
beneficial to the Company and its stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust Company.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After the Offering, the Company will have outstanding 15,116,667 shares of
Common Stock. The 5,808,334 shares sold in the Offering (plus any additional
shares sold upon exercise of the Underwriters' over-allotment option) will be
freely tradable without restriction unless acquired by affiliates of the
Company. None of the remaining 9,308,333 outstanding shares of Common Stock
(including 3,134,630 shares of Restricted Common Stock beneficially owned by the
Company's officers, directors and certain other stockholders) has been
registered under the Securities Act, which means that they may be resold
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144 thereunder.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of the acquisition of the restricted shares of
Common Stock from either the Company or any affiliate of the Company, the
acquiror or subsequent holder thereof may sell, within any three-month period
commencing 90 days after the date of the Prospectus relating to the Offering, a
number of shares that does not exceed the greater of one percent of the then
outstanding shares of the Common Stock, or the average weekly trading volume of
the Common Stock on the New York Stock Exchange during the four calendar weeks
preceding the date on which notice of the proposed sale is sent to the
Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the later of the
date of the acquisition of restricted shares of Common Stock from the Company or
any affiliate of the Company, a person who is not deemed to have been an
affiliate of the Company at any time for 90 days preceding a sale would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner of sale provisions or notice requirements.
Upon the completion of the Offering, the holders of Common Stock who did
not purchase shares in the Offering will own an aggregate of 9,308,333 shares of
Common Stock, including the stockholders of the Founding Companies, who will
receive in the aggregate 6,173,703 shares in connection with the Combinations,
and management and founders of VPI, who own an aggregate of 3,134,630 shares.
These shares have not been registered under the Securities Act and, therefore,
may not be sold unless registered under the Securities Act or sold pursuant to
an exemption from registration, such as the exemption provided by Rule 144.
Furthermore, these stockholders have separately agreed with the Company not to
sell, transfer or otherwise dispose of any of these shares for one year
following the closing of the Offering. These stockholders also have certain
demand and piggyback registration rights with respect to these shares.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock, or any securities convertible into or
exercisable or exchangeable for Common Stock, for a period of 180 days after the
date of this Prospectus without the prior written consent of Smith Barney Inc.
on behalf of the Underwriters. The holders of all shares outstanding prior to
the Offering and the stockholders of the Founding Companies who will receive
shares of Common Stock in exchange for their stock in the Founding Companies
have agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of one year from the date of this
Prospectus without the prior written consent of Smith Barney Inc. on behalf of
the Underwriters. The foregoing restrictions will not apply: (i) in the case of
the Company, to options or shares of Common Stock issued pursuant to the
Company's 1998 Long-Term Incentive Plan or in connection with acquisitions and
(ii) in the case of all holders shares of Common Stock disposed of as bona fide
gifts, subject in each case to any remaining portion of the one year or 180-day
period, as applicable, to any shares so issued or transferred. In evaluating any
request for a waiver of the one year or 180-day lock-up period, as applicable,
Smith Barney Inc. will consider, in accordance with its customary practice, all
relevant facts and circumstances at the time of the request, including, without
limitation, the recent trading market for the Common Stock, the size of the
request and, with respect to a request by the Company to issue additional equity
securities, the purpose of such an issuance. See "Underwriting."
61
<PAGE>
The 3,000,000 shares of Common Stock to be registered by the Company for
use as consideration in future acquisitions will be, upon issuance thereof,
freely tradable unless acquired by parties to the acquisition or affiliates of
such parties, other than the issuer, in which case they may be sold pursuant to
Rule 145 under the Securities Act. Rule 145 permits such persons to resell
immediately securities acquired in transactions covered under the Rule, provided
such securities are resold in accordance with the public information, volume
limitations and manner of sale requirements of Rule 144. If a period of one year
has elapsed since the date such securities were acquired in such transaction and
if the issuer meets the public information requirements of Rule 144, Rule 145
permits a person who is not an affiliate of the issuer to freely resell such
securities. The Company intends to contractually restrict the resale of these
shares in connection with future acquisitions accounted for using the purchase
method of accounting. The piggyback registration rights described above will not
apply to the registration statement to filed with respect to these 3,000,000
shares.
Sales, or the availability for sale of, substantial amounts of the Common
Stock in the public market could adversely affect prevailing market prices and
the ability of the Company to raise equity capital in the future.
62
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters") represented by Smith
Barney Inc., NationsBanc Montgomery Securities LLC and Furman Selz LLC (the
"Representatives"), have severally agreed, subject to the terms and conditions
in the underwriting agreement (the "Underwriting Agreement") by and between the
Company and the Underwriters, to purchase from the Company the number of shares
of Common Stock indicated below opposite its name, at the public offering price
less the underwriting discount set forth on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of the shares of Common Stock, if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ------
<S> <C>
Smith Barney Inc. .............................
NationsBanc Montgomery Securities LLC .........
Furman Selz LLC ...............................
Total ...................................... 5,808,334
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow selected
dealers a concession of not more than $ per share; and the Underwriters may
allow, and such dealers may reallow, a concession of not more than $ per share
to certain other dealers. After the initial public offering, the public offering
price and other selling terms may be changed by the Representatives. The Common
Stock is offered subject to receipt and acceptance by the Underwriters, and to
certain other conditions, including the right to reject orders in whole or in
part.
The Company has granted to the Underwriters an option, exercisable for the
30-day period after the date of this Prospectus, to purchase up to a maximum of
871,250 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise such over-allotment
option, the Underwriters will be committed, subject to certain conditions, to
purchase such additional shares in approximately the same proportion as set
forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments made in connection with the Offering.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock, or any securities convertible into or
exercisable or exchangeable for Common Stock, for a period of 180 days after the
date of this Prospectus without the prior written consent of Smith Barney Inc.
on behalf of the Underwriters. The holders of all shares outstanding prior to
the Offering and the stockholders of the Founding Companies who will receive
shares of Common Stock in exchange for their stock in the Founding Companies
have agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of one year from the date of this
Prospectus without the prior written consent of Smith Barney Inc. on behalf of
the Underwriters. The foregoing restrictions will not
63
<PAGE>
apply: (i) in the case of the Company to options or shares of Common Stock
issued pursuant to the Company's 1998 Long-Term Incentive Plan or in connection
with acquisitions and (ii) in the case of all holders shares of Common Stock
disposed of as bona fide gifts, subject in each case to any remaining portion of
the one year or 180-day period, as applicable, to any shares so issued or
transferred. In evaluating any request for a waiver of the 180-day lock-up
period, Smith Barney Inc. will consider, in accordance with its customary
practice, all relevant facts and circumstances at the time of the request,
including, without limitation, the recent trading market for the Common Stock,
the size of the request and, with respect to a request by the Company to issue
additional equity securities, the purpose of such an issuance. See "Shares
Eligible for Future Sale."
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M under the Securities Exchange Act of 1934,
pursuant to which such persons may bid for or purchase Common Stock for the
purpose of stabilizing its market price. The Underwriters also may create a
short position for the account of the Underwriters by selling more Common Stock
in connection with the Offering than they are committed to purchase from the
Company and, in such case, may purchase Common Stock in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 871,250 shares of Common Stock, by exercising the Underwriters'
over-allotment option referred to above. In addition, Smith Barney Inc., on
behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements with the Underwriters whereby it may reclaim from an Underwriter
(or dealer participating in the Offering) for the account of the other
Underwriters, the selling concession with respect to Common Stock that is
distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if any such
transactions are undertaken, they may be discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
intend to make sales of Common Stock offered by this Prospectus to accounts over
which they exercise discretionary authority in excess of 5% of the number of
shares of Common Stock offered hereby.
Prior to the Offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price will be determined
by negotiations between the Company and the Representatives. Among the factors
expected to be considered in such negotiations are the history of and the
prospects for the industry in which the Company competes, an assessment of the
Company's management, the past and present earnings of the Founding Companies
and the trend of such earnings, the prospects for future earnings of the
Company, the present state of the Company's development, the general condition
of the economy and the securities markets at the time of the Offering and the
market price of and demand for publicly traded stock of comparable companies in
recent periods.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Akin, Gump, Strauss, Hauer &
Feld, L.L.P., Washington, D.C. Certain legal matters related to the Offering
will be passed upon for the Underwriters by Kramer, Levin, Naftalis & Frankel,
New York, New York. The Company has agreed with Akin, Gump, Strauss, Hauer &
Feld, L.L.P. to discount part of its legal fees unless the Offering is
consummated, in which event the Company will pay the entire amount of such fees
as well as a bonus amount.
EXPERTS
The audited financial statements of Vacation Properties International,
Inc., Hotel Corporation of the Pacific, Inc., Brindley & Brindley Realty
Development, Inc., and B&B On The Beach Inc., Coastal Resorts Management, Inc.
and Coastal Resorts Realty LLC, Interstate Realty Company, Inc. and Sea
64
<PAGE>
Colony Management, Inc., Collection of Fine Prospecties, Inc., First Resort
Software, Inc., Houston and O'Leary Company, The Maury People, Inc., Howey
Acquisition, Inc., Priscilla Murphy Realty, Inc., Resort Property Management,
Inc., Telluride Resort Accomodations, Inc., and Trupp-Hodnett Enterprises, Inc.
and THE Management Company, included elsewhere in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. The audited financial
statements of Collection of Fine Properties, Inc., included elsewhere in this
Prospectus have been audited by Morrison, Brown, Argiz and Company, independent
auditors, as indicated in their report with respect thereto, and in reliance
upon the authority of said firm as experts in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form S-1 with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information pertaining to the Company and the
shares of Common Stock offered hereby, reference is made to such Registration
Statement, including the exhibits, financial statements and schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or any other document are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can be obtained from the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such Internet web
site is http://www.sec.gov.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
HISTORICAL FINANCIAL STATEMENTS
PAGE
-----
VACATION PROPERTIES INTERNATIONAL, INC. PRO FORMA:
Basis of Presentation .............................................. F-3
Unaudited Pro Forma Combined Balance Sheet ......................... F-4
Unaudited Pro Forma Combined Statement of Operations ............... F-6
Notes to Unaudited Pro Forma Combined Financial Statements ......... F-8
VACATION PROPERTIES INTERNATIONAL, INC.:
Report of Independent Public Accountants ........................... F-11
Balance Sheet ...................................................... F-12
Notes to Financial Statements ...................................... F-13
HOTEL CORPORATION OF THE PACIFIC, INC.:
Report of Independent Public Accountants ........................... F-16
Balance Sheets ..................................................... F-17
Statements of Operations ........................................... F-18
Statements of Changes in Stockholders' Equity (Deficit) ............ F-19
Statements of Cash Flows ........................................... F-20
Notes to Financial Statements ...................................... F-21
BRINDLEY & BRINDLEY:
Report of Independent Public Accountants ........................... F-30
Combined Balance Sheet ............................................. F-31
Combined Statement of Operations ................................... F-32
Combined Statement of Changes in Stockholders' Equity .............. F-33
Combined Statement of Cash Flows ................................... F-34
Notes to Combined Financial Statements ............................. F-35
COASTAL RESORTS MANAGEMENT, INC. AND
COASTAL RESORTS REALTY, LLC:
Report of Independent Public Accountants ........................... F-38
Combined Balance Sheets ............................................ F-40
Combined Statements of Operations .................................. F-41
Statements of Changes in Stockholders' and Members' Equity ......... F-42
Combined Statements of Cash Flows .................................. F-43
Notes to Combined Financial Statements ............................. F-45
COLLECTION OF FINE PROPERTIES, INC.:
Independent Auditor's Report ....................................... F-51
Consolidated Balance Sheets ........................................ F-52
Consolidated Statements of Operations .............................. F-53
Consolidated Statements of Changes in Stockholders' Equity ......... F-54
Consolidated Statements of Cash Flows .............................. F-55
Notes to Consolidated Financial Statements ......................... F-57
FIRST RESORT SOFTWARE, INC.:
Report of Independent Public Accountants ........................... F-63
Balance Sheet ...................................................... F-64
Statement of Operations ............................................ F-65
Statement of Changes in Stockholders' Equity (Deficit) ............. F-66
Statement of Cash Flows ............................................ F-67
Notes to Financial Statements ...................................... F-68
F-1
<PAGE>
PAGE
------
HOUSTON AND O'LEARY COMPANY:
Report of Independent Public Accountants ........................... F-71
Balance Sheet ...................................................... F-72
Statement of Operations ............................................ F-73
Statement of Changes in Stockholders' Equity ....................... F-74
Statement of Cash Flows ............................................ F-75
Notes to Financial Statements ...................................... F-76
THE MAURY PEOPLE, INC.:
Report of Independent Public Accountants ........................... F-79
Balance Sheet ...................................................... F-80
Statement of Operations ............................................ F-81
Statement of Changes in Stockholders' Equity (Deficit) ............. F-82
Statement of Cash Flows ............................................ F-83
Notes to Financial Statements ...................................... F-84
HOWEY ACQUISITION, INC.
d.b.a PRISCILLA MURPHY REALTY, INC.:
Reports of Independent Public Accountants .......................... F-88
Consolidated Balance Sheets ........................................ F-90
Consolidated Statements of Operations .............................. F-91
Consolidated Statements of Changes in Stockholders' Equity ......... F-92
Consolidated Statements of Cash Flows .............................. F-93
Notes to Consolidated Financial Statements ......................... F-95
RESORT PROPERTY MANAGEMENT, INC.:
Report of Independent Public Accountants ........................... F-98
Balance Sheets ..................................................... F-99
Statements of Operations ........................................... F-100
Statements of Changes in Stockholders' Deficit ..................... F-101
Statements of Cash Flows ........................................... F-102
Notes to Financial Statements ...................................... F-103
TELLURIDE RESORT ACCOMMODATIONS, INC.:
Report of Independent Public Accountants ........................... F-107
Balance Sheet ...................................................... F-108
Statement of Operations ............................................ F-109
Statement of Changes in Stockholders' Deficit ...................... F-110
Statement of Cash Flows ............................................ F-111
Notes to Financial Statements ...................................... F-112
TRUPP HODNETT COMPANY:
Report of Independent Public Accountants ........................... F-115
Combined Balance Sheets ............................................ F-116
Combined Statements of Operations .................................. F-117
Combined Statements of Changes in Stockholders' Equity ............. F-118
Combined Statements of Cash Flows .................................. F-119
Notes to Financial Statements ...................................... F-121
F-2
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give
effect to the acquisitions by Vacation Properties International, Inc. ("VPI" or
the "Company"), of the outstanding capital stock of Hotel Corporation of the
Pacific, Inc. ("Aston") and Brindley & Brindley Realty, Inc. and B&B on the
Beach, Inc. (collectively "Brindley and Brindley"), Coastal Resorts Management,
Inc. and Coastal Resorts Realty, LLC (collectively "Coastal Resorts"),
Collection of Fine Properties, Inc. ("CFP"), First Resort Software, Inc.
("FRS"), Houston & O'Leary Company ("H&O"), Jupiter Property Management, Inc. at
Park City ("JPM"), Maui Condo & Home Realty, Inc. ("Maui"), The Maury People,
Inc. ("Maury"), Howey Acquisition, Inc. and Priscilla Murphy Realty, Inc.
(collectively "PMR"), Resort Property Management, Inc. ("RPM"), Telluride Resort
Accommodations, Inc. ("TRA"), Trupp-Hodnett Enterprises, Inc. and THE Management
Company (collectively "THE"), and Whistler Chalets Limited ("Whistler"),
(collectively the "Founding Companies"). These acquisitions (the "Combinations")
will occur simultaneously with the closing of VPI's initial public offering (the
"Offering") and will be accounted for using the purchase method of accounting.
Aston, one of the Founding Companies has been designated as the accounting
acquiror in accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 97 which states that the combining company which receives the
largest portion of voting rights in the combined corporation is presumed to be
the acquiror for accounting purposes.
The unaudited pro forma combined balance sheet gives effect to the
Combinations and the Offering as if they had occurred on December 31, 1997. The
unaudited pro forma combined statement of income gives effect to these
transactions as if they had occurred on January 1, 1997.
The Company has preliminarily analyzed the savings that it expects to be
realized by consolidating certain operational and general and administrative
functions. To the extent the owners and certain key employees of the Founding
companies have agreed prospectively to reductions in salary, bonuses and
benefits, these reductions have been reflected in the unaudited pro forma
combined statement of income. Additionally, the effects of the exclusion of
certain non-operating assets and the assumption of or retirement of certain
liabilities that will be retained by the stockholders of the Founding companies
have been eliminated in the unaudited pro forma financial statements. With
respect to other potential cost savings, the Company has not and cannot quantify
these savings until completion of the combination of the Founding Companies. It
is anticipated that these savings will be partially offset by the costs of being
a publicly held company and the incremental increase in costs related to the
Company's new management. However, these costs, like the savings that they
offset, cannot be quantified accurately. Neither the anticipated savings nor the
anticipated costs have been included in the pro forma combined financial
information of VPI.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The unaudited pro forma financial data do not purport to
represent what the Company's financial position or results of operations would
actually have been if such transactions in fact had occurred on those dates and
are not necessarily representative of the Company's financial position or
results of operations for any future period. Since the Founding Companies were
not under common control or management, historical combined results may not be
comparable to, or indicative of, future performance. The unaudited pro forma
combined financial statements should be read in conjunction with the other
financial statement and notes thereto included elsewhere in the Prospectus. See
"Risk Factors" included elsewhere herein.
F-3
<PAGE>
PAGE 1 OF 2
VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET - DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
BRINDLEY & COASTAL
VPI ASTON BRINDLEY RESORTS
------- --------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................ $ -- $ 1,632 $ 24 $ 203
Trade and other receivables, net of allowance ............ -- 1,195 62 1,247
Other current assets ..................................... 244 129 3,932 442
---- ------- ------ ------
Total current assets .................................... 244 2,956 4,018 1,892
Property and equipment, net ............................... -- 1,776 125 278
Goodwill .................................................. -- -- -- 626
Other assets .............................................. -- 10,330 -- 92
---- ------- ------ ------
Total assets ............................................ $244 $15,062 $4,143 $2,888
==== ======= ====== ======
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt ..................... $ -- $ 597 $ 19 $ --
Customer deposits, deferred revenues and payable
to property owners ...................................... -- -- 3,895 470
Accounts payable, and accrued liabilities ................ 244 6,538 108 442
Payables to Founding Companies' Stockholders ............. -- -- -- --
Other current liabilities ................................ -- 409 -- --
---- ------- ------ ------
Total current liabilities ............................... 244 7,544 4,022 912
Long-term debt, net of current maturities ................. -- 2,804 22 715
Other long-term liabilities ............................... -- 4,609 -- --
Commitments and contingencies .............................
Stockholders' Equity (Deficit):
Common stock 2,650,428 shares outstanding (VPI),
9,308,333 shares outstanding (pro forma combined),
15,116,667 shares outstanding (pro forma as adjusted),. -- 100 -- --
Additional paid-in capital ............................... -- 5 -- 125
Retained earnings (deficit) .............................. -- -- 99 1,136
---- ------- ------ ------
Total stockholders' equity (deficit) .................... -- 105 99 1,261
---- ------- ------ ------
Total liabilities and stockholders' equity (deficit)..... $244 $15,062 $4,143 $2,888
==== ======= ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CFP FRS H&O JPM MAURY
--------- ------- ------- ----------- ------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................ $2,713 $126 $259 $ 14 $297
Trade and other receivables, net of allowance ............ 701 426 279 456 --
Other current assets ..................................... 434 45 45 1,155 572
------ ---- ---- --------- ----
Total current assets .................................... 3,848 597 583 1,625 869
Property and equipment, net ............................... 1,964 275 157 387 99
Goodwill .................................................. 54 -- -- 139 --
Other assets .............................................. -- -- -- 114 --
------ ---- ---- --------- ----
Total assets ............................................ $5,866 $872 $740 $ 2,265 $968
====== ==== ==== ========= ====
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt ..................... $ 180 $ -- $164 $ 1,628 $ --
Customer deposits, deferred revenues and payable
to property owners ...................................... 3,364 506 255 1,890 656
Accounts payable, and accrued liabilities ................ 1,175 130 136 428 224
Payables to Founding Companies' Stockholders ............. -- -- -- -- --
Other current liabilities ................................ -- -- -- -- --
------ ---- ---- --------- ----
Total current liabilities ............................... 4,719 636 555 3,946 880
Long-term debt, net of current maturities ................. 299 -- -- 553 --
Other long-term liabilities ............................... 15 125 -- 123 --
Commitments and contingencies .............................
Stockholders' Equity (Deficit):
Common stock 2,650,428 shares outstanding (VPI),
9,308,333 shares outstanding (pro forma combined),
15,116,667 shares outstanding (pro forma as adjusted) .. 788 3 -- 2 1
Additional paid-in capital ............................... -- 13 -- 385 --
Retained earnings (deficit) .............................. 45 95 185 (2,744) 87
------ ---- ---- --------- ----
Total stockholders' equity (deficit) .................... 833 111 185 (2,357) 88
------ ---- ---- --------- ----
Total liabilities and stockholders' equity (deficit)..... $5,866 $872 $740 $ 2,265 $968
====== ==== ==== ========= ====
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma combined financial statements.
F-4
<PAGE>
PAGE 2 OF 2
VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PMR RPM TRA THE MAUI
---------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 904 $ 186 $2,103 $ 293 $ 73
Trade and other receivables, net of allowance ..... 39 70 544 132 121
Other current assets .............................. 4,539 22 12 378 23
------- ------- ------ ------ ----
Total current assets ............................. 5,482 278 2,659 803 217
Property and equipment, net ........................ 102 203 62 259 24
Goodwill ........................................... 5,436 -- -- -- --
Other assets ....................................... 187 54 -- -- 29
------- ------- ------ ------ ----
Total assets ..................................... $11,207 $ 535 $2,721 $1,062 $270
======= ======= ====== ====== ====
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt .............. $ 803 $ 171 $ 194 $ -- $ --
Customer deposits, deferred revenues and pay-
able to property owners .......................... 4,479 269 2,096 347 --
Accounts payable and accrued liabilities .......... 242 32 849 191 95
Payables to Founding Companies' Stockholders....... -- -- -- -- --
Other current liabilities ......................... -- -- -- -- --
------- ------- ------ ------ ----
Total current liabilities ........................ 5,524 472 3,139 538 95
Long-term debt, net of current maturities .......... 3,925 310 -- -- --
Other long-term liabilities ........................ -- 3 -- -- 3
Commitments and contingencies ......................
Stockholders' Equity (Deficit):
Common stock 2,650,428 shares outstanding (VPI),
9,308,333 shares outstanding (pro forma
combined), 15,116,667 shares outstanding (pro
forma as adjusted) .............................. 100 -- 216 17 1
Additional paid-in capital ........................ 150 26 -- -- --
Retained earnings (deficit) ....................... 1,508 (276) (634) 507 171
------- ------- ------ ------ ----
Total stockholders' equity (deficit) ............. 1,758 (250) (418) 524 172
------- ------- ------ ------ ----
Total liabilities and stockholders' equity
(deficit) ....................................... $11,207 $ 535 $2,721 $1,062 $270
======= ======= ====== ====== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA OFFERING
ADJUSTMENTS PRO ADJUSTMENTS AS
WHISTLER (NOTE 3) FORMA (NOTE 3) ADJUSTED
---------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 698 $ 152 $ 9,677 $ -- $ 9,677
Trade and other receivables, net of allowance ..... 15 (1,042) 4,245 -- 4,245
Other current assets .............................. 1,061 5,723 18,756 -- 18,756
------ -------- -------- ---------- --------
Total current assets ............................. 1,774 4,833 32,678 -- 32,678
Property and equipment, net ........................ 1,416 (1,467) 5,660 -- 5,660
Goodwill ........................................... -- 65,780 72,035 -- 72,035
Other assets ....................................... 2 (5,677) 5,131 -- 5,131
------ -------- -------- ---------- --------
Total assets ..................................... $3,192 $ 63,469 $115,504 $ -- $115,504
====== ======== ======== ========== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt .............. $ 53 $ (3,809) $ -- $ -- $ --
Customer deposits, deferred revenues and pay-
able to property owners .......................... 1,018 -- 19,245 -- 19,245
Accounts payable and accrued liabilities .......... 936 -- 11,770 -- 11,770
Payables to Founding Companies' Stockholders....... -- 61,821 61,821 (61,821) --
Other current liabilities ......................... -- -- 409 -- 409
------ -------- -------- ---------- --------
Total current liabilities ........................ 2,007 58,012 93,245 (61,821) 31,424
Long-term debt, net of current maturities .......... 902 (9,311) 219 -- 219
Other long-term liabilities ........................ 171 (1,403) 3,646 -- 3,646
Commitments and contingencies ......................
Stockholders' Equity (Deficit):
Common stock 2,650,428 shares outstanding (VPI),
9,308,333 shares outstanding(pro forma combined),
15,116,667 shares outstanding (pro
forma as adjusted) ............................... -- (1,135) 93 58 151
Additional paid-in capital ........................ -- 12,912 13,616 61,763 75,379
Retained earnings (deficit) ....................... 112 4,394 4,685 -- 4,685
------ -------- -------- ---------- --------
Total stockholders' equity (deficit) ............. 112 16,171 18,394 61,821 80,215
------ -------- -------- ---------- --------
Total liabilities and stockholders' equity
(deficit) ....................................... 3,192 $ 63,469 $115,504 $ -- $115,504
====== ======== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma combined financial statements.
F-5
<PAGE>
PAGE 1 OF 2
VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
BRINDLEY & COASTAL
VPI ASTON BRINDLEY RESORTS
----- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Revenues ......................................... $-- $19,554 $4,021 $3,615
Operating expenses ............................... -- 8,908 3,028 1,788
--- ------- ------ ------
Gross profit .................................... -- 10,646 993 1,827
General and administrative expenses .............. -- 5,081 395 559
Depreciation and amortization .................... -- 394 87 85
--- ------- ------ ------
Income (loss) from operations ................... -- 5,171 511 1,183
Interest (expense) and other income, net ......... -- (86) 42 (47)
--- ------- ------ ------
Income (loss) before income taxes ................ -- 5,085 553 1,136
Provision for income taxes ....................... -- -- -- --
--- ------- ------ ------
Net income (loss) ................................ $-- $ 5,085 $ 553 $1,136
=== ======= ====== ======
<CAPTION>
CFP FRS H&O JPM MAURY
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues ......................................... $4,303 $2,864 $1,596 $3,986 $1,183
Operating expenses ............................... 2,830 1,704 494 2,601 211
------ ------ ------ ------ ------
Gross profit .................................... 1,473 1,160 1,102 1,385 972
General and administrative expenses .............. 586 372 274 1,675 654
Depreciation and amortization .................... 307 45 48 159 28
------ ------ ------ ------ ------
Income (loss) from operations ................... 580 743 780 (449) 290
Interest (expense) and other income, net ......... 133 25 (15) (145) 28
------ ------ ------ ------ ------
Income (loss) before income taxes ................ 713 768 765 (594) 318
Provision for income taxes ....................... -- -- -- -- --
------ ------ ------ ------ ------
Net income (loss) ................................ $ 713 $ 768 $ 765 $ (594) $ 318
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma combined financial statements.
F-6
<PAGE>
PAGE 2 OF 2
VACATION PROPERTIES INTERNATIONAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PURCHASE DATA)
<TABLE>
<CAPTION>
PMR RPM TRA THE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues .................................................... $4,740 $2,295 $4,313 $4,061
Operating expenses .......................................... 1,184 1,560 3,037 1,838
------ ------ ------ ------
Gross profit ............................................... 3,556 735 1,276 2,223
General and administrative expenses ......................... 1,663 548 982 1,939
Depreciation and amortization ............................... 203 79 48 85
------ ------ ------ ------
Income (loss) from operations .............................. 1,690 108 246 199
Interest (expense) and other income, net .................... (182) 217 31 47
------ ------ ------ ------
Income (loss) before income taxes ........................... 1,508 325 277 246
Provision for income taxes .................................. -- 75 -- 60
------ ------ ------ ------
Net income (loss) ........................................... $1,508 $ 250 $ 277 $ 186
====== ====== ====== ======
Net income per share ........................................
Shares used in computing net income per share (Note 5) ......
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO
MAUI WHISTLER (NOTE 4) FORMA
------------ ---------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues .................................................... $1,422 $2,098 $ 792 (a) $ 60,843
Operating expenses .......................................... 366 1,428 (539)(a) 30,438
------ ------ --------- ------------
Gross profit ............................................... 1,056 670 1,331 30,405
General and administrative expenses ......................... 954 387 (2,933) 13,136
Depreciation and amortization ............................... 25 45 1,847 (b) 3,485
------ ------ --------- ------------
Income (loss) from operations .............................. 77 238 2,417 13,784
Interest (expense) and other income, net .................... (1) (32) 231 (a) 246
-------- ------ --------- ------------
Income (loss) before income taxes ........................... 76 206 2,648 14,030
Provision for income taxes .................................. 21 4 6,381 (c) 6,541
------- ------ --------- ------------
Net income (loss) ........................................... $ 55 $ 202 $ (2,239) $ 7,489
======= ====== ========= ============
Net income per share ........................................ $ 0.50
============
Shares used in computing net income per share (Note 5) ...... 15,116,667
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma combined financial statements.
F-7
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
1. GENERAL:
Vacation Properties International, Inc. ("VPI"), was formed to create a
leading single provider of vacation property rental, management and real estate
services. VPI has conducted no operations to date and will acquire substantially
all of the assets of the Founding Companies concurrently with the consummation
of the Offering.
The historical financial statements reflect the financial position and
results of operations of VPI and the Founding Companies as of December 31, 1997,
and for the year ended December 31, 1997, and were derived from the respective
VPI and Founding Company financial statements where indicated. The audited
historical financial statements included elsewhere herein have been included in
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
80.
2. ACQUISITION OF FOUNDING COMPANIES:
Concurrent with the closing of the Offering, VPI will acquire all of the
outstanding capital stock of the Founding Companies. The Combinations will be
accounted for using the purchase method of accounting with Aston being
designated as the accounting acquiror.
The following table sets forth the consideration to be paid (a) in cash
(including debt to be retired) and (b) in shares of Common Stock to the
stockholders of each of the Founding Companies. The consideration to be paid for
each of the Founding Companies was determined through arm's-length negotiations
between VPI and representatives of each Founding Company. The factors considered
by the Company in determining the consideration to be paid included, among
others, the historical operating results, the net worth, the amount and type of
indebtedness and the future prospects of the Founding Companies. For purposes of
computing the estimated purchase price for accounting purposes, the value of the
shares is determined using an estimated fair value of $9.60 per share, which
represents a discount of 20 percent from the assumed initial public offering
price of $12 per share due to restrictions on the sale and transferability of
the shares issued. The purchase price for the Acquisitions is subject to certain
working capital adjustments at closing. See "Certain Transactions - Organization
of the Company."
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
---------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Aston Hotels & Resorts ................. $ 29,500 1,708,333
Brindley & Brindley .................... 2,000 195,000
Coastal Resorts ........................ -- 816,667
Collection of Fine Properties .......... 4,850 404,167
First Resort ........................... 2,855 290,767
Houston and O'Leary .................... 2,470 248,167
Jupiter Property Management ............ 1,257 104,750
Maui Condominium and Home .............. 1,375 166,667
The Maury People ....................... 2,000 150,000
Priscilla Murphy Realty ................ 5,500 1,093,333
Resort Property Management ............. 1,200 108,333
Telluride Resort Accomodations ......... 3,014 125,103
Trupp-Hodnett Enterprises .............. 5,000 627,833
Whistler Chalets ....................... 800 134,583
-------- ---------
$ 61,821 6,173,703
======== =========
</TABLE>
The above table does not include debt of approximately $219,000 to be
assumed by VPI.
F-8
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA - (CONTINUED)
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
The following table summarizes unaudited pro forma combined balance sheet
adjustments (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) ADJUSTMENTS
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents ........................... $ -- $ 152 $ -- $ 152
Trade and other receivables ......................... (440) (602) -- (1,042)
Other current assets ................................ (553) 4,821 1,455 5,723
Property and equipment, net ......................... (1,467) -- -- (1,467)
Goodwill ............................................ -- 65,780 -- 65,780
Other assets ........................................ -- (5,677) -- (5,677)
Current maturities on long-term debt ................ 3,809 -- -- 3,809
Payable to Founding Companies' stockholders ......... -- (61,821) -- (61,821)
Long-term debt ...................................... 9,311 -- -- 9,311
Other long-term liabilities ......................... -- 1,403 -- 1,403
Common stock ........................................ -- 1,135 -- 1,135
Additional paid-in capital .......................... -- (12,912) -- (12,912)
Retained earnings ................................... (10,660) 7,721 (1,455) (4,394)
--------- --------- -------- ---------
$ -- $ -- $ -- $ --
========= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
OFFERING
(D) (E) ADJUSTMENTS
----------- -------------- ------------
<S> <C> <C> <C>
Cash and cash equivalents ........................ $ 61,821 $ (61,821) $ --
Payables to Founding Companies' stockholders ..... -- 61,821 61,821
Common stock ..................................... (58) -- (58)
Additional paid-in capital ....................... (61,763) -- (61,763)
--------- ---------- ---------
$ -- $ -- $ --
========= ========== =========
</TABLE>
(a) Reflects a reduction of net assets of approximately $10.7 million
including certain non-operating assets and the assumption of or
retirement of certain liabilities that will be excluded from the
Combinations and retained by certain stockholders of the Founding
Companies.
(b) Reflects the Combinations of the Founding Companies including: (i) the
liability for cash consideration to be paid of $61.8 million; (ii)
approximately $4.4 million representing certain working capital
adjustments to be made in connection with the Combinations; (iii) the
issuance of 6,173,703 shares of common stock to the stockholders of the
Founding Companies; (iv) the issuance of 484,202 shares of common stock
to management, and (v) the creation of approximately $72.0 million of
goodwill.
(c) Reflects the deferred income tax asset attributable to the temporary
differences between financial reporting and income tax bases of assets
and liabilities currently held in S Corporations.
(d) Reflects the proceeds from the issuance of 5,808,334 shares of common
stock, net of estimated offering costs (based on an assumed initial
public offering price of $12 per share). Offering costs primarily consist
of underwriting discounts and commissions, accounting fees, legal fees
and printing expenses.
(e) Reflects the cash portion of the consideration to be paid to the Founding
Companies in connection with the Combinations.
F-9
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC., AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA - (CONTINUED)
4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
(a) Reflects (i) a reduction in salaries, bonuses and benefits derived from
contractual agreements which establish the compensation of the owners
and certain key employees of the Founding Companies subsequent to the
Offering and (ii) the effect of the exclusion of certain non-operating
assets and the assumption of or retirement of certain liabilities that
will be retained by certain stockholders of the Founding Companies.
(b) Reflects the amortization of goodwill using a 40-year estimated life for
each of the Founding Companies other than First Resort Software, Inc.
which will be amortized over a 15-year estimated life.
(c) Reflects the incremental provision for federal and state income taxes
relating to the other statement of operations adjustments and to reflect
income taxes on S Corporation income.
5. NET INCOME PER SHARE
The shares used in computing net income per share include: (i) 3,134,630
shares issued to management of and founders of VPI; (ii) 6,173,703 shares to be
issued to the stockholders of the Founding Companies in connection with the
Combinations; and (iii) 5,808,334 shares to be issued in connection with the
Offering necessary to pay the $61,821,000 cash portion of the consideration for
the Combinations and to pay the estimated underwriting discount and other
offering expenses in the aggregate amount of $7,879,000. Excludes 1,814,000
shares of Common Stock reserved for issuance pursuant to the Company's 1998
Long-Term Incentive Plan, of which options to purchase 1,595,000 shares will be
granted by the Company concurrently with the Offering at an exercise price equal
to the initial public offering price.
F-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vacation Properties International, Inc.:
We have audited the accompanying balance sheet of Vacation Properties
International, Inc., as of December 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Vacation Properties International,
Inc., as of December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 11, 1998
F-11
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
ASSETS
CASH AND CASH EQUIVALENTS .................................................. $ 200
DEFERRED OFFERING COSTS .................................................... 244,000
--------
Total Assets ............................................................ $244,200
========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCRUED LIABILITIES AND AMOUNTS DUE TO VPI FUNDING, LLC $244,000
--------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par, 10,000,000 authorized, none outstanding........ --
Common stock, $0.01 par, 50,000,000 shares authorized, and 2,650,428
shares outstanding ...................................................... 200
--------
Total stockholders' equity .............................................. 200
--------
Total liabilities and stockholders' equity .............................. $244,200
========
Reflects a 8,834.76-for-one stock split effective on March 9, 1998
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-12
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. GENERAL:
Vacation Properties International, Inc., a Delaware Corporation, ("VPI" or
the "Company"), was founded in September 1997 to create a leading single
provider of vacation property rental, management and real estate services. VPI
intends to acquire substantially all of the assets of fourteen companies (the
"Founding Companies") (the "Combinations") and complete an initial public
offering (the "Offering") of its common stock.
VPI has not conducted any operations, and all activities to date have
related to the Offering and the Combinations. Cash of $200 was provided from the
initial capitalization of the Company (see Note 2). All other expenditures will
be funded by VPI Funding, LLC, a Delaware limited liability company whose member
managers are owners of the Company. Accordingly, statements of operations,
changes in stockholders' equity and cash flows for this period would not provide
meaningful information and have been omitted. As of December 31, 1997 costs of
approximately $244,000 have been incurred by VPI Funding, LLC in connection with
the Offering. The Company is dependent upon the Offering to execute the pending
Combinations. There is no assurance that the pending Combinations will be
completed or that VPI will be able to generate future operating revenues.
2. STOCKHOLDERS' EQUITY:
Common Stock and Preferred Stock
In connection with the organization and initial capitalization of VPI, the
Company issued 300 shares of common stock at $.01 per share to Capstone
Partners, LLC ("Capstone"), Alpine Consolidated II, LLC ("Alpine") and certain
other stockholders. On March 1, 1998 Capstone and Alpine contributed 28.297
shares of Common Stock to VPI Funding, LLC.
VPI effected a 8,834.76-for-one |stock split on March 9, 1998 for each
share of common stock (the Company "Common Stock") then outstanding. In
addition, the Company increased the number of authorized shares of Common Stock
to 50,000,000 and authorized 10,000,000 shares of $.01 par value preferred
stock. The effects of Common Stock split and the increase in the shares of
authorized Common Stock have been retroactively reflected in the balance sheet
and the accompanying notes.
Restricted Common Stock
In March, 1998, the stockholders exchanged 2,650,428 shares of Common Stock
for an equal number of shares of restricted voting common stock ("Restricted
Common Stock"). The Common Stock and the Restricted Common Stock are identical
except that the holders of Restricted Common Stock are only entitled to one-half
of one vote for each share on all matters.
Long-Term Incentive Plan
In March 1998, the Board of Directors and the Company's stockholders
approved the Company's 1998 Long-Term Incentive Plan (the "Plan"). The purpose
of the Plan is to provide a means by which the Company can attract and retain
executive officers, employee directors, other key employees, non-employee and
advisory directors and consultants of and other service providers to the Company
and its subsidiaries and to compensate such persons in a way that provides
additional incentives and enables such persons to acquire or increase a
proprietary interest in the Company. Individual awards under the Plan may take
the form of one or more of: (i) either incentive stock options ("ISOs") or
non-qualified stock options ("NQSOs"); (ii) stock appreciation rights ("SARs");
(iii) restricted or deferred stock; (iv) dividend equivalents; (v) bonus shares
and awards in lieu of Company obligations to pay cash compensation; (vi)
non-employee directors' deferred shares; and (vii) other awards the value of
which is based in whole or in part upon the value of the Common Stock.
F-13
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS- (CONTINUED)
The Company has reserved 1,814,000 shares of Common Stock for use in
connection with the Plan. The maximum number of shares of Common Stock that may
be subject to outstanding awards under the Plan will not exceed 12% of the
aggregate number of shares of Common Stock outstanding, minus the number of
shares previously issued pursuant to awards granted under the Plan. Shares of
Common Stock which are attributable to awards which have expired, terminated or
been canceled or forfeited are available for issuance or use in connection with
future awards.
In connection with the Offering, options in the form of NQSOs to purchase a
total of 400,000 shares of Common Stock of the Company will be granted to
management of the Company. Each of the foregoing option grants will have an
exercise price equal to the initial public offering price per share in the
Offering, and will vest at a rate of 25% per year. The options generally will
expire on the earlier of 10 years after the date of grant or three months after
termination of employment (immediately in the event of a termination for cause),
unless otherwise determined by the Committee. The Plan will remain in effect
until terminated by the Board of Directors.
3. STOCK BASED COMPENSATION
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," allows entities to choose between a new fair
value based method of accounting for employee stock options or similar equity
instruments and the current intrinsic, value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25").
Companies electing to remain with the accounting in APB Opinion No. 25 must make
pro forma disclosure of net income and earnings per share as if the fair value
method of accounting had been applied. The Company will provide pro forma
disclosure of net income and net income per share, as applicable, in the notes
to future consolidated financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"). For the
Company, SFAS No. 128 was effective for the year ended December 31, 1997. SFAS
No. 128 simplified the standards required under previous accounting rules for
computing earnings per share and replaced the presentation of primary earnings
per share and fully diluted earnings per share with a presentation of basic
earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS").
Basic EPS excludes dilution and is determined by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could occur
if securities and other contracts to issue common stock were exercised or
converted into common stock.
F-14
<PAGE>
VACATION PROPERTIES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS- (CONTINUED)
4. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)
VPI has signed definitive agreements to acquire all of the Common Stock and
ownership interests of Founding Companies to be consummated simultaneously with
the closing of the Offering. The companies to be acquired are:
Aston Hotels & Resorts
Brindley & Brindley
Coastal Resorts
Collection of Fine Properties
First Resort
Houston and O'Leary
Jupiter Property Management
Maui Condominium and Home
The Maury People
Priscilla Murphy Realty
Resort Property Management
Telluride Resort Accommodations
Trupp-Hodnett Enterprises
Whistler Chalets
The aggregate consideration that will be paid by VPI to acquire the
Founding Companies is, subject to certain working capital adjustments,
approximately $61.8 million in cash (including debt to be retired) and 6,173,703
shares of Common Stock.
In March, 1998, VPI filed a registration statement on Form S-1 for the sale
of its Common Stock. An investment in shares of Common Stock offered by this
Prospectus involves a high degree of risks, including, among others, absence of
a combined operating history, risks relating to the Company's acquisition
strategy, risks relating to acquisition financing, reliance on key personnel and
a substantial portion of the proceeds from the offering payable to affiliates of
the Founding Companies. See "Risk Factors" included elsewhere in this
Prospectus.
In the first quarter of 1998, the Company issued a total of 484,202 shares
of Common Stock to management of the Company. As a result, the Company will
record for financial statement purposes a non-recurring non-cash compensation
charge in 1998.
F-15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hotel Corporation of the Pacific, Inc.:
We have audited the accompanying balance sheets of Hotel Corporation of the
Pacific, Inc. (a Hawaii corporation), as of December 31, 1996 and 1997, and the
related statements of operations, changes in stockholders' equity (deficit) and
cash flows for each of the three years in the period ended December 31, 1997.
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 generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hotel Corporation of the
Pacific, Inc., as of December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 6, 1998
F-16
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................... $ 2,118 $ 1,632
Accounts receivable, less allowance of $97 and $75 for doubtful
accounts .......................................................... 1,448 1,195
Inventories ......................................................... 41 46
Prepaid expenses and other assets ................................... 102 83
------- -------
Total current assets .............................................. 3,709 2,956
ADVANCES TO STOCKHOLDER .............................................. 7,611 7,735
ADVANCES TO AFFILIATES, net .......................................... -- 1,799
SECURITY DEPOSITS .................................................... 712 641
PREPAID EXPENSES AND OTHER ASSETS .................................... 178 155
PROPERTY AND EQUIPMENT, net .......................................... 1,186 1,776
NET ASSETS OF DISCONTINUED OPERATIONS ................................ 74 --
------- -------
Total assets ...................................................... $13,470 $15,062
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable .................................... $ 61 $ 12
Current portion of capital lease obligations ........................ 260 409
Current portion of other long-term obligations ...................... 591 585
Accounts payable and accrued liabilities ............................ 4,730 6,538
------- -------
Total current liabilities ......................................... 5,642 7,544
SECURITY DEPOSITS .................................................... 326 270
EXCESS OF LOSSES OVER INVESTMENT IN PARTNERSHIP ...................... 346 --
ADVANCES FROM AFFILIATES ............................................. 1,235 --
NOTES PAYABLE ........................................................ 2,816 2,804
CAPITAL LEASE OBLIGATIONS ............................................ 882 1,325
OTHER LONG-TERM OBLIGATIONS .......................................... 2,118 1,611
NET LIABILITIES OF DISCONTINUED OPERATIONS ........................... -- 1,403
------- -------
Total liabilities ................................................. 13,365 14,957
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $10 par value, 100,000 shares authorized, 10,000 shares
outstanding ....................................................... 100 100
Paid-in surplus ..................................................... 5 5
Retained earnings ................................................... -- --
------- -------
Total stockholders' equity ........................................ 105 105
------- -------
Total liabilities and stockholders' equity ........................ $13,470 $15,062
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
REVENUES:
Property management fees ................... $ 7,036 $ 7,540 $ 8,079
Service fees ............................... 8,896 8,442 8,338
Other ...................................... 3,116 3,478 3,137
------- ------- --------
Total revenues .......................... 19,048 19,460 19,554
OPERATING EXPENSES .......................... 10,550 10,401 8,908
------- ------- --------
GROSS PROFIT ................................ 8,498 9,059 10,646
GENERAL AND ADMINISTRATIVE EXPENSES ......... 5,434 5,574 5,475
------- ------- --------
Income from operations .................. 3,064 3,485 5,171
OTHER INCOME (EXPENSE):
Interest expense, net ...................... (406) (736) (763)
Gain on sales of assets .................... -- 394 677
Arbitration expense ........................ (365) -- --
------- ------- --------
Total other income (expense) ............... (771) (342) (86)
------- ------- --------
INCOME FROM CONTINUING OPERATIONS ........... 2,293 3,143 5,085
INCOME (LOSS) FROM DISCONTINUED OPERA-
TIONS ...................................... (32) 455 (1,328)
LOSS ON DISPOSAL OF DISCONTINUED OPERA-
TIONS ...................................... -- -- (166)
------- ------- --------
NET INCOME .................................. $ 2,261 $ 3,598 $ 3,591
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
-------------------- PAID-IN EARNINGS
SHARES AMOUNT SURPLUS (DEFICIT) TOTAL
--------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 ......... 100,000 $100 $ 5 $ (500) $ (395)
Net income ........................ -- -- -- 2,261 2,261
Distributions ..................... -- -- -- (2,261) (2,261)
------- ---- --- -------- --------
BALANCE, December 31, 1995 ......... 100,000 100 5 (500) (395)
Net income ........................ -- -- -- 3,598 3,598
Distributions ..................... -- -- -- (3,098) (3,098)
------- ---- --- -------- --------
BALANCE, December 31, 1996 ......... 100,000 100 5 -- 105
Net income ........................ -- -- -- 3,591 3,591
Distributions ..................... -- -- -- (3,591) (3,591)
------- ---- --- -------- --------
BALANCE, December 31, 1997 ......... 100,000 $100 $ 5 $ -- $ 105
======= ==== === ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 2,261 $ 3,598 $ 3,591
(Income) loss from discontinued operations ........................ 32 (455) 1,328
Loss on disposal of discontinued operations ....................... -- -- 166
-------- -------- --------
Income from continuing operations ................................ 2,293 3,143 5,085
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation and amortization ..................................... 257 326 394
Deferred rent expense ............................................. (7) (7) (14)
Gain on sale of fixed assets ...................................... -- (394) --
Gain on sale of principal asset of partnership .................... -- -- (677)
Loss (gain) of investment in partnership .......................... (7) 45 --
Changes in operating assets and liabilities-
Accounts receivable ............................................... (334) (236) 253
Prepaid expenses and other assets ................................. (309) 258 37
Accounts payable and accrued liabilities .......................... 648 258 923
Reservation and security deposits ................................. 245 (459) (56)
--------- --------- --------
Cash provided by continuing operations ........................... 2,786 2,934 5,945
Cash flows from discontinued operations ............................. 249 (253) (17)
--------- --------- --------
Net cash from operating activities ............................... 3,035 2,681 5,928
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase in advances) proceeds from repayment of advances to
affiliates ..................................................... (430) 3,625 (2,144)
Proceeds from sale of principal asset of partnership .............. -- -- 331
Increase in advances to stockholder ............................... (1,572) (886) (124)
Increase in distributions payable to stockholder .................. -- 465 64
Proceeds from sale of property and equipment ...................... -- 398 --
Purchase of property and equipment ................................ -- -- (56)
Increase in security deposits ..................................... (618) (94) 71
--------- --------- --------
Net cash (used in) provided by investing activities .............. (2,620) 3,508 (1,858)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders ..................................... (2,261) (3,098) (3,591)
Repayment of notes and mortgage payable ........................... (283) (637) (61)
Increase (payment) of other long-term obligations ................. 305 (1,160) (744)
Principal payments under capital leases ........................... (111) (241) (160)
Proceeds from notes payable ....................................... 3,000 -- --
--------- --------- --------
Net cash provided by (used in) financing activities .............. 650 (5,136) (4,556)
--------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 1,065 1,053 (486)
CASH AND CASH EQUIVALENTS, beginning of year ......................... -- 1,065 2,118
--------- --------- --------
CASH AND CASH EQUIVALENTS, end of year ............................... $ 1,065 $ 2,118 $ 1,632
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .............................................. $ 339 $ 556 $ 628
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FI-
NANCING ACTIVITIES:
Capital lease obligations ......................................... $ 388 $ 912 $ 928
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Hotel Corporation of the Pacific, Inc. (the Company), is a Hawaii
corporation which does business under the trade names "Aston Hotels & Resorts,"
"Aston Property Management" and "Aston." The Company provides hotel and resort
management and condominium association management services in the state of
Hawaii. Hotel and resort management services are provided to either individual
condominium unit owners, owners of multiple units within single condominium
projects (resort rental programs), or single-owner projects or hotel properties.
Condominium association management services are provided to associations of
apartment owners. In many instances, the Company manages both the condominium
association and a resort rental program within the same project. The Company
maintains a portfolio of approximately 5,000 units in its rental program.
Hotel and resort condominium rental program management services include
centralized sales and marketing, reservations, accounting, human resources,
electronic data processing, telephone equipment support and management of
on-site personnel. The Company also operates food and beverage facilities
located in two resorts managed by the Company. As of December 31, 1996 and 1997,
the Company provided resort and hotel management services to 28 and 29
condominium resorts or hotels, respectively, and provided condominium management
services to 17 and 16 condominium associations, respectively.
The Company also leases and operates hotel properties. The Company has
begun to implement its plan to discontinue the leasing of the leased properties
during the second quarter of 1998 as discussed in Note 5, "Discontinued
Operations and Disposition of Assets and Liabilities." Consequently, the
financial statements present the net assets (liabilities), results of operations
and cash flows of these leased properties as discontinued operations.
The Company had a working capital deficit at December 31, 1997. The Company
has funded operations with cash flows from operations and short-term borrowings
from lenders. Management expects that operations will generate sufficient cash
flows from operations to meet the Company's working capital needs during 1998.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. (VPI), pursuant to which
all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the Offering) of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records property rental and management fees on the accrual
basis of accounting ratably over the term of guest stays, as earned. Other
revenues include food and beverage sales of $2,302,000, $2,185,000 and
$2,271,000 for the years 1995, 1996 and 1997 respectively.
Operating Expenses
Operating expenses include expenses related to reservations, marketing and
advertising, accounting and other costs associated with rental and management.
Operating expenses also include food and beverage cost of sales and operating
expenses as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Reservations, marketing, accounting and other expenses ......... $ 8,382 $ 8,289 $6,956
Food and beverage cost of sales and operating expenses ......... 2,168 2,112 1,952
------- ------- ------
Total operating expenses .................................... $10,550 $10,401 $8,908
------- ------- ------
</TABLE>
F-21
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Inventories
Inventories consist primarily of food and beverage items and are stated at
the lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment are stated at cost or, in the case of equipment
acquired under capital leases, the present value of future lease payments.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets or the remaining lease terms.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments which extend the
useful lives of existing equipment are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code and state tax statutes, whereby the Company is not subject to
taxation for federal or state purposes. Under S Corporation status, the
stockholders report their share of the Company's taxable earnings or losses in
their personal tax returns.
Concentration of Financial Instrument Assets
Concentrations of financial instrument assets primarily consist of cash
deposits and accounts receivable. The Company's policy is to deposit its cash
with high-quality financial institutions. At December 31, 1996 and 1997, the
Company's cash was deposited in demand and short-term interest-bearing accounts
with three of the larger banks in Hawaii.
Advertising Costs
All advertising and promotion costs are expensed as incurred.
Investment in Partnership
The Company was a 5 percent general partner in a limited partnership whose
principal asset was a commercial shopping mall. The Company's principal
stockholder was the other general partner and held a 45% partnership interest.
The Company used the equity method to account for its interest in the
partnership. At December 31, 1996, the excess of the Company's cumulative equity
in net losses over its investment is reflected as a noncurrent liability. The
partnership's investment in the mall was sold during 1997. The Company's
proceeds resulted in a gain on the sale of $677,000. The partnership is expected
to be liquidated with no anticipated loss to the Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-22
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Concentration of Risk
The Company's operations are exclusively located in the state of Hawaii and
are subject to negative events that affect travel patterns of visitors.
3. ADVANCES TO AFFILIATES:
Advances to affiliates represent advances to companies controlled by the
Company's principal stockholder. The advances have no scheduled repayment, and
the Company suspended the accrual of interest. In 1996, one affiliate made a
$2,000,000 repayment, $112,500 of which was recognized as previously unrecorded
interest. The remaining receivable balance has been guaranteed by the Company's
principal stockholder.
4. ADVANCES TO STOCKHOLDER:
Advances to stockholder relate to advances to the Company's principal
stockholder. Such advances have largely been utilized relative to the
stockholder's investment in two hotels managed by the Company. The advances are
noninterest-bearing and have no scheduled repayments.
5. DISCONTINUED OPERATIONS:
The Company has decided that it will no longer continue or enter into
leasing arrangements for lodging facilities, has terminated certain leases, and
has a plan in place to dispose of its other existing leased properties during
the second quarter of 1998. This plan will eliminate the Company's future
obligation to make lease payments to owners of these facilities. The Company
plans to primarily focus its' efforts on renting and managing condominiums,
hotel rooms and homes for the owners on a fee basis. Accordingly, for all
periods presented in the accompanying financial statements, the financial
position, results of operations and cash flows of the leased assets are
reflected as discontinued operations. Summarized financial information of the
discontinued operations is presented in the following tables.
Net assets (liabilities) of discontinued operations are as follows (in
thousands):
DECEMBER 31,
-----------------------
1996 1997
----------- -----------
Current assets ...................... $ 2,857 $ 2,955
Advances to affiliates .............. 1,304 1
Other assets ........................ 202 193
Property and equipment .............. 418 197
-------- --------
Total assets ....................... 4,781 3,346
Current liabilities ................. (3,412) (4,119)
Capital lease obligations ........... (247) (53)
Other long-term obligations ......... (1,048) (577)
-------- --------
Net assets (liabilities) ............ $ 74 $ (1,403)
======== ========
F-23
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Income (loss) from discontinued operations are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
------------ ---------- ------------
<S> <C> <C> <C>
Revenue ........................................ $4,911 $29,945 $ 30,848
Operating expenses ............................. 3,609 22,833 24,826
General and administrative expenses ............ 1,326 6,631 7,317
------ ------- --------
Operating income (loss) ....................... (24) 481 (1,295)
Other expense .................................. (8) (26) (33)
-------- ------- --------
Net income (loss) from discontinued operations . $ (32) $ 455 $ (1,328)
======= ======= ========
</TABLE>
In addition to the loss from discontinued operations, the Company's
operating results for the year ended December 31, 1997, include a charge of
$166,000 for expected loss resulting from the disposal of discontinued
operations.
6. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable consisted of the following (in thousands):
DECEMBER 31,
---------------------
1996 1997
--------- ---------
Receivables from managed properties ........... $1,007 $ 610
Other ......................................... 538 660
------ ------
1,545 1,270
Less- Allowance for doubtful accounts ......... (97) (75)
------ ------
$1,448 $1,195
====== ======
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIFE ----------------------
IN YEARS 1996 1997
------------ ---------- -----------
<S> <C> <C> <C>
Leasehold interests ..................................... 3-7 $ 49 $ 91
Furniture, fixtures and equipment ....................... 3-10 842 938
Leased property ......................................... 3-7 1,255 2,305
------ --------
2,146 3,334
Less- Accumulated depreciation and amortization ......... (960) (1,558)
------ --------
Property and equipment, net ........................... $1,186 $ 1,776
====== ========
</TABLE>
Accounts payable and accrued liabilities consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
Accounts payable ......................................... $2,616 $3,311
Accrued payroll .......................................... 1,289 1,214
Other accrued liabilities ................................ 825 2,013
------ ------
Total accounts payable and accrued liabilities ......... $4,730 $6,538
====== ======
</TABLE>
F-24
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
7. NOTES PAYABLE:
At December 31, 1996 and 1997, notes payable consist of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Notes payable, collateralized by 586 shares of the principal stockholder's 7,500 com-
mon shares and real property in San Francisco, California, owned by the stockholder-
Interest only payable monthly at 10%, due May 11, 1999 ................................ $1,000 $1,000
Interest only payable monthly at 7.5% through February 1996, and at 15% thereafter,
due January 31, 1999(1) ............................................................. 500 500
Note payable, interest only payable monthly at 7.5% through February 1996 and at
15% thereafter, due January 31, 1999, guaranteed by principal stockholder(1) .......... 500 500
Note payable, interest only payable monthly at 20% plus contingent interest, as defined,
commencing May 31, 1996, due May 31, 2000, secured by lease deposit in same
amount(2).............................................................................. 500 500
Notes payable to spouse of principal stockholder, unsecured-
Interest only payable quarterly at 10% and 12%, due February 28, 1999 ................. 285 285
Note payable to bank in monthly installments of $1,242 including interest at 10.25%
adjusted annually, due May 4, 2000 .................................................... 42 31
Note payable, interest at 12%, payable upon demand, collateralized by certain fixtures
and equipment ......................................................................... 50 --
------ ------
Total ............................................................................... 2,877 2,816
Less- Current portion .................................................................. (61) (12)
------ ------
Noncurrent portion .................................................................. $2,816 $2,804
====== ======
</TABLE>
Annual maturities of long-term debt are as follows (in thousands):
1998 ................... $ 12
1999 ................... 2,299
2000 ................... 505
------
Total ................ $2,816
======
- ----------
(1) In addition to the stated interest on two of the notes described above, the
Company is required to pay additional interest on each note equal to the
lesser of 10 percent of distributable income (as defined in the agreement)
of one of the leased hotels or $50. Such additional interest amounted to $92
and $100 for the years ended December 31, 1996 and 1997, respectively.
(2) No contingent interest was accrued in 1996 or 1997.
F-25
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
8. OTHER LONG-TERM OBLIGATIONS:
At December 31, 1996 and 1997, other long-term obligations consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Distributions payable to stockholder (Note 11) ...................................... $ 465 $ 529
Severance payable to former senior executives and employees, at present value with
imputed interest rates ranging between 8.50% and 10.25% (unamortized imputed
interest of $62 and $42) ........................................................... 593 347
Termination payable to the owners of a hotel managed prior to 1992, interest at prime
rate (8.50% at December 31, 1997) .................................................. 850 500
Other accrued liabilities (Note 9) .................................................. 801 820
------ ------
Total ............................................................................ $2,709 $2,196
Less- Current portion ............................................................... (591) (585)
------ ------
Noncurrent portion ............................................................... $2,118 $1,611
====== ======
</TABLE>
Future annual payments of severance and termination payables are as follows
(in thousands):
1998 ........... $585
1999 ........... 262
----
$847
====
9. LEASES:
Operating Leases
The Company leases its principal offices under an operating lease with the
initial term expiring in July 31, 2002, and with two five-year options to extend
the agreement. The lease provides for an initial period of free rent and also
specifies scheduled rent increases over the lease term.
Effective February 1, 1996, the Company entered into a noncancelable
operating lease for a hotel property on Maui with terms extending through
January 31, 1999. The lease provides for scheduled rent and security deposits
that increase over the term. In conjunction with this lease, the Company is
obligated to pay an annual retainer fee and a business referral and marketing
fee to an unrelated party who arranged the lease. The retainer fee is payable in
quarterly installments. Under the terms of the business referral and marketing
agreement, the Company is required to pay a percentage of the net profits
derived from the hotel property. The Company accrued $239,000 and $196,000 for
these fees for the periods ended December 31, 1996 and 1997, respectively. This
lease is included in the discontinued operations.
Both the Maui hotel property lease and the office lease aggregate rental
payments over the life of the lease are being recognized as rent expense on a
straight-line basis over the terms of the leases. Accruals representing prorated
future payments under the leases are included in other long-term obligations as
of December 31, 1996 and 1997.
The Company is obligated under a noncancelable operating lease for a resort
facility on Maui with terms extending through December 31, 2000. Under terms of
the lease, the Company pays annual rent equivalent to the net operating profits,
as defined, of the facility up to a defined amount per year. No rent was
incurred in 1995 or 1996. In 1997, rent of $231,000 was incurred. This lease is
included in discontinued operations.
In addition to operating leases for office space and hotel properties, the
Company has entered into certain noncancelable operating leases for equipment
and operating space and for individual condominium units within its managed
properties. The terms of these condominium leases usually coincide with the man-
F-26
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
agement agreements under which the Company manages rental pools within the
respective condominium projects. Under the terms of the front desk and operating
space leases, the Company pays the respective apartment owners association a
percentage of the room revenue generated from the rental pool. Under the terms
of the condominium leases, the Company pays individual condominium owners a
fixed monthly lease rent and, in return, is allowed to place the unit into the
respective rental pool.
At December 31, 1997, future minimum lease commitments under all
noncancelable operating leases are as follows (in thousands):
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS
------------ -------------
1998 ...................... $ 823 $2,620
1999 ...................... 844 328
2000 ...................... 844 120
2001 ...................... 795 --
Thereafter ................ 332 --
------ ------
Total ..................... $3,638 $3,068
====== ======
Under terms of the leases, the Company is generally required to pay all
taxes, insurance and maintenance. Rent expense for the years ended December 31,
1995, 1996 and 1997, aggregated approximately $2,300,000, $4,750,000 and
$5,300,000, respectively.
Capital Leases
Capital leases consist principally of leases for office furnishings and
equipment and for automotive equipment. Future minimum lease payments for assets
under capital leases at December 31, 1997, are as follows (in thousands):
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS
------------ -------------
1998 ................................... $ 583 $ 58
1999 ................................... 508 41
2000 ................................... 447 16
2001 ................................... 337 --
Thereafter ............................. 285 --
------ -----
Total minimum lease payments ........... 2,160 115
Less- Amount representing interest ..... (416) (10)
------ -----
Present value of minimum lease payment
(current portion of $471) ........... $1,744 $ 105
====== =====
The capitalized cost of leased equipment totaled $1,975,000 and $2,610,000
at December 31, 1996 and 1997, respectively. The related accumulated
depreciation totaled $604,000 and $921,000 at December 31, 1996 and 1997,
respectively.
As an accommodation to certain of the managed properties, the Company
assists in obtaining leases of operating equipment. In some instances, this
assistance includes entering into the leases as the technical lessee. The
managed properties perform all obligations under the leases, including the
making of lease payments and the provision of insurance coverage. The Company
remains contingently liable under the leases until completion of the lease
terms. Because the Company undertakes the role of a technical lessee simply as
an accommodation to the managed properties and because the leased equipment is
used only for and by the managed properties, these leases have not been recorded
on the Company's books.
F-27
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES:
Guarantees
The Company's principal stockholder has personally guaranteed certain of
the Company's debt and capital lease obligations. As of December 31, 1997, the
guaranteed obligations totaled $2,789,000.
The Company has provided guarantees for, or is the cosigner on, personal
debts of its principal stockholder. At December 31, 1997, these personal debts
totaled $17,374,000.
The Company's management agreements are obtained through negotiations with
the respective owners and are impacted by the normal market pressures of a
highly competitive industry. Contract clauses as to the management fees and
reimbursements received by the Company vary greatly.
Certain of the Company's management agreements contain provisions for
guaranteed levels of returns to owners. These agreements also contain force
majeure clauses to protect the Company from forces or occurrences beyond the
control of management. During 1995, 1996 and 1997, the Company made payments in
excess of the management fees earned on these guaranteed agreements of $620,000,
$643,000 and $793,000, respectively.
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the periods presented in the
accompanying financial statements.
Benefit Plans
The Company has a 401(k) profit-sharing plan for its employees and for the
employees of certain of its managed resort rental and hotel properties. Under
the terms of the plan, any nonunion employee with one year of service and 1,000
credited hours of service is eligible to participate. Managed property employees
may participate as approved by the owners of the individual managed properties.
Employees of managed properties are considered employees of the Company only for
purposes of participation in the 401(k) plan.
Participating employees may defer up to 15 percent of their eligible
compensation. During 1997, the employer, either the Company or the managed
property, provided a matching contribution ranging from 37.5 percent to 50.0
percent of the employee's contribution up to the first 6 percent of the eligible
compensation. During 1996, the employer, either the Company or the managed
property, provided a matching contribution ranging from 25 percent to 50 percent
of the employee's contribution up to the first 6 percent of eligible
compensation. In 1995, the employer, either the Company or the managed property,
provided a matching contribution of 25 percent of the employee's contribution up
to 5 percent of the eligible compensation. Company contributions to the 401(k)
plan were $53,000, $107,000 and $184,000 in 1995, 1996 and 1997, respectively.
The Company has applied for qualification of a second 401(k) profit-sharing
plan for employees at one of the leased hotels with the same qualifications as
the first plan.
F-28
<PAGE>
HOTEL CORPORATION OF THE PACIFIC, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
11. RELATED-PARTY TRANSACTIONS:
The Company manages two hotels owned by its principal stockholder.
Centralized services (cooperative sales and marketing, reservations, accounting
services and other reimbursements) and management fees charged to these two
hotels approximated $501,000 and $506,000 in 1996 and 1997, respectively. The
Company leases certain office space and parking spaces in one of these hotels.
Rent expense approximated $14,000 in 1996 and 1997 for these spaces.
The Company also paid HCP, Inc., a company that is wholly owned by the
Company's principal stockholder, $481,000 and $476,000 in 1996 and 1997,
respectively, for sales representation and related accounting services. The
Company was named as a party in an arbitration related to certain hotel
properties managed by AHCP, Inc., prior to 1991. The Company incurred legal fees
and other expenses totaling $365,000 in 1995 related to the arbitration which
was resolved favorably for the Company during 1995.
The Company leased storage space from a limited partnership in which the
Company was a 5 percent general partner and the Company's principal stockholder
was the other general partner. During 1995, 1996 and 1997, the Company incurred
$128,000, $114,000 and $110,000, respectively, in lease rent related to this
space. The building within which such space is located was sold to an related
third party in 1997.
The Company has unwritten consulting agreements with family members of the
Company's principal stockholder. Consulting services include assistance in
community and governmental affairs. During 1995, 1996 and 1997, the Company
incurred $229,000, $221,000 and $232,000, respectively, relative to these
consulting arrangements. The Company also provides certain management and
clerical personnel for a development company owned by the Company's principal
stockholder. During 1995, 1996 and 1997, the Company incurred $125,000, $125,000
and $126,000, respectively, in salaries and benefits costs relative to this
development company. In return, the Company receives certain consulting and
support services.
At December 31, 1997, the Company was obligated to the spouse of the
principal stockholder on notes payable due February 28, 1999, totaling $285,000
(see Note 7).
12. SUBSEQUENT EVENTS (UNAUDITED):
Effective February 1, 1998, the Company's management agreement with a hotel
in Waikiki was terminated due to the sale of the property. Management fees
earned on this property were approximately $330,000 during 1997. On February 1,
1998, the Company entered into a new management contract with a hotel property
in downtown Honolulu.
13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
On February 28, 1998, the Company's lease arrangement with a hotel in
Waikiki was terminated due to the sale of the property. The hotel had gross
revenues of approximately $5,347,000 and net income of approximately $371,000
during 1997.
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI. In connection with the Offering, certain liabilities will be
retained by one of the stockholders. In connection with the Offering, one
stockholder has agreed to reductions in salary and benefits which would have
reduced general and administrative expenses by $380,000, $282,000 and $282,000
for 1995, 1996 and 1997, respectively. In addition, certain stockholders will
retain non-operating assets and assume or retire certain liabilities that will
be excluded from the Combinations.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brindley & Brindley Realty Development, Inc.
and B&B On The Beach Inc.:
We have audited the accompanying combined balance sheets of Brindley &
Brindley consisting of Brindley & Brindley Realty and Development, Inc., and B&B
On The Beach Inc., both North Carolina corporations, as of December 31, 1997,
and the related combined statements of operations, changes in stockholders'
equity and cash flows for the year then ended. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Brindley &
Brindley, as of December 31, 1997, and the results of their operations and their
cash flows for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-30
<PAGE>
BRINDLEY & BRINDLEY
COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
1997
-------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 24
Cash held in trust ...................................... 3,895
Accounts receivable ..................................... 62
Prepaid expenses and other current assets ............... 37
------
Total current assets ................................. 4,018
PROPERTY AND EQUIPMENT, net .............................. 125
------
Total assets ......................................... $4,143
======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ....................... $ 19
Customer deposits and deferred revenue .................. 3,895
Accounts payable and accrued liabilities ................ 108
------
Total current liabilities ............................ 4,022
LONG-TERM DEBT, net of current maturities ................ 22
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par; 200,000 shares authorized; 200
shares outstanding .................................... --
Retained earnings ....................................... 99
------
Total stockholders' equity ........................... 99
------
Total liabilities and stockholders' equity ........... $4,143
======
The accompanying notes are an integral part of this financial statement.
F-31
<PAGE>
BRINDLEY & BRINDLEY
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
1997
-------------
REVENUES:
Property rental fees ..................... $2,642
Service fees ............................. 978
Real estate commissions, net ............. 401
------
Total revenues ........................ 4,021
OPERATING EXPENSES ........................ 3,028
------
Gross profit .......................... 993
GENERAL AND ADMINISTRATIVE EXPENSE ........ 482
------
Income from operations ................ 511
OTHER INCOME:
Interest income, net ..................... 42
------
NET INCOME ................................ $ 553
======
The accompanying notes are an integral part of this financial statement.
F-32
<PAGE>
BRINDLEY & BRINDLEY
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
-------- -------- --------- ---------
BALANCE, December 31, 1996 ......... 200 $ -- $ 73 $ 73
Net income ........................ -- -- 553 553
Distributions ..................... -- -- (527) (527)
--- ---- ------ ------
BALANCE, December 31, 1997 ......... 200 $ -- $ 99 $ 99
=== ==== ====== ======
The accompanying notes are an integral part of this financial statement.
F-33
<PAGE>
BRINDLEY & BRINDLEY
COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................... $ 553
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation ................................................ 87
Changes in operating assets and liabilities-
Accounts receivable ......................................... (33)
Prepaid expenses and other current assets ................... (30)
Accounts payable and accrued liabilities .................... 4
------
Net cash provided by operating activities .................. 581
------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............................ (83)
------
Net cash used in investing activities ...................... (83)
------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short-term debt ............................. 19
Distributions to stockholders ................................. (527)
------
Net cash used in financing activities ...................... (508)
------
NET DECREASE IN CASH AND CASH EQUIVALENTS ...................... (10)
CASH AND CASH EQUIVALENTS, beginning of period ................. 34
------
CASH AND CASH EQUIVALENTS, end of period ....................... $ 24
======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest ..................................... $ 3
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-34
<PAGE>
BRINDLEY & BRINDLEY
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Brindley & Brindley Realty & Development, Inc. and B&B On The Beach, Inc.
(collectively "Brindley & Brindley" or the "Company") both North Carolina
companies, are leading providers of beach vacation property rentals, management
services and sales in the outer banks of North Carolina. Brindley and Brindley
manages approximately 450 rental homes. The Company provides its management
services to property owners pursuant to management contracts, which are
generally one year in length. The majority of such contracts contain automatic
renewal provisions but also allow property owners to terminate the contract at
any time. Brindley & Brindley's operations are seasonal, with peaks during the
first and fourth quarters of the year.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. The Company
requires a deposit equal to 50% of the rental fee at the time reservations are
booked and the remaining 50% of the rental fee 30 days prior to the expected
arrival date. These deposits are non-refundable and are recorded as customer
deposits and deferred revenue in the accompanying combined financial statements
until the guest stay commences. The Company records revenue for cancellations as
they occur.
Service fees are recorded for a variety of services and are recognized as
the service is provided, including housekeeping, reservations and pool services.
Commissions on real estate sales are recognized at closing and are recorded
net of the related commission expense. The Company recognized commission
revenues of $1,189,000 and commission expense of $788,000 in 1997.
Operating Expenses
Operating expenses include rental agent commissions, employees salaries,
marketing and advertising expense, and other costs associated with property
sales, rental and management.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the combined statements of operations.
F-35
<PAGE>
BRINDLEY & BRINDLEY
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code and state tax statutes, whereby the Company is not subject to
taxation for federal or state purposes. Under S Corporation status, the
stockholders report their shares of the Company's taxable earnings or losses in
their personal tax returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Risk
The Company's operations are exclusively in the Corolla, North Carolina
area and are subject to significant changes due to weather conditions.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Property and equipment consisted of the following (in thousands):
ESTIMATED USEFUL DECEMBER 31,
LIVES IN YEARS 1997
-------------- -------------
Buildings and improvements ........ 5-40 $ 7
Office equipment and vehicles ..... 3-7 338
------
345
Less - Accumulated depreciation ... (220)
------
Property and equipment, net ...... $ 125
======
Accounts payable and accrued liabilities consisted of the following (in
thousands):
DECEMBER 31,
1997
-------------
Accrued compensation and benefits ................... $ 28
Accounts payable and other accrued liabilities ...... 80
----
Total accounts payable and accrued liabilities ..... $108
====
At December 31, 1997, maturities of long-term debt were as follows (in
thousands):
Year ending December 31,
1998 .................. $19
1999 .................. 8
2000 .................. 9
2001 .................. 5
---
$41
===
F-36
<PAGE>
BRINDLEY & BRINDLEY
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's combined financial
position or combined results of operations.
Insurance
The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the period presented in the
accompanying combined financial statements.
Benefit Plans
The Company's 401(k) retirement plan is available to substantially all of
the Company's full-time salaried employees. The Company's contribution to the
plan is based upon a percentage of employee contributions. The cost of this plan
to the Company was approximately $14,000 in 1997.
5. RELATED PARTIES:
During 1997, the Company paid approximately $104,000 or approximately
$8,700 per month to one of the owners for rent of the office building and local
warehouse pursuant to two oral agreements, each on a month-to-month basis.
Brindley & Brindley entered into two written lease agreements with the Brindleys
for these facilities that commenced on January 1, 1998. The terms of these
leases expire December 31, 2002, with options to extend for two 5-year periods
at the end of the lease periods and provide for aggregate annual rental payments
of approximately $133,500.
6. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI.
In connection with the Offering, the owner and certain key employees have
agreed to reductions in salary and benefits which would have reduced general and
administrative expenses by approximately $69,000 in 1997. In addition, certain
stockholders will retain non-operating assets and assume or retire certain
liabilities that will be excluded from the Combinations.
F-37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(COMBINED SUCCESSOR COMPANIES REPORT)
To the Shareholders of Coastal Resorts Management, Inc. and
the Members of Coastal Resorts Realty LLC:
We have audited the accompanying combined balance sheets of Coastal Resorts
Management, Inc. (a Delaware corporation) and Coastal Resorts Realty LLC (a
Delaware limited liability company) (collectively, the "Company") as of December
31, 1996 and 1997, and the related combined statements of operations, changes in
stockholders' and members' equity and cash flows for the period December 30,
1996 (inception) to December 31, 1996 and for the year ended December 31, 1997.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Coastal
Resorts Management, Inc., and Coastal Resorts Realty LLC as of December 31, 1996
and 1997, and the results of their combined operations and cash flows for the
period December 30, 1996 (inception) to December 31, 1996 and for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 29, 1998
F-38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(COMBINED PREDECESSOR COMPANIES REPORT)
To the Shareholders of Interstate Realty Co., Inc. and
Sea Colony Management, Inc.:
We have audited the accompanying combined statements of operations and cash
flows of Interstate Realty Co., Inc. (a Maryland corporation) and Sea Colony
Management, Inc. (a Delaware Corporation) (collectively, the "Company") for the
period January 1, 1996 through December 30, 1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 combined financial statements referred to above present
fairly, in all material respects, the results of the combined operations and
cash flows of Interstate Realty Co., Inc. and Sea Colony Management, Inc. for
the period January 1, 1996 through December 30, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington D.C.
January 29, 1998
F-39
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 6 $ 203
Cash held in escrow .............................................. 198 442
Accounts receivable .............................................. 143 117
Receivables from related parties ................................. 48 1,130
------ ------
Total current assets ........................................... 395 1,892
PROPERTY AND EQUIPMENT, net ....................................... 68 278
GOODWILL AND OTHER INTANGIBLE ASSETS, net ......................... 859 718
------ ------
Total assets ................................................... $1,322 $2,888
====== ======
LIABILITIES AND STOCKHOLDERS' AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Customer deposits and deferred revenue ........................... $ 163 $ 212
Payable to property owners ....................................... 163 258
Accounts payable and accrued liabilities ......................... 196 395
Accounts payable and accrued liabilities-related parties ......... -- 47
------ ------
Total current liabilities ...................................... 522 912
NOTE PAYABLE TO RELATED PARTY ..................................... 675 715
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' AND MEMBERS' EQUITY:
Common stock, $0.01 par; 100,000 shares authorized; ..............
25,000 issued and outstanding .................................... -- --
Capital in excess of par value ................................... 25 25
Members' equity .................................................. 100 100
Retained earnings ................................................ -- 1,136
------ ------
Total stockholders' and members' equity ........................ 125 1,261
------ ------
Total liabilities and stockholders' and members' equity ........ $1,322 $2,888
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED PREDECESSOR COMBINED SUCCESSOR
COMPANIES COMPANIES
---------------------- -------------------
PERIOD JANUARY 1, YEAR
1996 THROUGH ENDED
DECEMBER 30, 1996 DECEMBER 31, 1997
---------------------- -------------------
<S> <C> <C>
REVENUES:
Property rental fees ....................... $ 630 $ 908
Real estate commissions, net ............... 1,058 1,905
Water plant ................................ -- 462
Service fees ............................... 229 340
------ ------
Total revenues ........................... 1,917 3,615
OPERATING EXPENSES .......................... 837 1,788
------ ------
Gross profit ............................. 1,080 1,827
GENERAL AND ADMINISTRATIVE EXPENSES ......... 477 644
------ ------
Income from operations ................... 603 1,183
INTEREST INCOME (EXPENSE) ................... 121 (47)
------ ------
Income before income taxes ............... 724 1,136
PROVISION FOR INCOME TAXES .................. 304 --
------ ------
NET INCOME .................................. $ 420 $1,136
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
STATEMENTS OF CHANGES IN STOCKHOLDERS' AND MEMBERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------- PAID-IN MEMBERS' RETAINED
SHARES AMOUNT CAPITAL EQUITY EARNINGS TOTAL
-------- -------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Initial Capitalization -- CRR,
December 30, 1996 ................. -- $ -- $ -- $100 $ -- $ 100
Initial Capitalization -- CRM,
December 30, 1996 ................. 25,000 -- 25 -- -- 25
Net Income ...................... -- -- -- -- -- --
------ ---- ---- ---- ------ ------
BALANCE, December 31, 1996 ......... 25,000 -- 25 100 -- 125
Net Income ...................... -- -- -- -- 1,136 1,136
------ ---- ---- ---- ------ ------
BALANCE, December 31, 1997 ......... 25,000 $ -- $ 25 $100 $1,136 $1,261
====== ==== ==== ==== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
PREDECESSOR
COMPANIES COMBINED SUCCESSOR COMPANIES
-------------- ------------------------------
JANUARY 1 - INCEPTION - JANUARY 1 -
DECEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1997
-------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................... $ 420 $ -- $ 1,136
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization .................. 28 -- 85
Gain on sale of assets ......................... -- -- (8)
Changes in operating assets and liabilities--
Escrow accounts .................................. 102 -- (244)
Accounts receivable .............................. (32) -- 26
Commission receivable ............................ (71) -- --
Receivables from related parties ................. -- -- (1,082)
Due to/from related party ........................ (334) -- --
Prepaid insurance and income taxes ............... 63 -- --
Customer deposits and deferred revenue ........... (127) -- 49
Payable to property owners ....................... -- -- 95
Accounts payable and accrued liabilities ......... (16) -- 199
Accounts payable and accrued liabilities -- re-
lated parties .................................. -- -- 47
------ ---- ---------
Net cash provided by operating activities ......... 33 -- 303
------ ---- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
COMBINED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED
PREDECESSOR
COMPANIES COMBINED SUCCESSOR COMPANIES
-------------- ------------------------------
JANUARY 1 - INCEPTION - JANUARY 1 -
DECEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1997
-------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses, net of cash acquired ..... $ -- $ (119) $ --
Purchase of property and equipment ............... (33) -- (261)
Proceeds from sale of assets ..................... -- -- 115
------- ------- ------
Net cash used in investing activities .......... (33) (119) (146)
------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable to related party ...... -- -- 200
Payments on note payable to related party ........ -- -- (160)
Capital contributions ............................ -- 125 --
------- ------- ------
Net cash provided by financing activities ...... -- 125 40
------- ------- ------
NET INCREASE IN CASH AND CASH EQUIVA-
LENTS ............................................ -- 6 197
CASH AND CASH EQUIVALENTS, beginning of
period ........................................... 6 -- 6
------- ------- ------
CASH AND CASH EQUIVALENTS, end of period........... $ 6 $ 6 $ 203
======= ======= ======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Fair value of assets acquired, net of cash ....... $ -- $ 885 $ --
Less: Cash paid .................................. -- 119 --
Seller provided financing ........................ -- 675 --
Liabilities incurred ............................. -- 91 --
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest ........................... $ -- $ -- $ --
======= ======= ======
Cash paid for taxes .............................. $25,500 $ -- $ --
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Coastal Resorts Management, Inc. ("CRM"), incorporated on September 26, 1996,
and Coastal Resorts Realty LLC ("CRR"), formed on August 28, 1996, (collectively
the "Companies" or the "Company") are a Delaware corporation and a Delaware
limited liability company, respectively. CRM provides property management
services to homeowner associations as well as other related service companies.
CRR provides property rental services to owners of vacation properties and acts
as an agent for sales of new and used vacation properties. The Company manages
approximately 550 rental units in Bethany Beach, Delaware. CRR and CRM purchased
their operations from Interstate Realty Co., Inc. ("Interstate") and Sea Colony
Management, Inc. ("SCM"), respectively, on December 30, 1996 (See Note 4). The
Company provides its management services to property owners pursuant to
management contracts, which range in length from one to five years. The majority
of such contracts allow property owners to terminate the contract only for
cause. The Company's operations are seasonal, with peaks during the second and
third quarters of the year.
The Companies and their stockholders and members intend to enter into a
definitive agreement with Vacation Properties International, Inc. ("VPI"),
pursuant to which all of the outstanding stock of the Companies will be
exchanged for shares of VPI common stock concurrent with the consummation of the
initial public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Combination and Financial Statement Presentation
The accompanying financial statements of CRM and CRR (the "Successor
Companies") have been prepared on a combined basis as the Companies are under
common control and are expected to be the subject of a consolidation with and
into VPI.
The accompanying financial statements of Interstate and SCM (the
"Predecessor Companies") have been prepared on a combined basis as the
Predecessor Companies were under common control and were the subject of an
acquisition by the Successor Companies. The financial statements of the
Predecessor Companies are presented for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission.
The combined statement of operations of the Companies for the period from
December 30, 1996 (inception) to December 31, 1996, has not been presented due
to the nominal level of operations.
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. The Company
requires a deposit equal to 33% of the rental fee 10 days after the reservation
is booked. These deposits are non-refundable and are recorded as customer
deposits and deferred revenue in the accompanying combined financial statements.
The Company records revenue for cancellations as they occur.
Service fees are recorded for a variety of services and are recognized as
the service is provided, including processing and inspection fees.
F-45
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Commissions on real estate sales are recognized at closing and are recorded
net of the related commission expense. The Company recognized commission
revenues of $1,507,000 and $3,002,000 for the years 1996 and 1997 and commission
expense of $449,000 and $1,097,000 for the years 1996 and 1997.
Operating Expenses
Operating expenses include rental agent commissions, salaries, marketing
and advertising expense, and other costs associated with sales, rental and
management.
Cash and Cash Equivalents
For purposes of the balance sheets and statements of cash flows, the
Company considers all cash held and investments held with maturities of less
than 3 months as cash and cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
Income Taxes
CRM has elected S Corporation status as defined by the Internal Revenue
Code and state tax statutes, whereby the Company is not subject to taxation for
federal or state tax purposes. Under S Corporation status, the stockholders
report their share of CRM's taxable earnings or losses in their personal tax
returns. CRR is a Limited Liability Company and is taxed as a Partnership.
Accordingly, the Company is not subject to taxation for federal or state
purposes. The members report their share of CRR's taxable earnings or losses in
their personal tax returns.
The Predecessor Companies were C Corporations and accounted for their
income taxes under the provisions of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, the current
provision for income taxes represents actual or estimated amounts payable or
refundable on tax returns filed or to be filed for each year. Deferred tax
assets and liabilities are recorded for estimated future tax effects of: (a)
temporary differences between the tax bases of assets and liabilities and
amounts reported in the consolidated balance sheets, and (b) operating loss and
tax credit carry forwards. The overall change in deferred tax assets and
liabilities for the period measures the deferred tax expense for the period.
Effects of changes in enacted tax laws on deferred tax assets and liabilities
are reflected as adjustments to tax expense in the period of the enactment. The
measurement of deferred tax assets may be reduced by a valuation allowance based
on judgmental assessment of available evidence if deemed more likely than not
that some or all of the deferred tax assets will not be realized.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-46
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Risk
The Companies' operations are exclusively in the Bethany Beach, Delaware
area and are subject to significant changes due to weather conditions.
In 1997, 26 percent of gross revenues were attributable to commissions on
new homes sales which were built by Sea Colony Development Corporation, Inc., a
related party.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following (in thousands):
ESTIMATED DECEMBER 31,
USEFUL LIVES ---------------
IN YEARS 1996 1997
------------- ------ -------
Computer equipment ................... 5 $60 $ 88
Furniture and fixtures ............... 7 8 241
Total ............................. 68 329
Less -- Accumulated depreciation ..... -- (51)
--- -----
Property and equipment, net .......... $68 $ 278
=== =====
4. PURCHASE:
On December 30, 1996, CRR entered into an agreement to purchase the assets
and assume certain liabilities of Interstate (a related party) for the purchase
price of $759,000. CRR borrowed $600,000 from a related party entity to finance
the purchase. The fair value of the net assets purchased totaled $2,000,
resulting in the recognition of goodwill of $642,000 and a trademark of
$115,000. The trademark was sold in 1997 (see Note 6).
On December 30, 1996, CRM entered into an agreement to purchase the common
stock of SCM (a related party) for the purchase price of $132,000. CRM borrowed
$75,000 from a related party entity to finance the purchase. The fair value of
the net assets purchased totaled $30,000, resulting in the recognition of
intangible assets, totaling $102,000.
F-47
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The goodwill is being amortized over a period of 40 years.
The trademark was subsequently sold to another related party for
approximately $115,000 pursuant to an agreement effective December 31, 1997. The
trademark was being amortized over a period of 15 years.
The intangible assets associated with the purchase of SCM are being
amortized over a period of 10 years.
5. COMMITMENTS AND CONTINGENCIES:
Litigation
The Companies are involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Companies' combined financial
position or results of operations.
Insurance
Through policies secured by a related party, the Companies are covered by a
broad range of insurance policies, including general and business auto
liability, commercial property, workers' compensation and a general umbrella.
The cost of these policies has not been allocated to the Companies in the
accompanying financial statements. The Companies expect to incur insurance
expense in future years.
Benefit Plans
A related party's 401(k) retirement plan (the "Plan") is available to
substantially all of the Company's employees. The Plan is 100% employee funded
and the Companies have no current or future obligations related to the Plan. The
Companies currently pay a fee for the related administration costs.
Future Minimum Lease Payments
The Company rents office space and equipment under operating leases. Rental
expense related to these leases was approximately $69,000 and $111,000 in 1996
and 1997, respectively. Rental expense related to leases with related parties
was approximately $69,000 and $77,000 in 1996 and 1997, respectively.
Minimum future lease payments under these noncancelable operating leases in
effect as of December 31, 1997 are as follows (in thousands):
YEAR AMOUNT
- ----------------------- -------
1998 ................ $132
1999 ................ 107
2000 ................ 85
2001 ................ 90
2002 ................ 38
----
Total ............... $452
====
6. RELATED PARTIES:
Related Party Agreements
Effective June 1, 1996, one of the Predecessor Entities entered into an
agreement with CMF Fitness, Inc., a related party. The agreement appointed the
Predecessor Entity as the manager of, and exclusive agent for, the Sea Colony
Fitness Center located in Bethany Beach, Delaware. The agreement is effective
from June 1, 1996 until December 31 of the calendar year in which the last new
home in the Sea Colony community is sold, but in no event later than December
31, 2005.
F-48
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CRM receives a management fee of approximately $6,000 per month for its
services. CRM and the Predecessor Entity earned approximately $41,000 and
$70,000 in 1996 and 1997, respectively, in relation to this management
agreement.
Effective January 1, 1997, CRM entered into an agreement with Sea Colony
Water Company, L.L.C., ("SCWC"), a related party. The agreement appointed CRM as
the manager of and exclusive agent for the Sea Colony Water Plant located in
Bethany Beach, Delaware. The agreement is effective from January 1, 1997 until
December 31, 2001 or the sale of the property. CRM is entitled to retain all
revenue collected by the water plant, less the following: (1) an annual payment
to SCWC of $100,000, (2) an annual payment to SCWC equal to 12.5% of the
cumulative value of capital improvements made to the water plant after January
1, 1997, and (3) all costs and expenses associated with the operation of the
property except capital improvements and expenditures, costs of compliance with
laws and regulations, and costs of insurance. CRM earned approximately $463,000
in revenue from the operation of the water plant in 1997. Operating expenses
plus the additional costs described above incurred by CRM related to the water
plant were approximately $319,000.
Effective January 1, 1997, CRR entered into an agreement with Sea Colony
Development Corporation, Inc. ("SCDC"), a related party. The agreement requires
CRR to develop a marketing plan to promote new homes in the Sea Colony
community. The agreement also appointed CRR as the sole and exclusive agent for
sale of new homes at Sea Colony from January 1, 1997 until December 31, 1999.
The agreement states that CRR shall receive a commission of 6.5% of the full
purchase price on all new homes sold at Sea Colony. CRR earned approximately
$1,244,000 in new home sales commissions under this agreement in 1997. At
December 31, 1997, in connection with this agreement the Company has a net
receivable of approximately $674,000 from SCDC consisting of a receivable of
approximately $1,244,000 for commissions on new home sales in 1997 and a related
payable of approximately $570,000 for commissions, marketing and advertising
expenses paid by SCDC on behalf of CRR.
Effective January 1, 1997, the Companies entered into an agreement with CMF
Paymaster, Inc., a related party, to receive administrative services relating to
payroll and other employee matters. The agreement is effective from January 1,
1997 through December 31, 1999, and requires the Companies to pay $2.00 per pay
period per employee of the Companies.
The trademark purchased on December 30, 1996 for $115,000 was sold to SCDC
pursuant to an agreement effective December 31, 1997. As of December 31, 1997,
the Company has recorded a receivable from SCDC for $115,000 related to this
sale. A gain of $4,000 was recognized on the sale and is included in other
revenues.
Note Payable to Related Party
In connection with the purchase of Interstate and SCM on December 30, 1996
the Companies borrowed $675,000 from a related party. The loan has an effective
interest rate of 7.25% and is due December 31, 2001. During 1997 the Companies
received additional advances of $200,000 and made principal payments of
$160,000. Accrued interest payable at December 31, 1997, was $46,888. The assets
of the Company have been pledged as collateral for the note.
Related Party Leases
The Company leases office space under three separate leases with a related
party. In aggregate, the Company paid approximately $69,000 and $77,000 in 1996
and 1997, respectively.
F-49
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.
AND
COASTAL RESORTS REALTY LLC
(COMBINED SUCCESSOR COMPANIES)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Capital Contribution
On January 13, 1998, the owners of the Companies made a capital
contribution of approximately $762,000. On the same day, this amount was used to
repay the Companies' related party debt of $715,000 and the related accrued
interest.
7. INCOME TAXES:
The provision for income taxes consists of the following for the period
January 1 through December 30, 1996 (in thousands):
CURRENT:
Federal ........................... $ 280
State ............................. 64
-----
Total current provision ......... 344
DEFERRED:
Federal ........................... (27)
State ............................. (13)
-----
Total deferred benefit: ......... (40)
-----
Provision for income taxes ......... $ 304
=====
A reconciliation of the statutory income tax rate to the provision for
income taxes included in the statement of operations of the Predecessor
Companies for the period January 1 through December 30, 1996 is as follows (in
thousands):
Federal income tax at statutory rate ......... 253
State income taxes, net ...................... 51
---
Income tax provision ......................... $304
====
8. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Companies and their stockholders and members have entered into a
definitive agreement with VPI pursuant to which all of the outstanding stock and
membership interest of the Companies will be acquired by VPI. In addition, the
stockholders and members will retain goodwill and other intangible assets that
will be excluded from the Combinations.
F-50
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To Collection of Fine Properties, Inc.:
We have audited the accompanying consolidated balance sheets of Collection
of Fine Properties, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the three years ended December 31, 1997, 1996 and 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Collection
of Fine Properties, Inc. as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for the three years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
MORRISON, BROWN, ARGIZ AND COMPANY
Denver, Colorado
January 23, 1998
F-51
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................... $2,664 $2,713
Marketable securities ....................................... 103 --
Accounts receivable ......................................... 100 67
Receivables from affiliates and stockholders ................ 213 634
Prepaid expenses and other current assets ................... 312 434
------ ------
Total current assets ...................................... 3,392 3,848
------ ------
PROPERTY AND EQUIPMENT, net .................................. 1,903 1,964
------ ------
OTHER ASSETS ................................................. 98 54
------ ------
Total assets .............................................. $5,393 $5,866
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit .............................................. $ -- $ 97
Current portion of long-term debt ........................... 397 28
Current portion of capital lease obligations ................ 51 55
Customer deposits and deferred revenue ...................... 3,287 3,336
Payable to affiliates ....................................... 42 28
Accounts payable and accrued liabilities .................... 938 1,175
------ ------
Total current liabilities ................................. 4,715 4,719
------ ------
LONG-TERM DEBT, net of current maturities .................... 188 299
------ ------
CAPITAL LEASE OBLIGATIONS, net of current maturities ......... 70 15
------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par value, 10,000 shares authorized, issued
and outstanding ........................................... 788 788
Retained earnings (deficit) ................................. (368) 45
------ ------
Total stockholders' equity ................................ 420 833
------ ------
Total liabilities and stockholders' equity ................ $5,393 $5,866
====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-52
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
--------- --------- ---------
REVENUES:
<S> <C> <C> <C>
Property rental fees ................. $2,734 $3,273 $3,513
Service fees ......................... 266 273 243
Other ................................ 500 595 547
------ ------ ------
Total revenues ...................... 3,500 4,141 4,303
OPERATING EXPENSES ..................... 2,621 2,777 2,830
------ ------ ------
Gross profit .......................... 879 1,364 1,473
GENERAL AND ADMINISTRATIVE EXPENSES .... 923 948 893
------ ------ ------
Income (loss) from operations ......... (44) 416 580
OTHER INCOME (EXPENSE):
Interest income, net ................. 21 31 58
Other ................................ (34) 85 75
------ ------ ------
NET INCOME (LOSS) ................... $ (57) $ 532 $ 713
====== ====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-53
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
------------------ EARNINGS
SHARES AMOUNT (DEFICIT) TOTAL
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1995 ........... 10,000 $788 $ (443) $ 345
Net loss .......................... -- -- (57) (57)
Distributions ..................... -- -- (100) (100)
------ ---- ------ ------
BALANCE, December 31, 1995 ......... 10,000 788 (600) 188
Net income ........................ -- -- 532 532
Distributions ..................... -- -- (300) (300)
------ ---- ------ ------
BALANCE, December 31, 1996 ......... 10,000 788 (368) 420
Net income ........................ -- -- 713 713
Distributions ..................... -- -- (300) (300)
------ ---- ------ ------
BALANCE, December 31, 1997 ......... 10,000 $788 $ 45 $ 833
====== ==== ====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-54
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ....................................... $ (57) $ 532 $ 713
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization .......................... 379 367 307
Gain on sale of assets ................................. -- (9) --
Changes in operating assets and liabilities:
Accounts receivable .................................... (21) 1 33
Receivable from affiliates and stockholders ............ 27 (105) (421)
Prepaid expenses and other current assets .............. 66 (21) (122)
Customer deposits and deferred revenue ................. 188 568 49
Payable to affiliates .................................. 74 (363) (13)
Accounts payable and accrued expenses .................. 186 (96) 237
------ ------- ------
Net cash provided by operating activities ............ 842 874 783
------ ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from loan receivable ........................... -- 160 --
Advances to stockholders ................................ -- (16) --
Purchases of property and equipment ..................... (360) (288) (284)
Proceeds from sale of property and equipment ............ -- 46 8
Other assets ............................................ 19 (10) 37
Sales and (purchases) of marketable securities .......... -- (103) 103
Proceeds from sale of land held for development ......... -- 67 --
------ ------- ------
Net cash used in investing activities ................ (341) (144) (136)
------ ------- ------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-55
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances on line of credit ......................... 514 -- 752
Repayments on line of credit ....................... (724) (90) (655)
Proceeds from notes payable ........................ 149 -- --
Payments on notes payable .......................... (123) (26) (344)
Payments on note payable to related parties ........ -- (154) --
Payments on capital leases ......................... (50) (54) (51)
Distributions to stockholders ...................... -- (400) (300)
---- ---- ----
Net cash used in financing activities ............. (234) (724) (598)
---- ---- ----
NET INCREASE IN CASH AND CASH EQUIVA-
LENTS .............................................. 267 6 49
CASH AND CASH EQUIVALENTS, beginning of year.......... 2,391 2,658 2,664
----- ----- -----
CASH AND CASH EQUIVALENTS, end of year ............... $2,658 $2,664 $2,713
====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid ....................................... $ 75 $ 100 $ 79
====== ====== ======
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Acquisition of assets under capitalized leases ..... $ -- $ -- $ 86
====== ====== ======
Write-off of fully depreciated fixed assets ........ $ -- $ -- $ 362
====== ====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-56
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Collection of Fine Properties, Inc. and its subsidiary Peak Ski Rental,
Ltd. ("Subsidiary", collectively the "Company"), a Colorado S-Corporation,
provides vacation property rental and management services for properties owned
by third parties and located in the Breckenridge, Colorado area. The properties
are primarily condominium rental units which are owned by third parties. The
Company manages approximately 470 rental units. The Company's subsidiary is
engaged in the rental of ski equipment.
On January 1, 1995, Tyra Management, Inc., Colorado Mountain Lodging, Inc.,
and River Mountain Lodge, Inc. formed a business combination accounted for as a
pooling of interests. All of the assets and liabilities of those companies were
transferred to Collection of Fine Properties, Inc. The stockholders of the
combined companies received 10,000 shares of common stock of Collection of Fine
Properties, Inc. in exchange for their stock in Tyra Management, Inc., Colorado
Mountain Lodging, Inc. and River Mountain Lodge, Inc. All existing basis in the
assets and liabilities of the combined companies was transferred to the Company.
As a result of this combination, the Company acquired 100% ownership of
Subsidiary, which prior to the combination, was owned one-third by each of the
combining companies.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation
The consolidated financial statements include the accounts of Collection of
Fine Properties, Inc. and Peak Ski Rental, Ltd. All significant intercompany
accounts and transactions have been eliminated.
Revenue recognition
The Company records property rental and management fees on the accrual
basis of accounting ratably over the term of guest stays, as earned. Certain
other linen and maintenance fees are charged periodically. The Company provides
all marketing, management, housekeeping and minor maintenance.
The Company requires a non-refundable deposit equal to 100% of the rental
amount 60 days prior to the actual stay, recorded as Customer Deposits within
the accompanying consolidated balance sheets. Revenue from cancellations is
recognized when received.
Operating expenses
Operating expenses include travel agent commissions, salaries,
communications, advertising, credit card fees and other costs associated with
managing properties.
Cash and cash equivalents
The Company considers all short-term investments purchased with an original
maturity of three months or less to be cash equivalents.
Marketable securities
Marketable securities consist of corporate bonds and are classified as held
to maturity. The fair market value of the securities approximates the cost.
F-57
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Held to maturity securities are securities which the Company has the
positive intent and ability to hold to maturity. Amounts are reported at
amortized cost, adjusted for the amortization of premiums and accretion of
discounts.
Inventories
Inventories consist of ski lift tickets, merchandise, uniforms, supplies
and parts used for the repair and service of the owners' units. Inventories are
stated at cost, determined on a first-in, first-out (FIFO) method. Inventories
are included in prepaid expenses and other current assets on the balance sheets.
Land held for development
Land held for development consists of raw land purchased for future
development. Cost includes original acquisition costs and costs incurred
specific to the property. During 1996, this property was sold to a related party
at cost.
Property and equipment
Property and equipment are recorded at cost.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
Income taxes
The Company has S-Corporation status as defined by the Internal Revenue
Code. Under S-Corporation status, the stockholders report their shares of the
Company's taxable earnings or losses in their personal tax returns.
Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at December 31, 1997 and 1996
and revenues and expenses during the three years ended December 31, 1997, 1996
and 1995. The actual outcome of these estimates could differ from the estimates
made in the preparation of the financial statements.
Concentration of credit risk
At December 31, 1997 and 1996, the Company had cash deposits in a financial
institution of approximately $2,341,000 and $2,085,000, respectively, in excess
of the federal insured limit of $100,000.
The Company is economically dependent upon the tourism trade and changes in
weather conditions in the Breckenridge, Colorado area. The operations are
seasonal, with peaks during the first and fourth quarters of the year.
Reclassifications
Certain items in the 1995 and 1996 financial statements have been
reclassified to conform with the 1997 presentation.
F-58
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosure regarding the fair
value of financial instruments for which it is practical to estimate that value.
The carrying value of cash and cash equivalents, approximates the fair value due
to the short-term nature of these instruments. The fair value of the Company's
long-term debt is estimated to approximate carrying value as the pricing and
terms are indicative of current rates and credit risk.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Inventories consisted of the following (in thousands):
DECEMBER 31,
----------------
1996 1997
------ -------
Merchandise ................ $ 31 $ 35
Parts and supplies ......... 27 31
Uniforms ................... 9 13
Ski lift tickets ........... 94 78
---- ----
$161 $157
==== ====
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ---------------------
IN YEARS 1996 1997
------------- --------- ---------
<S> <C> <C> <C>
Buildings ......................................... 31-39 $1,206 $1,230
Property held for investment ...................... 31-39 330 332
Furniture and equipment ........................... 3-7 962 806
Transportation equipment .......................... 5 104 203
Equipment under capital leases .................... lease term 262 242
Leasehold improvements ............................ 39 52 59
Linens ............................................ 4 216 259
3,132 3,131
Less accumulated depreciation and amortization..... 1,229 1,167
------ ------
Property and equipment, net ...................... $1,903 $1,964
====== ======
</TABLE>
Accounts payable and accrued liabilities consisted of the following (in
thousands):
1996 1997
------ ---------
Trade payable .................................. $703 $ 915
Payroll and payroll taxes ...................... 101 111
Sales tax ...................................... 134 149
---- ------
Total accounts payable and accrued liabilities $938 $1,175
==== ======
4. PROPERTY HELD UNDER CAPITAL LEASES:
The Company is subject to leases for telephone and computer equipment under
arrangements, which are accounted for as capital leases. The leases are
amortized over an estimated useful life of 5 years. Amortization on equipment
under capital leases for the years ended December 31, 1997, 1996 and 1995 was
approximately $49,000.
F-59
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following is a schedule of future minimum payments due under the
capital leases and the present value of the net minimum lease payments (in
thousands):
Year ending December 31,
1998 .......................................................... $ 58
1999 .......................................................... 15
-----
Total minimum lease payments ................................... 73
Less amount representing interest .............................. 3
-----
Present value of net minimum obligations under capital leases .. 70
Less current maturities ........................................ 55
-----
$ 15
=====
5. RELATED PARTIES:
The related party balances consisted of the following (in thousands):
DECEMBER 31,
----------------
1996 1997
------ -------
Receivable from affiliates ........... $162 $583
Receivable from stockholders ......... 51 51
---- ----
$213 $634
==== ====
Payable to affiliates ................ $ 42 28
==== ====
Related party receivables are unsecured, non-interest bearing and are
expected to be collected in the subsequent year.
The Company has a mortgage note payable with an affiliate (Note 7).
During 1996 and 1995, the Company incurred management fees to a related
party of approximately $100,000 and $118,000, respectively, for administrative
services. No management fees were incurred during 1997.
During 1997, 1996 and 1995, the Company received expense reimbursements
from a related party of approximately $75,000, $57,000 and $60,000,
respectively.
Loan receivable
Tyra Management, Inc. sold property to a related party at its cost basis of
approximately $323,000. Tyra Management, Inc. received a note from that related
entity. At January 1, 1995, when Tyra Management, Inc. was combined into the
Company, the note had been paid down to approximately $151,000, which included
accrued interest. The note was transferred to the Company as part of the
combination. No additional payments were made by the related entity during 1995.
Interest, which accrues at the rate of 6% per annum ($9,000) was added to the
balance at December 31, 1995. The loan was paid off during 1996.
6. LINE OF CREDIT:
The Company has a $750,000 line of credit from a bank. During 1997, the
maximum balance outstanding under the line of credit was approximately $502,000
and the minimum was zero. The line is secured by certain real estate, furniture,
fixtures, equipment and inventory. The principal shareholders of the Company are
additional parties to the note. The interest charged is the New York prime rate,
which was 8.5% and 8.25% at December 31, 1997 and 1996, respectively. These
interest rates approximate the weighted average rates during the respective
years.
F-60
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
7. LONG-TERM DEBT:
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ -------
<S> <C> <C>
Mortgage note, payable in monthly principal installments of $500 plus interest
at the prime rate (8.5% and 8.25% at December 31, 1997 and 1996, respectively).
The note is secured by property and matures July, 2000, at which time a balloon
payment is due. Certain shareholders are guarantors of the note.. $131 $125
Mortgage note, payable in monthly installments of $600 including interest at the
prime rate (8.5% and 8.25% at December 31, 1997 and 1996, respectively). The
note is secured by property and matures January, 2003, at which time a balloon
payment is due.................................................................. 72 71
Mortgage note, payable in monthly installments of $3.6, including interest at
9%. The note is secured by property and matured August, 1997, at which time a
balloon payment was due......................................................... 319 --
Mortgage note, payable in monthly installments of $.5 to a related party
including interest at 8%. The note is secured by property and matures through
November, 2023.................................................................. 63 62
Loan payable for purchase of vehicles, payments of $2.1, including principal and
interest ....................................................................... -- 69
---- ----
$585 $327
==== ====
</TABLE>
The aggregate maturities of long-term debt at December 31, 1997 are as
follows (in thousands):
Year ending December 31,
1998 ............................ $ 28
1999 ............................ 30
2000 ............................ 140
2001 ............................ 5
2002 ............................ 3
Thereafter ...................... 121
----
327
Less current maturities ......... 28
----
$299
====
8. BENEFIT PLAN:
The Company instituted a 401(K) Profit Sharing Plan during September, 1996.
Employer contributions to the plan during 1997 and 1996 were approximately
$20,000 and $6,000, respectively.
F-61
<PAGE>
COLLECTION OF FINE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
9. SUBSEQUENT EVENT:
During January, 1998, the Company distributed $300,000 to its stockholders.
10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI.
In connection with the Offering, an owner has agreed to reductions in
salary and benefits which would have reduced general and administrative expenses
by approximately $64,000, $74,000 and $94,000 for 1995, 1996, and 1997,
respectively. In addition, certain stockholders will retain non-operating assets
and assume or retire certain liabilities that will be excluded from the
Combinations.
F-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Resort Software, Inc.:
We have audited the accompanying balance sheet of First Resort Software,
Inc. (a Colorado corporation) as of December 31, 1997, and the related
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of First Resort Software, Inc.,
as of December 31, 1997, and the results of its operations and its cash flows
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-63
<PAGE>
FIRST RESORT SOFTWARE, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................................... $ 126
Accounts receivable ............................................. 274
Notes receivable ................................................ 152
Prepaid expenses and other current assets ....................... 45
-----
Total current assets .......................................... 597
PROPERTY AND EQUIPMENT, net ...................................... 275
-----
Total assets .................................................. $ 872
=====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Deferred revenue ................................................ $ 506
Accounts payable and accrued liabilities ........................ 130
-----
Total current liabilities ..................................... 636
LONG-TERM OBLIGATIONS ............................................ 125
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par; 50,000 shares authorized; 3,000 shares out-
standing ...................................................... 3
Additional paid in capital ...................................... 13
Retained earnings ............................................... 95
-----
Total stockholders' equity .................................... 111
-----
Total liabilities and stockholders' equity .................... $ 872
=====
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-64
<PAGE>
FIRST RESORT SOFTWARE, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
1997
-------------
REVENUES:
Software sales ........................... $1,318
Service contracts ........................ 1,390
Other .................................... 156
------
Total revenues ......................... 2,864
OPERATING EXPENSES ........................ 1,704
------
Gross profit ............................. 1,160
GENERAL AND ADMINISTRATIVE EXPENSES ....... 417
------
Income from operations ................... 743
OTHER INCOME:
Interest income .......................... 25
------
NET INCOME ................................ $ 768
======
The accompanying notes are an integral part of this financial statement.
F-65
<PAGE>
FIRST RESORT SOFTWARE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------- PAID IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
-------- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 ......... 3,000 $ 3 $13 $ (106) $ (90)
Net income ........................ -- -- -- 768 768
Distributions ..................... -- -- -- (567) (567)
----- --- --- ------ ------
BALANCE, December 31, 1997 ......... 3,000 $ 3 $13 $ 95 $ 111
===== === === ====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-66
<PAGE>
FIRST RESORT SOFTWARE, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................ $ 768
Adjustments to reconcile net income to net cash provided by op-
erating activities--
Depreciation .................................................... 45
Changes in operating assets and liabilities--
Accounts receivable ............................................. (44)
Notes receivable ................................................ (25)
Prepaid expenses and other current assets ....................... 29
Deferred revenue ................................................ 49
Accounts payable and accrued liabilities ........................ (17)
------
Net cash provided by operating activities ...................... 805
------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................................ (183)
------
Net cash used in investing activities .......................... (183)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on line of credit ........................................ (39)
Distributions to stockholders ..................................... (567)
------
Net cash used in financing activities .......................... (606)
------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 16
CASH AND CASH EQUIVALENTS, beginning of year ....................... 110
------
CASH AND CASH EQUIVALENTS, end of year ............................. $ 126
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-67
<PAGE>
FIRST RESORT SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
First Resort Software, Inc. (the "Company") is a Colorado corporation. The
Company was founded and began operations in 1985. The Company develops, markets
and distributes property management computer software applications and provides
its licensees with implementation services and ongoing support. The Company has
a client base of over 650 companies located in the United States, Canada and the
Caribbean.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records revenue from software sales when the software is
successfully installed on the client's system.
The Company's revenue recognition policies conform to accounting principles
for software revenue recognition issued by the American Institute of Certified
Public Accountants ("AICPA"). For customer arrangements that include multiple
elements (i.e., additional software products, postcontract customer support, or
services) the contract price is generally allocated to the various elements
based on Company--specific objective evidence of fair values. Revenue related to
software maintenance agreements, which are generally one year in duration, is
generally billed in advance and recognized ratably over the term of the
maintenance contract. Customer deposits received and amounts invoiced but not
yet recognized as revenue are reflected as deferred revenue in the accompanying
balance sheet. These amounts are included in revenue when the relevant
recognition criteria are met.
Revenues related to service elements are generally recognized as the
services are provided. Should the Company enter into arrangements with customers
that require significant production, modification or customization of software,
the entire arrangement will be accounted for using progress to completion
accounting methods prescribed by the AICPA.
Operating Expenses
Operating expenses include salaries, benefits, communications, marketing,
postage and shipping, and other costs associated with developing, servicing and
marketing software.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight--line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
F-68
<PAGE>
FIRST RESORT SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Research and Development
Research and development costs, except as discussed below, are expensed as
incurred. These costs consist primarily of salaries relating to the development
of new products and technologies.
Generally accepted accounting principles provide that costs incurred to
produce software for external sale or lease should be capitalized. Costs
eligible for capitalization are those incurred after the product's technological
feasibility has been established and before the product is ready for general
release. The establishment of technological feasibility and the ongoing
assessment of the recoverability of capitalized costs requires considerable
judgment by management with respect to certain external factors, including, but
not limited to, anticipated future product revenues, estimated economic life and
changes in software and hardware technology. The Company incurred costs through
December 31, 1997 which satisfy the above criteria of approximately $149,000 and
therefore these software development costs have been capitalized by the Company.
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation. Under S
Corporation status, the stockholders report their share of the Company's taxable
earnings or losses in their personal tax returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED USEFUL DECEMBER 31,
LIVES IN YEARS 1997
------------------ -------------
<S> <C> <C>
Furniture, fixtures and equipment ....... 5 $ 255
Leasehold improvements .................. 5 9
Computer software ....................... 5 149
413
Less - Accumulated depreciation ......... (138)
------
Property and equipment, net ............ $ 275
======
</TABLE>
4. LINE OF CREDIT:
The Company has a loan agreement with a bank providing a line of credit
("LOC") credit facility of $150,000, which is subject to renewal and review on
an annual basis. The LOC bears interest at prime plus 1.75% and matures March
25, 1998. At December 31, 1997, there was no outstanding balance on this LOC.
The owners of the Company have guaranteed the obligations and liabilities
of the Company in connection with the LOC pursuant to a continuing guaranty
dated March 25, 1994.
F-69
<PAGE>
FIRST RESORT SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
5. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in certain legal actions arising from the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
Insurance
The Company carries a broad range of insurance coverage, workers'
compensation and an error and omissions policy. The Company has not incurred
significant claims or losses on any of its insurance policies during the period
presented in the accompanying financial statements.
Benefit Plans
The Company's 401(k) retirement plan is available to substantially all of
the Company's employees. The Company's contribution to the plan is based upon a
percentage of employee contributions, as defined by the plan. The cost of this
plan was approximately $18,000 in 1997.
6. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI. In connection with the Offering the stockholders have agreed to
increases in salary and benefits which would have increased general and
administrative expenses by $42,000 in 1997. In addition, certain stockholders
will retain non-operating assets and assume or retire certain liabilities that
will be excluded from the Combinations.
F-70
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Houston and O'Leary Company:
We have audited the accompanying balance sheet of Houston and O'Leary
Company (a Colorado corporation) as of December 31, 1997, and the related
statements of operations, changes in stockholders' equity and cash flows for the
year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Houston and O'Leary Company,
as of December 31, 1997, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-71
<PAGE>
HOUSTON AND O'LEARY COMPANY
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................................... $259
Accounts receivable ............................................ 5
Receivables from stockholders .................................. 274
Prepaid expenses and other current assets ...................... 45
----
Total current assets ......................................... 583
PROPERTY AND EQUIPMENT, net ..................................... 157
----
Total assets ................................................. $740
====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ................................................ $164
Customer deposits and deferred revenue ......................... 255
Capital lease obligations ...................................... 50
Accounts payable and accrued liabilities ....................... 86
----
Total current liabilities .................................... 555
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par; 10,000 shares authorized; 200 shares out-
standing ..................................................... --
Retained earnings .............................................. 185
----
Total stockholders' equity ................................... 185
----
Total liabilities and stockholders' equity ................... $740
====
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-72
<PAGE>
HOUSTON AND O'LEARY COMPANY
STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
1997
-------------
REVENUES:
Real estate commissions .................. $1,170
Property rental fees ..................... 298
Other .................................... 128
------
Total revenues ......................... 1,596
OPERATING EXPENSES ........................ 494
------
Gross profit ........................... 1,102
GENERAL AND ADMINISTRATIVE EXPENSES ....... 322
------
Income from operations ................. 780
OTHER INCOME:
Interest income, net ..................... (15)
------
NET INCOME ................................ $ 765
======
The accompanying notes are an integral part of this financial statement.
F-73
<PAGE>
HOUSTON AND O'LEARY COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 ......... 200 $-- $ 49 $ 49
Net income ........................ -- -- 765 765
Distributions ..................... -- -- (629) (629)
--- --- ------ ------
BALANCE, December 31, 1997 ......... 200 $-- $ 185 $ 185
=== === ====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-74
<PAGE>
HOUSTON AND O'LEARY COMPANY
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................... $ 765
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation ................................................ 48
Changes in operating assets and liabilities--
Payable to property owners .................................. 20
Prepaid expenses and other current assets ................... 3
Deferred revenue ............................................ 21
Accounts payable and accrued liabilities .................... (46)
------
Net cash provided by operating activities .................. 811
------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............................ (57)
------
Net cash used in investing activities ...................... (57)
------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt .................................... (43)
Distributions to stockholders ................................. (629)
------
Net cash used in financing activities ...................... (672)
------
NET INCREASE IN CASH AND CASH EQUIVALENTS ...................... 82
CASH AND CASH EQUIVALENTS, beginning of year ................... 177
------
CASH AND CASH EQUIVALENTS, end of year ......................... $ 259
======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMA-
TION:
Cash paid for interest ........................................ $ 15
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-75
<PAGE>
HOUSTON AND O'LEARY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Houston and O'Leary Company (the "Company"), a Colorado corporation,
provides luxury vacation property rentals and sales in Aspen, Colorado and
provides non-exclusive rental services for approximately 130 rental units. The
Company provides its management services to property owners pursuant to
management contracts, which are generally one year in length. The majority of
such contracts contain automatic renewal provisions but also allow property
owners to terminate the contract at any time.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. The Company
requires a deposit equal to 100% of the rental fee 45 days prior to the expected
arrival date. These deposits are non-refundable and are recorded as customer
deposits and deferred revenue in the accompanying financial statements until the
guest stay commences. The Company records revenue for cancellations as they
occur. Commissions on real estate sales are recognized at closing.
Operating Expenses
Operating expenses include broker commissions, salaries, communications,
advertising, credit card fees and other costs associated with rental and sales
of properties.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code and state tax statutes, whereby, the Company is not subject to
taxation for federal or state purposes. Under S Corporation status, the
stockholders report their share of the Company's taxable earnings or losses in
their personal tax returns.
F-76
<PAGE>
HOUSTON AND O'LEARY COMPANY
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Risk
The Company's operations are exclusively in the Aspen, Colorado area and
are subject to significant changes due to weather conditions.
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED USEFUL DECEMBER 31,
LIVES IN YEARS 1997
------------------ -------------
<S> <C> <C>
Furniture, fixtures and equipment ......... 5 $ 89
Artwork ................................... -- 20
Airplane .................................. 5 159
------
268
Less - Accumulated depreciation ........... (111)
------
Property and equipment, net .............. $ 157
======
</TABLE>
4. SHORT-TERM DEBT:
Short-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
Term note payable to bank, interest at 1% over the prime rate as
disclosed in the Wall Street Journal; collateralized by Airplane and
guaranteed by shareholders; payable in monthly installments of $1,059,
including interest, through March 5, 2000 at which time the remaining
principal becomes payable .............................................. $ 65
Revolving note payable to bank ......................................... 99
----
$164
====
</TABLE>
Under the revolving note payable to a bank, the bank will provide a
revolving line of credit up to $100,000 to finance the Company's working capital
needs. At December 31, 1997, the Company had $99,000 outstanding on the line of
credit. Interest is payable monthly based upon the prime rate (9.50% at December
31, 1997). The note is collateralized by the assets of the Company.
Subsequent to year end, the note payable to a bank was assigned and assumed
by one of the stockholders.
5. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
F-77
<PAGE>
HOUSTON AND O'LEARY COMPANY
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Insurance
The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the period presented in the
accompanying financial statements.
6. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI.
In connection with the Offering, certain non-operating assets and related
liabilities with a net asset value of $257,000 will be retained by one of the
stockholders. If this transaction had been recorded at December 31, 1997, the
effect on the accompanying balance sheet would be a decrease in assets of
$357,000, and a decrease in liabilities of $100,000 and a decrease in
stockholders' equity of $257,000. The stockholders and key management have
agreed to reductions in salary and benefits which would have reduced general and
administrative expenses by $58,000 in 1997. In addition, certain stockholders
will retain non-operating assets and assume or retire certain liabilities that
will be excluded from the Combinations.
F-78
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Maury People, Inc.:
We have audited the accompanying balance sheet of The Maury People, Inc. (a
Massachusetts corporation) as of December 31, 1997, and the related statements
of operations, changes in stockholder's equity(deficit) and cash flows for the
year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of The Maury People, Inc., as
of December 31, 1997, and the results of its operations and its cash flows for
the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-79
<PAGE>
THE MAURY PEOPLE, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................... $ 297
Cash held in escrow ................................................. 553
Prepaid expenses and other current assets ........................... 19
-----
Total current assets .............................................. 869
PROPERTY AND EQUIPMENT, net .......................................... 99
-----
Total assets ...................................................... $ 968
=====
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Escrow deposits on real estate sales ................................ $ 553
Payable to property owners .......................................... 103
Accounts payable and accrued liabilities ............................ 224
-----
Total current liabilities ......................................... 880
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common Stock, no par; 1,000 shares authorized; 200 shares issued 1
Retained earnings ................................................... 87
-----
Total stockholder's equity ........................................ 88
-----
Total liabilities and stockholder's equity ........................ $ 968
=====
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-80
<PAGE>
THE MAURY PEOPLE, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
1997
-------------
REVENUES:
Real estate commissions, net ............. $ 829
Property rental fees, net ................ 354
------
Total revenues ......................... 1,183
OPERATING EXPENSES ........................ 211
------
Gross profit ............................. 972
GENERAL AND ADMINISTRATIVE EXPENSES ....... 682
------
Income from operations ................... 290
OTHER INCOME:
Interest income, net ...................... 28
------
NET INCOME ............................... $ 318
======
The accompanying notes are an integral part of this financial statement.
F-81
<PAGE>
THE MAURY PEOPLE, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED TOTAL
------------------- EARNINGS ----------
SHARES AMOUNT (DEFICIT)
-------- -------- ----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 ......... 200 $ 1 $ (84) $ (83)
Net income ........................ -- -- 318 318
Distributions ..................... -- -- (147) (147)
--- --- ------ ------
BALANCE, December 31, 1997 ......... 200 $ 1 $ 87 $ 88
=== === ====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-82
<PAGE>
THE MAURY PEOPLE, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................... $ 318
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation .................................................................. 28
Changes in operating assets and liabilities-
Cash held in escrow ........................................................... (184)
Escrow deposits on real estate sales .......................................... 184
Prepaid expenses and other current assets ..................................... (6)
Due to property owners ........................................................ 32
Accounts payable and accrued liabilities ...................................... 1
-------
Net cash provided by operating activities .................................... 373
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .............................................. (77)
-------
Net cash used in investing activities ........................................ (77)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable ...................................................... 50
Payments on note payable ........................................................ (50)
Distributions to stockholders ................................................... (147)
-------
Net cash used in financing activities ........................................ (147)
-------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................................ 149
CASH AND CASH EQUIVALENTS, beginning of period ................................... 148
-------
CASH AND CASH EQUIVALENTS, end of period ......................................... $ 297
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-83
<PAGE>
THE MAURY PEOPLE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
The Maury People, Inc. (the "Company") is a Massachusetts corporation which
provides vacation property rentals and sales on the island of Nantucket off the
coast of Massachusetts. The Company provides non-exclusive rental services for
approximately 1200 rental units. The Company's property rental operations are
seasonal, with peaks during the first and fourth quarters of the year.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records property rental fees upon the receipt of customer
deposits. The Company requires a deposit equal to 100% of the rental fee 45 days
prior to the expected arrival date. Since these Company's deposits are
non-refundable, the Company records its fees and a payable to property owners in
the accompanying financial statements. The Company records revenue for
cancellations as they occur.
Commissions on real estate sales are recognized at closing and are recorded
net of the related commission expense to unaffiliated brokers. The Company
recognized commission revenues of $1,949,000 and commission expense of
$1,120,000 to affiliated brokers for the year 1997.
Operating Expenses
Operating expenses include agent commissions, salaries, communications,
advertising, and other costs associated with managing and selling properties.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code and state tax statutes, whereby the Company is not subject to
taxation for federal or state purposes. Under S Corporation status, the
stockholders report their share of the Company's taxable earnings or losses in
their personal tax returns.
F-84
<PAGE>
THE MAURY PEOPLE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Risk
The Company's operations are exclusively on Nantucket Island.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
At December 31, 1997, the Company had restricted cash totaling $553,000 in
real estate sales escrow.
Property and equipment consisted of the following (in thousands):
ESTIMATED
USEFUL LIVES DECEMBER 31,
IN YEARS 1997
-------------- -------------
Leasehold improvements .................. 10 $ 56
Office equipment ........................ 5 152
------
208
Less - Accumulated depreciation ......... (109)
------
Property and equipment, net ........... $ 99
======
Accounts payable and accrued liabilities consisted of the following (in
thousands):
DECEMBER 31,
1997
-------------
Accrued rental commissions ............................. $ 66
Accrued sales commissions .............................. 51
Accounts payable and other accrued liabilities ......... 107
----
Total accounts payable and accrued liabilities ......... $224
====
4. COMMITMENTS AND CONTINGENCIES:
Lease Obligation
The Company leases equipment and office space under noncancelable operating
leases expiring at various times through 2004. Rental expense for the year ended
December 31, 1997 was approximately $166,000. The minimum future rental payments
under noncancelable operating leases are as follows (exclusive of certain pass
through expenses such as real estate taxes and common area maintenance expenses
and exclusive of Consumer Price Index Adjustments):
Year ending December 31,
1998 ..................... $ 164
1999 ..................... 204
2000 ..................... 197
2001 ..................... 195
2002 ..................... 188
Thereafter ............... 232
-------
$ 1,180
=======
F-85
<PAGE>
THE MAURY PEOPLE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Litigation
The Company is involved in certain legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including
multiperil, workers' compensation and an error and omissions policy. The Company
has not incurred significant claims or losses on any of its insurance policies
during the periods presented in the accompanying financial statements.
Benefit Plan
For all eligible employees, the Company sponsors a defined benefit pension
plan. Plan benefits are based on years of service and compensation. The
Company's funding policy is to make contributions at a minimum in accordance
with the requirements of applicable laws an regulations, but no more than the
amount deductible for income tax purposes. The components of net pension expense
for the Company's retirement plan for the year ended December 31, 1997 are
presented below:
Service cost ........................... $ 1,459
Interest cost .......................... 39,420
Actual return on plan assets ........... (95,338)
Net amortization and deferral .......... 75,875
---------
Net periodic pension expense ......... $ 21,416
=========
The funded status of the Company's retirement plan and amounts included in
the Company's balance sheet at December 31, 1997 are set forth in the following
table:
Actuarial present value of benefit obligations:
Accumulated benefit obligation .............................. $ 602,557
=========
Projected benefit obligation ................................ $ 602,557
Plan assets at fair value ................................... 635,448
---------
Plan assets in excess of projected benefit obligations ...... 32,891
Unrecognized net gain ....................................... (70,894)
Unrecognized net transition obligation ...................... 38,637
---------
Prepaid pension asset ..................................... $ 634
=========
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7.0 percent. The expected
long-term rate of return on assets was 5.0 percent.
5. RELATED PARTIES:
At present, the Company intends to transfer its offices to facilities owned
by a trust of which the owner is the primary beneficiary upon expiration of its
existing lease on March 31, 1999. The new lease term extends through March 2004,
with a five year extension option. Annual rent payments begin at $185,400 and
increase based on increases in the Consumer Price Index subject to a 6% annual
ceiling on increases.
6. NOTE PAYABLE:
During 1997, the Company had a $50,000 note payable to a bank, due in one
payment consisting of principal and interest. The note bore interest at 6.35%.
The note was secured by a security interest in a deposit account. The note was
paid in full during 1997.
F-86
<PAGE>
THE MAURY PEOPLE, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
7. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholder has entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI.
In connection with the Offering, the owner has agreed to reductions in
salary and benefits which would have reduced general and administrative expenses
by approximately $142,000 for 1997. In addition, the stockholder will retain
non-operating assets and assume or retire certain liabilities that will be
excluded from the Combinations.
F-87
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(SUCCESSOR COMPANY REPORT)
To Howey Acquisition, Inc.:
We have audited the accompanying consolidated balance sheet of Howey
Acquisition, Inc. (a Florida corporation) as of December 31, 1997, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the period from January 3, 1997 (inception) through December
31, 1997. These consolidated financial statements are the responsibility of the
Company'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 generally accepted auditing
standards. 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 consolidated financial position of
Howey Acquisition, Inc., as of December 31, 1997, and the results of their
operations and their cash flows for the period from January 3, 1997 (inception)
through December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-88
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PREDECESSOR COMPANY REPORT)
To Priscilla Murphy Realty, Inc.:
We have audited the accompanying balance sheet of Priscilla Murphy Realty,
Inc. (a Florida corporation) as of December 31, 1996, and the related statements
of operations, changes in stockholders' equity and cash flows for the years
ended December 31, 1995 and 1996. 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Priscilla Murphy Realty,
Inc., as of December 31, 1996, and the results of its operations and its cash
flows for the years ended December 31, 1995 and 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-89
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- ----------
DECEMBER 31,
--------------------------
1996 1997
------------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................... $1,672 $ 904
Cash held in trust ...................................... 3,736 4,479
Advances to property owners ............................. 23 39
Prepaid expenses and other current assets ............... 3 60
------ -------
Total current assest .................................. 5,434 5,482
PROPERTY AND EQUIPMENT, net .............................. 148 102
GOODWILL, net ............................................ -- 5,436
OTHER ASSETS, net ........................................ 181 187
------ -------
Total assets .......................................... $5,763 $11,207
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt .................... $ 100 $ 803
Customer deposits and deferred revenue .................. 3,736 4,479
Accounts payable and accrued liabilities ................ 45 242
------ -------
Total current liabilities ............................. 3,881 5,524
LONG-TERM DEBT, net of current maturities ................ 100 3,925
STOCKHOLDERS' EQUITY:
Class A Common stock, $.50 par value 40,000 shares
authorized and outstanding ............................ 1 20
Class B Common stock, non-voting, $.50 par value, 160,000
shares authorized and outstanding ..................... -- 80
Additional paid-in capital .............................. -- 150
Retained earnings ....................................... 1,781 1,508
------ -------
Total stockholders' equity ............................ 1,782 1,758
------ -------
Total liabilities and stockholders' equity ............ $5,763 $11,207
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-90
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------- --------------------------
YEAR ENDED DECEMBER
31,
------------------- PERIOD JANUARY 3, 1997
1995 1996 THROUGH DECEMBER 31, 1997
--------- --------- --------------------------
<S> <C> <C> <C>
REVENUES:
Property rental fees ....................... $2,347 $2,402 $ 2,514
Real estate commissions, net ............... 1,326 1,630 1,473
Service fees ............................... 643 689 753
------ ------ -------
Total revenues ........................... 4,316 4,721 4,740
OPERATING EXPENSES .......................... 1,319 1,314 1,184
------ ------ -------
Gross profit ............................... 2,997 3,407 3,556
GENERAL AND ADMINISTRATIVE EXPENSES ......... 2,257 2,125 1,866
------ ------ -------
Income from operations ..................... 740 1,282 1,690
OTHER INCOME (EXPENSE):
Interest income (expense), net ............. 112 121 (182)
------ ------ -------
NET INCOME .................................. $ 852 $1,403 $ 1,508
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-91
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL
------------------- ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- -------- ---------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Predecessor:
BALANCE, December 31, 1994 ........... 992 $ 1 -- $ -- $ -- $ 1,412 $ 1,413
Net income .......................... -- -- -- -- -- 852 852
Distributions ....................... -- -- -- -- -- (740) (740)
--- --- -- ---- ---- -------- --------
BALANCE, December 31, 1995 ........... 992 1 -- -- -- 1,524 1,525
Net income .......................... -- -- -- -- -- 1,403 1,403
Distributions ....................... (257) -- -- -- -- (1,146) (1,146)
---- --- -- ---- ---- -------- --------
BALANCE, December 31, 1996 ........... 735 $ 1 -- $ -- $ -- $ 1,781 $ 1,782
==== === === ==== ==== ======== ========
Company :
Capitalization Company (Note 1) ..... 40,000 $20 160,000 $ 80 $150 $ -- $ 250
Net income .......................... -- -- -- -- -- 1,508 1,508
------ --- ------- ---- ---- -------- --------
BALANCE, December 31, 1997 ........... 40,000 $20 160,000 $ 80 $150 $ 1,508 $ 1,758
====== === ======= ==== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-92
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------- -----------------------
YEAR ENDED DECEMBER 31, PERIOD JANUARY 3, 1997
------------------------- THROUGH
1995 1996 DECEMBER 31, 1997
----------- ------------- -----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................. $ 852 $ 1,403 $ 1,508
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization ............................ 239 95 203
Gain on sale of assets ................................... 4 -- --
Changes in operating assets and liabilities ................. --
Cash held in trust ........................................ (491) (946) (743)
Advances to property owners ............................... 2 (39)
Prepaid expenses and other current assets ................. (56) (15) (60)
Customer deposits and deferred revenue .................... 491 946 743
Accounts payable and accrued liabilities .................. (33) 46 242
------- -------- --------
Net cash provided by operating activities .............. 1,006 1,531 1,854
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net assets acquired (excluding cash) ........................ -- -- (225)
Purchase of property and equipment .......................... (108) (4) --
Proceeds from sale of office equipment and vehicles ......... 4 -- --
Excess of purchase price over net assets acquired ........... -- -- (5,575)
------- --------- --------
Net cash used in investing activities .................. (104) (4) (5,800)
------- ---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ................................ -- -- 5,750
Payments on long-term debt .................................. (231) (135) (1,150)
Distributions to stockholders ............................... (740) (878) --
Net proceeds from stock issuance ............................ -- -- 250
------- --------- --------
Net cash provided by (used in) financing activities . (971) (1,013) 4,850
------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ................................................. (69) 514 904
CASH AND CASH EQUIVALENTS, beginning of year ................. 1,227 1,158 --
------- --------- --------
CASH AND CASH EQUIVALENTS, end of year ....................... $ 1,158 $ 1,672 $ 904
======= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest .................................... $ 80 $ 70 $ 211
======= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-93
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS-(CONTINUED)
(IN THOUSANDS)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1996, the Company distributed certain fixed assets and liabilities
of the Company to a shareholder as follows:
Net book value of assets ........... $ 774
Debt assumed ....................... (506)
------
Distributed to Stockholder ......... $ 268
======
On January 3, 1998, the Company acquired assets as follows:
Net assests acquired .......... $ 225
Goodwill ...................... 5,575
-------
Total assets acquired ......... $ 5,800
=======
The entire purchase price was financed via third party borrowings.
The accompanying notes are an integral part of these financial statements.
F-94
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Howey Acquisition, Inc. ("HAI") dba, Priscilla Murphy Realty, Inc. and its
wholly-owned subsidiaries, Priscilla Murphy Realty, Inc. ("PMR") and Realty
Consultants, Inc., collectively the "Company", are Florida corporations. The
Company provides vacation property rentals and sales on the Florida Islands of
Sanibel and Captiva for approximately 900 rental units. The Company provides its
management services to property owners pursuant to management contracts which
are generally one year in length. The majority of such contracts contain
automatic renewal provisions but also allow property owners to terminate the
contract at any time. The Company's operations are seasonal, with a peak during
the first quarter of the year.
On January 3, 1998, HAI entered into an agreement to purchase the assets
and assume certain liabilities of PMR. HAI borrowed $5,800,000 from a bank and a
stockholder to finance the purchase transaction. The fair value of the net
assets purchased totaled $225,000, resulting in the recognition of goodwill of
$5,575,000. The goodwill is being amortized using a 40-year estimated life.
Additionally, the Company executed a non-compete agreement with the former
shareholder valued at $200,000. The non-compete agreement is for a period of ten
years and is payable in installments of approximately $3,000 per month for 5
years.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Combination and Financial Statement Presentation
The consolidated financial statements include the accounts of HAI its
wholly-owned subsidiary, PMR collectively, the "Company." All intercompany items
and transactions have been eliminated.
The financial statements of the PMR (the "Predecessor Company") are
presented for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The Predecessor Company had only one class
of common stock and is included in Class A common stock for presentation
purposes in the accompanying consolidated financial statements.
The consolidated statements of operations of the Companies for the period
from January 1, 1997 to January 3, 1997 (inception), has not been presented due
to the nominal level of operations.
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. The Company
requires a deposit equal to 100% of the rental fee 45 days prior to the expected
arrival date. These deposits are non-refundable and are recorded as customer
deposits and deferred revenue in the accompanying financial statements until the
guest stay commences. The Company records revenue for cancellations as they
occur.
Service fees are recorded for a variety of services and are recognized as
the service is provided, including cleaning income, repair and maintenance and
service charges.
Commissions on real estate sales are recognized at closing and are recorded
net of the related commission expense. The Company recognized commission
revenues of $4,360,000, $5,221,000 and $5,440,000 for the years 1995 and 1996
and the period ending December 31, 1997, and commission expense of $3,034,000,
$3,591,000 and $3,967,000 for the years 1995 and 1996 and the period ending
December 31, 1997, respectively.
F-95
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
Operating Expenses
Operating expenses include travel agent commissions, salaries,
communications, advertising, credit card fees and other costs associated with
managing and selling properties.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code and state tax statutes, whereby the Company is not subject to
taxation for federal or state tax purposes. Under S Corporation status, the
stockholders' report their shares of the Company's taxable earnings or losses in
their personal tax returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Risk
The Companies operations are exclusively in the Fort Myers/Sanibel and
Captiva Islands, Florida area and are subject to significant changes due to
weather conditions.
3. OTHER ASSETS
Other assets consist of a non-compete agreement between the Company and the
prior owner. The total consideration for the agreement was $200,000 and is being
amortized over the term of the agreement, 10 years. The Company signed a five
year note payable for this agreement.
F-96
<PAGE>
HOWEY ACQUISITION, INC. DBA PRISCILLA MURPHY REALTY, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED )
4. DEBT
Long-term debt as of December 31, 1997 and 1996, consist of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Note payable to a bank, bearing interest at 7.50%; monthly payments of $58 through
maturity in January 2002. Secured by assets of the Company and guaranteed by
stockholder. ........................................................................ $ -- $ 2,350
Note payable to an affiliate, bearing interest at 7.95%; subordinate to bank note pay-
able; no payment may be made until bank note is paid in full. ....................... -- 2,063
Note payable to a stockholder, bearing interest at 7.95%; subordinate to bank note
payable; no payment may be made until bank note is paid in full. .................... -- 155
Note payable, monthly payments of $3 through maturity in January 2002; interest im-
puted at 7.50% unsecured. ........................................................... -- 160
Note payable to a bank, bearing interest at 7.70%; quarterly payments of $25 through
maturity in December 1998; unsecured. ............................................... 200 --
------ -------
200 4,728
Less current maturities .............................................................. (100) (803)
------ -------
$ 100 $ 3,925
====== =======
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation, error
and ommission, and a general umbrella policy. The Company has not incurred
significant claims or losses on any of its insurance policies during the periods
presented in the accompanying financial statements.
Benefit Plans
The Company's 401(k) retirement plan is available to substantially all of
the Company's employees. The Company's contribution to the plan is based upon a
percentage of employee contributions. The cost of this plan was approximately
$9,000 in 1995, $12,000 in 1996 and $9,000 in 1997.
6. RELATED PARTIES:
The Company has leased office space under three separate agreements since
August 1997 from trusts affiliated with an owner. In aggregate, rents paid to
these affiliated trusts were approximately $45,000. Subsequent to year end, the
Company entered a fourth lease for an additional $12,000 per year.
7. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI. In connection with the Offering, stockholders have agreed to
reductions in salary and benefits which would have reduced general and
administrative expenses by $250,000, $320,000 and $31,000 for 1995, 1996 and
1997, respectively. In addition, certain stockholders will retain non-operating
assets and assume or retire certain liabilities that will be excluded from the
Combinations.
F-97
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Resort Property Management, Inc.:
We have audited the accompanying balance sheet of Resort Property
Management, Inc. (a Utah corporation) as of September 30, 1997, and the related
statements of operations, changes in stockholders' deficit and cash flows for
the year 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 audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Resort Property Management,
Inc., as of September 30, 1997, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-98
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1997
--------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 186 $1,291
Due from property owners .............................. 60 --
Receivable from stockholders .......................... 10 --
Prepaid expenses and other current assets ............. 22 70
------ ------
Total current assets ................................ 278 1,361
NOTE RECEIVABLE ........................................ 54 54
PROPERTY AND EQUIPMENT, net ............................ 203 326
------ ------
Total assets ........................................ $ 535 $1,741
====== ======
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt ..................... $ 171 $ 31
Customers deposits and deferred revenue ............... 233 1,306
Payable to property owners ............................ 36 352
Accounts payable and accrued liabilities .............. 32 264
------ ------
Total current liabilities ........................... 472 1,953
DEFERRED TAXES ......................................... 3 3
LONG-TERM DEBT, net of current portion ................. 310 130
------ ------
Total liabilities ................................... 785 2,086
------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock, no par; 100,000 shares authorized; 51,000
shares outstanding .................................. 26 26
Retained deficit ...................................... (276) (371)
------ ------
Total stockholders' deficit ......................... (250) (345)
------ ------
Total liabilities and stockholders' deficit ......... $ 535 $1,741
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-99
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------
1997 1996 1997
-------------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Property rental fees ....................... $1,930 $ 320 $ 370
Service fees ............................... 365 116 93
------ ------ ------
Total revenues ........................... 2,295 436 463
OPERATING EXPENSES .......................... 1,560 375 343
------ ------ ------
Gross profit ............................. 735 61 120
GENERAL AND ADMINISTRATIVE EXPENSES ......... 627 175 256
------ ------ ------
Income (loss) from operations ............ 108 (114) (136)
OTHER INCOME (EXPENSE):
Interest income (expense), net ............. 7 -- (4)
Gain on sale of land ....................... 210 -- --
------ ------ -------
Income (loss) before taxes ............... 325 (114) (140)
PROVISION (BENEFIT) FOR INCOME TAX .......... 75 (39) (45)
------ ------ -------
NET INCOME (LOSS) ........................... $ 250 $ (75) $ (95)
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-100
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT DEFICIT DEFICIT
-------- -------- ---------- --------------
<S> <C> <C> <C> <C>
BALANCE, September 30, 1996 .................... 51 $26 $ (526) $ (500)
Net income .................................... -- -- 250 250
-- --- ------ ------
BALANCE, September 30, 1997 .................... 51 26 (276) (250)
Net loss (unaudited) .......................... -- -- (95) (95)
-- --- ------ ------
BALANCE, December 31, 1997 (unaudited) ......... 51 $26 $ (371) $ (345)
== === ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-101
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------
1997 1996 1997
-------------- ------------ ---------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................. $ 250 $ (75) $ (95)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities--
Depreciation .................................................... 36 10 11
Gain on sale of land ............................................ (210) -- --
Changes in operating assets and liabilities--
Due from property owners ........................................ (24) 35 60
Payment on receivables from stockholders ........................ (10) -- 10
Prepaid expenses and other current assets ....................... (3) (8) (48)
Customer deposits and deferred revenue .......................... (50) 1,594 1,073
Payable to property owners ...................................... 16 311 316
Deferred tax liability .......................................... 3 -- --
Accounts payable and accrued liabilities ........................ 28 99 232
------- ------- ------
Net cash provided by operating activities ...................... 36 1,966 1,559
------- ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable ................................................... (54) -- --
Purchase of property and equipment ................................ (179) (127) (134)
Proceeds from sale of office equipment, vehicles and land ......... 335 -- --
------- ------- ------
Net cash used in investing activities .......................... 102 (127) (134)
------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ...................................... 493 -- --
Payments on long-term debt ........................................ (451) (365) (320)
------- ------- ------
Net cash used in financing activities .......................... 42 (365) (320)
------- ------- ------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 180 1,474 1,105
CASH AND CASH EQUIVALENTS, beginning of period ..................... 6 6 186
------- ------- ------
CASH AND CASH EQUIVALENTS, end of period ........................... $ 186 $1,480 $1,291
======= ======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW:
Cash paid for interest ............................................ $ 25 $ 5 $ 7
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-102
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Resort Property Management, Inc. (the "Company"), a Utah corporation,
provides property rentals and management services for properties owned by third
parties and located within the Park City, Utah region. The Company manages
approximately 330 total rental units. The Company provides its management
services to property owners pursuant to management contracts, which are
generally one year in length. The majority of such contracts contain automatic
renewal provisions but also allow property owners to terminate the contract at
any time. The Company's operations are seasonal, with a peak during the second
quarter of the fiscal year.
The Company had working capital deficits at September 30, 1997 and December
31, 1997. The Company has funded its operations with cash flows from operations
and short-term borrowings from lenders. Management expects that operations will
generate sufficient cash flows from operations to meet the Company's working
capital needs in 1998.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Unaudited Financial Information
The interim financial statements as of September 30, 1997, and for the
three months ended December 31, 1996 and 1997, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial position
and results of operations for the interim financial statements, have been
included. The results of operations for the interim periods are not necessarily
indicative of the results for the entire fiscal year.
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. During peak
periods, the Company requires a deposit equal to 100% of the rental fee 30 days
prior to the expected arrival date. These deposits are non-refundable and are
recorded as customer deposits and deferred revenue in the accompanying combined
financial statements until the guest stay commences. The Company records revenue
for cancellations as they occur.
Service fees are recorded for a variety of services and are recognized as
the service is provided, including housekeeping, phone service and rentals.
Operating Expenses
Operating expenses include travel agent commissions, salaries,
communications, advertising, credit card fees and other costs associated with
managing and renting the properties.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
F-103
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
Income Taxes
The company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under SFAS No. 109, the current provision for income taxes represents
actual or estimated amounts payable or refundable on tax returns filed or to be
filed for each year. Deferred tax assets and liabilities are recorded for the
estimated future tax effects of: (a) temporary differences between the tax bases
of assets and liabilities and amounts reported in the consolidated balance
sheets, and (b) operating loss and tax credit carryforwards. The overall change
in deferred tax assets and liabilities for the period measures the deferred tax
expense for the period. Effects of changes in enacted tax laws on deferred tax
assets and liabilities are reflected as adjustments to tax expense in the period
of enactment. The measurement of deferred tax assets may be reduced by a
valuation allowance based on judgemental assessment of available evidence if
deemed more likely than not that some or all of the deferred tax assets will not
be realized.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Risk
The Company's operations are exclusively in the Park City, Utah area and
are subject to significant changes in weather conditions.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Property and equipment consisted of the following (in thousands):
ESTIMATED USEFUL SEPTEMBER 30,
LIFE IN YEARS 1997
------------------ --------------
Leasehold improvements ............... 12 $ 21
Office equipment and other ........... 5 236
Vehicles ............................. 5 128
------
385
Less - Accumulated depreciation ...... (182)
------
Property and equipment, net .......... $ 203
======
At September 30, 1997, maturities of long-term debt were as follows (in
thousands):
Year ending September 30,
1998 ................... $171
1999 ................... 17
F-104
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
2000 ............... 19
2001 ............... 21
2002 ............... 3
--
$231
====
In addition to the debt disclosed above, the Company has a revolving line
of credit with a bank. The line of credit has an interest rate of 10.25%, a
maximum limit of $250,000 and is secured by personal property of the Company's
owners. As of September 30, 1997, the line of credit was fully drawn, and is
included in long-term debt in the accompanying financial statements.
4. INCOME TAXES:
The provision for income taxes consists of the following for the year ended
September 30, 1997 (in thousands):
Current .......... $ 6
Deferred ......... 69
---
$75
===
The provision for income taxes differs from the amount computed by applying
the U.S. Federal income tax statutory rate of 34% for the following reasons:
U.S. corporate income tax provision at statutory rate ......... $ 111
Utilization of NOL carryforwards .............................. (36)
-----
$ 75
=====
5. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the periods presented in the
accompanying financial statements.
6. RELATED PARTIES:
During 1997, the Company paid rental payments to the owners in exchange for
use of the housekeeping facility in the amount of approximately $18,000.
The Company plans to enter a lease agreement with the owners in June 1998
for an initial term of 10 years and two options to extend the lease for 5
additional years. The lease agreement to be finalized prior to the Offering will
have estimated annual payments of $100,000, and annual increases of Consumer
Price Index.
F-105
<PAGE>
RESORT PROPERTY MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Leases
The Company has entered into various leases for housekeeping and laundry
facilities, and for their corporate office. The following is a schedule of
future minimum rental payments which are required under operating leases that
have lease terms in excess of one year as of September 30, 1997:
1998 .............. $ 61,793
1999 .............. 21,408
2000 .............. 14,517
2001 .............. 15,246
--------
$112,964
========
5. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI.
In connection with the Offering, the owner and certain key employees have
agreed to reductions in salary and benefits which would have reduced general and
administrative expenses by approximately $186,000 for the year ended September
30, 1997. In addition, certain stockholders will retain non-operating assets and
assume or retire certain liabilities that will be excluded from the
Combinations.
F-106
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Telluride Resort Accommodations, Inc.:
We have audited the accompanying balance sheet of Telluride Resort
Accommodations, Inc. (a Colorado corporation) as of December 31, 1997, and the
related statements of operations, changes in stockholders' deficit and cash
flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Telluride Resort
Accommodations, Inc., as of December 31, 1997, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 30, 1998
F-107
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................................... $2,103
Accounts receivable ............................................. 392
Due from property owners ........................................ 152
Prepaid expenses and other current assets ....................... 12
------
Total current assets .......................................... 2,659
PROPERTY AND EQUIPMENT, net ...................................... 62
------
Total assets .................................................. $2,721
======
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Line of credit .................................................. $ 194
Customer deposits and deferred revenue .......................... 2,096
Payable to property owners ...................................... 640
Accounts payable and accrued liabilities ........................ 209
------
Total current liabilities ..................................... 3,139
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common Stock, no par; 1,000,000 shares authorized; 15,000 shares
outstanding ................................................... 216
Retained deficit ................................................ (634)
------
Total stockholders' deficit ................................... (418)
------
Total liabilities and stockholders' deficit ................... $2,721
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-108
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
1997
-------------
REVENUES:
Property rental fees ..................... $3,204
Service fees ............................. 1,109
------
Total revenues ......................... 4,313
OPERATING EXPENSES ........................ 3,037
------
Gross profit ........................... 1,276
GENERAL AND ADMINISTRATIVE EXPENSES ....... 1,030
------
Income from operations ................. 246
OTHER INCOME:
Interest income, net ..................... 31
------
NET INCOME ................................ $ 277
======
The accompanying notes are an integral part of this financial statement.
F-109
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT DEFICIT TOTAL
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 ......... 15,000 $216 $ (611) $ (395)
Net income ........................ -- -- 277 277
Distributions ..................... -- -- (300) (300)
------ ---- ------ ------
BALANCE, December 31, 1997 ......... 15,000 $216 $ (634) $ (418)
====== ==== ====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-110
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................ $ 277
Adjustments to reconcile net income to net cash provided by op-
erating activities .............................................. -
Depreciation ...................................................... 48
Changes in operating assets and liabilities ....................... -
Accounts receivable ............................................. 35
Prepaid expenses and other current assets ....................... 15
Payable to property owners, net ................................. 19
Customer deposits and deferred revenue .......................... 28
Accounts payable and accrued liabilities ........................ 299
------
Net cash provided by operating activities ...................... 721
------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................................ (25)
------
Net cash used in investing activities .......................... (25)
------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit .................................. 93
Distributions to stockholders ..................................... (300)
------
Net cash used in financing activities .......................... (207)
------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 489
CASH AND CASH EQUIVALENTS, beginning of year ....................... 1,614
------
CASH AND CASH EQUIVALENTS, end of year ............................. $2,103
======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMA-
TION:
Cash paid for interest ............................................ $ 5
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-111
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Telluride Resort Accommodations, Inc. (the "Company"), a Colorado
corporation, provides property rentals and management services in Telluride,
Colorado and manages approximately 450 total rental units. The Company provides
its management services to property owners pursuant to management contracts,
which are generally one year in length. The majority of such contracts contain
automatic renewal provisions but also allow property owners to terminate the
contract at any time. The Company's operations are seasonal, with a peak during
the first quarter of the year.
The Company had a working capital deficit at December 31, 1997. The Company
has funded its operations with cash flows from operations and short-term
borrowings from lenders. Management expects that operations will generate
sufficient cash flows from operations to meet the Company's working capital
needs during 1998.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the Company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. During peak
periods, the Company requires a deposit equal to 100% of the rental fee 45 days
prior to the expected arrival date. These deposits are non-refundable and are
recorded as customer deposits and deferred revenue in the accompanying financial
statements until the guest stay commences. The Company records revenue for
cancellations as they occur.
Service fees are recorded for a variety of services and are recognized as
the service is provided, including spring and fall cleaning, unit maintenance
and housekeeping.
Operating Expenses
Operating expenses include travel agent commissions, salaries, maintenance,
housekeeping, communications, advertising, credit card fees and other costs
associated with management of the properties.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful life of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
F-112
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code and state tax statutes, whereby the Company is not subject to
taxation for federal or state tax purposes. Under S Corporation status, the
stockholders report their share of the Company's taxable earnings or losses in
their personal tax returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Risk
The Company's operations are exclusively in the Telluride, Colorado area
and are subject to significant changes due to weather conditions.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Property and equipment consisted of the following (in thousands):
ESTIMATED USEFUL DECEMBER 31,
LIVES IN YEARS 1997
---------------- ------------
Furniture, fixtures and equipment ...... 5 $ 580
Leasehold improvement .................. 5 79
Vehicles and other ..................... 5 65
------
724
Less - Accumulated depreciation ........ (662)
------
Property and equipment, net ............ $ 62
======
Accounts payable and accrued liabilities as of December 31, 1997, consisted
of the following (in thousands):
DECEMBER 31,
1997
-------------
Sales tax payable ............................. $127
Accounts payable and other accrued liabilities 82
----
Total accounts payable and accrued liabilities $209
====
4. LINES OF CREDIT:
The Company has lines of credit with a bank. The first line of credit
matures June 1998 and provides a revolving line of credit up to $200,000 to
finance working capital needs. At December 31, 1997, the Company had $194,000
outstanding on this line of credit. Interest is payable monthly at 1.75% over
the Wall Street Journal Base Rate (8.5% at December 31, 1997). The second line
of credit in the amount of $90,000, matures August 31, 1998 and can be drawn
upon only in the event that certain guaranteed load factors aboard aircraft into
the Telluride area are not met. Interest is payable monthly at 2.00% over the
Wall Street Journal Base Rate (8.5% at December 31, 1997). There was no
outstanding balance on this line of credit at December 31, 1997.
F-113
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
5. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the periods presented in the
accompanying financial statement.
Benefit Plans
The Company's 401(k) retirement plan is available to substantially all of
the Company's employees. The Plan allows the Company to make discretionary
contributions to the Plan. The Company has made no such contribution to the Plan
in 1997.
6. RELATED PARTIES:
During 1997, the Company paid certain stockholders $32,000 in consulting
fees. In addition, the Company rented office space from stockholders totaling
$36,000.
7. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI. In addition, certain stockholders will retain non-operating
assets and assume or retire certain liabilities that will be excluded from the
Combinations.
F-114
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trupp-Hodnett Enterprises, Inc. and
THE Management Company:
We have audited the accompanying combined balance sheets of Trupp Hodnett
Company, consisting of Trupp-Hodnett Enterprises, Inc. and THE Management
Company (both Georgia corporations) (collectively "Trupp Hodnett Company" or the
"Company") as of December 31, 1996 and 1997, and the related combined statements
of operations, changes in stockholders' equity and cash flows for the years
ended December 31, 1996 and 1997. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Trupp
Hodnett Company, as of December 31, 1996 and 1997, and the results of their
combined operations and their cash flows for the years then ended December 31,
1996 and 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 16, 1998
F-115
<PAGE>
TRUPP HODNETT COMPANY
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 144 $ 293
Cash held in trust ................................... 321 347
Accounts receivable .................................. 69 100
Receivables from stockholders and employees .......... 111 32
Prepaid expenses and other current assets ............ 17 31
------ ------
Total current assets ............................... 662 803
PROPERTY AND EQUIPMENT, net ........................... 245 259
OTHER ASSETS .......................................... 305 --
------ ------
Total assets ....................................... $1,212 $1,062
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ...................................... $ 345 $ --
Customer deposits and deferred revenue ............... 290 331
Payable to property owners ........................... 31 16
Accounts payable and accrued liabilities ............. 130 191
------ ------
Total current liabilities .......................... 796 538
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par; 2,000 shares
authorized; 200 shares outstanding ................. 17 17
Retained earnings .................................... 399 507
------ ------
Total stockholders' equity ......................... 416 524
------ ------
Total liabilities and stockholders' equity ......... $1,212 $1,062
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-116
<PAGE>
TRUPP HODNETT COMPANY
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1996 1997
--------- ------------
<S> <C> <C>
REVENUES:
Property rental fees ....................... $2,508 $2,809
Real estate commissions, net ............... 673 892
Service fees ............................... 250 360
------ ------
Total revenues ........................... 3,431 4,061
OPERATING EXPENSES .......................... 1,652 1,838
------ ------
Gross profit ............................. 1,779 2,223
GENERAL AND ADMINISTRATIVE EXPENSES ......... 1,653 2,024
------ ------
Income from operations ................... 126 199
OTHER INCOME (EXPENSE):
Interest expense, net ...................... (19) (5)
Gain on sale of assets ..................... -- 52
------ -------
Income before income taxes ............... 107 246
PROVISION FOR INCOME TAXES .................. 12 60
------ -------
NET INCOME .................................. $ 95 $ 186
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-117
<PAGE>
TRUPP HODNETT COMPANY
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
-------- -------- --------- --------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 ........ 200 $17 $ 304 $ 321
Net income ....................... -- -- 95 95
--- --- ----- -----
BALANCE, December 31, 1996 ........ 200 17 399 416
Net income ....................... -- -- 186 186
Distributions .................... -- -- (78) (78)
--- --- ----- -----
BALANCE, December 31, 1997 ........ 200 $17 $ 507 $ 524
=== === ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-118
<PAGE>
TRUPP HODNETT COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1996 1997
----------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 95 $ 186
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation ........................................... 83 85
Gain on sale of assets ................................. -- (52)
Changes in operating assets and liabilities--
Cash held in trust ...................................... (321) (26)
Accounts receivable ..................................... (17) (31)
Receivables from stockholder and employees .............. (8) 79
Prepaid expenses and other current assets ............... (7) (14)
Customer deposits and deferred revenue .................. 290 41
Payable to property owners .............................. 31 (15)
Accounts payable and accrued liabilities ................ 50 61
------- -----
Net cash provided by operating activities .............. 196 314
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ........................ (58) (99)
Purchase of other assets .................................. (40) (80)
Proceeds from sale of other assets ........................ -- 105
------- -----
Net cash used in investing activities .................. (98) (74)
------- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt ............................. -- 84
Payments on short-term debt ............................... (73) (97)
Distributions to stockholders ............................. -- (78)
------- -----
Net cash used in financing activities .................. (73) (91)
------- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS .................. 25 149
CASH AND CASH EQUIVALENTS, beginning of year ............... 119 144
------- -----
CASH AND CASH EQUIVALENTS, end of year ..................... $ 144 $ 293
======= =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .................................... $ 35 $ 18
======= =====
Cash paid for income taxes ................................ $ 8 $ 1
======= =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-119
<PAGE>
TRUPP HODNETT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In 1997, the Company sold certain fixed assets of the Company to a third
party as follows:
Net book value of assets ......... $ 385
Debt assumed ..................... (332)
------
Net assets sold .................. $ 53
======
F-120
<PAGE>
TRUPP HODNETT COMPANY
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
The Management Company ("TMC"), an S Corporation, and Trupp-Hodnett
Enterprises, Inc. ("THE"), a C Corporation, (collectively "Trupp Hodnett" or the
"Company"), both Georgia corporations, are leading providers of vacation
property rentals, management services and sales in the St. Simons Island,
Georgia. Trupp Hodnett manages approximately 400 total rental units. The Company
provides its management services to property owners pursuant to management
contracts, which generally are one year in length. The majority of such
contracts contain automatic renewal provisions but also allow property owners to
terminate the contract at any time. The Company's operations are seasonal, with
peaks during the second and third quarters of the year.
The Company and its stockholders intend to enter into a definitive
agreement with Vacation Properties International, Inc. ("VPI"), pursuant to
which all of the outstanding stock of the company will be exchanged for cash and
shares of VPI common stock concurrent with the consummation of the initial
public offering (the "Offering") of the common stock of VPI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. For weekly and
monthly stays in homes and cottages the Company requires a deposit equal to 50%
of the rental fee 60 days prior to the expected arrival date. These deposits are
refundable with 60 days notice of cancellation. Daily and weekly stays in "condo
hotels" use a credit card to guarantee arrival.
All deposits are recorded as customer deposits and deferred revenue in the
accompanying combined financial statements until the guest stay commences.
Advance deposits are recorded as payable to property owners, ratably over the
term of guest stays, as earned. The Company records revenue for cancellations as
they occur.
Service fees are recorded for a variety of services and are recognized as
the service is provided, including management fees.
Commissions on real estate sales are recognized at closing and are recorded
net of the related commission expense. The Company recognized commission
revenues of $1,308,000 and $1,621,000 for the years 1996 and 1997 and commission
expense of $635,000 and $729,000 for the years 1996 and 1997.
Operating Expenses
Operating expenses include travel agent commissions, salaries,
communications, advertising, credit card fees and other costs associated with
managing and selling properties.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the
Company considers all investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the combined statements of operations.
F-121
<PAGE>
TRUPP HODNETT COMPANY
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Other Assets
As of December 31, 1996, other assets is comprised of properties held for
resale.
Income Taxes
TMC has elected S Corporation status as defined by the Internal Revenue
Code and state tax statutes, whereby, TMC is not subject to taxation for federal
or state tax purposes. Under S Corporation status, the stockholders report their
share of the Company's taxable earnings or losses in their personal tax returns.
THE is a regular C Corporation and as such is subject to taxation for
federal and state purposes. THE accounts for income taxes under the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Under SFAS No. 109, the current provision for income
taxes represents actual or estimated amounts payable or refundable on tax
returns filed or to be filed for each year. Deferred tax assets and liabilities
are recorded for the estimated future tax effects of: (a) temporary differences
between the tax bases of assets and liabilities and amounts reported in the
consolidated balance sheets, and (b) operating loss and tax credit
carryforwards. The overall change in deferred tax assets and liabilities for the
period measures the deferred tax expense for the period. Effects of changes in
enacted tax laws on deferred tax assets and liabilities are reflected as
adjustments to tax expense in the period of enactment. The measurement of
deferred tax assets may be reduced by a valuation allowance based on judgemental
assessment of available evidence if deemed more likely than not that some or all
of the deferred tax assets will not be realized.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Risk
The Company's operations are exclusively in the St. Simons Island area and
are subject to significant changes due to weather conditions.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ---------------------
IN YEARS 1996 1997
------------- --------- ---------
<S> <C> <C> <C>
Leasehold improvements .................. 31 $ 31 $ 40
Office equipment and vehicles ........... 3-7 551 635
------ ------
582 675
Less - Accumulated depreciation ......... (337) (416)
------ ------
Property and equipment, net ............ $ 245 $ 259
====== ======
</TABLE>
F-122
<PAGE>
TRUPP HODNETT COMPANY
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Accounts payable and accrued liabilities consisted of the following
(in thousands):
DECEMBER 31,
----------------
1996 1997
------ -------
Accrued compensation and benefits .................. $ 31 $ 36
Accounts payable and other accrued liabilities ..... 99 155
---- ----
Total accounts payable and accrued liabilities..... $130 $191
==== ====
4. SHORT-TERM DEBT:
As of December 31, 1996, the Company's short-term debt was comprised of
$263,000 of notes payable and $82,000 of outstanding lines of credit. The
Company repaid all of its notes payable and lines of credit in 1997.
As of December 31, 1997, the Company had two outstanding unused, unsecured
lines of credit with banks. The Company's $100,000 line of credit bears interest
at the Chase Manhattan Bank prime rate plus 1.0% and matures December 1, 1998.
The Company's $30,000 line of credit bears interest at the Wall Street Journal's
bank prime rate plus 2.0% and matures June 1, 1998.
5. SALE OF OTHER ASSETS:
During 1997, the Company sold other assets (comprised of land and a
building) with a book value totaling $250,000 and the related note payable of
$208,000 to a third-party for $94,000. The Company recorded a gain of $52,000,
which is included in other income. Additionally, a sale to a related party was
consummated (see Note 7).
6. INCOME TAXES:
The provision for income taxes consists of the following (in thousands):
DECEMBER 31,
--------------
1996 1997
------ -----
Current ......... $12 $60
=== ===
The provision for income taxes differs from the amount computed by applying
the U.S. Federal income tax statutory rate of 34% for the following reasons:
DECEMBER 31,
-------------------
1996 1997
-------- --------
U.S. corporate income tax provision at statutory
rate .......................................... $ 36 $ 84
State income taxes ............................. 4 9
S Corporation income ........................... (28) (33)
----- -----
$ 12 $ 60
===== =====
7. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's combined financial
position or results of operations.
F-123
<PAGE>
TRUPP HODNETT COMPANY
NOTES TO FINANCIAL STATEMENTS - (CONTINUED )
Insurance
The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company is self-insured for employee medical with a
stop-loss policy beginning at $7,500. The Company has not incurred significant
claims or losses on any of its insurance policies during the periods presented
in the accompanying combined financial statements.
Benefit Plans
The Company began a 401(k) retirement plan in April of 1997 which is
available to substantially all of the Company's employees. The Company is
obligated to match the employee's contribution up to 5%. The cost of this plan
to the Company was approximately $9,000 in 1997.
8. RELATED PARTIES:
The Company's revenues include approximately $132,000 and $187,000 in 1996
and 1997, respectively for fees earned from properties in which the Company's
stockholders have an ownership interest. In 1997, the Company sold a building,
the related land (total book value of $135,000) and the related $124,000
mortgage note payable to the Company's stockholders for $11,000 in cash.
In 1995, the Company advanced the stockholders $75,000 as a note receivable
at an annual interest rate of 6%. As of December 31, 1996, the $75,000 note
balance and the related accrued interest of $9,000 was included in receivables
from stockholders and employees. The Company recorded interest income on this
note of $4,500 and $4,000 in 1996 and 1997, respectively. The stockholders
repaid the note in 1997.
The Company has agreements to lease office space from the stockholders and
the minimum lease payments are as follows (in thousands):
1998 ...................... $ 112
1999 ...................... 117
2000 ...................... 122
2001 ...................... 126
2002 ...................... 131
Thereafter ................ 967
------
$1,575
======
During 1996 and 1997, the Company recorded rental expense of $93,000 and
$110,000, respectively, relating to the above leases.
9. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Company and its stockholders have entered into a definitive agreement
with VPI pursuant to which all of the outstanding stock of the Company will be
acquired by VPI.
In connection with the Offering, the owner and certain key employees have
agreed to reductions in salary and benefits which would have reduced general and
administrative expenses by approximately $850,000 and $1.1 million for 1996 and
1997, respectively. In addition, certain stockholders will retain non-operating
assets and assume or retire certain liabilities that will be excluded from the
Combinations.
F-124
<PAGE>
====================================== ======================================
NO DEALER, SALES REPRESENTATIVE
OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN SHARES
AUTHORIZED BY THE COMPANY OR ANY OF
THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SHARES OF
COMMON STOCK TO WHICH IT RELATES OR AN
OFFER TO, OR A SOLICITATION OF, ANY
PERSON IN ANY JURISDICTION WHERE SUCH VACATION PROPERTIES
AN OFFER OR SOLICITATION WOULD BE INTERNATIONAL, INC.
UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
OR THAT THE INFORMATION CONTAINED COMMON STOCK
HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS [LOGO]
PAGE
----
Prospectus Summary ............... 3
Risk Factors ..................... 11
The Company ...................... 17
Use of Proceeds .................. 21
Dividend Policy .................. 21 -----------------
Capitalization ................... 22
Dilution ......................... 23
Selected Financial Data .......... 24
Management's Discussion and PROSPECTUS
Analysis of Financial Condition
and Results of Operations ..... 26
Business ......................... 35
Management ....................... 45 , 1998
Certain Transactions ............. 51
Principal Stockholders ........... 58
Description of Capital Stock ..... 59
Shares Eligible for Future Sale .. 62 -----------------
Underwriting ..................... 64
Legal Matters .................... 65
Experts .......................... 65
Additional Information ........... 66
Index to Financial Statements .... F-1
UNTIL ___, 1998 (25 DAYS FROM THE DATE
OF THIS PROSPECTUS), ALL DEALERS SALOMON SMITH BARNEY
EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO NATIONSBANC MONTGOMERY
DELIVER A PROSPECTUS. THIS IS IN SECURITIES LLC
ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. FURMAN SELZ
====================================== ======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. (1)
The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with the Offering. All of
such amounts (except the SEC Registration Fee and the NASD Filing Fee) are
estimated.
SEC Registration Fee ................................... $
New York Stock Exchange Listing Fee ....................
NASD Filing Fee ........................................
Accounting Fees and Expenses ...........................
Printing Costs .........................................
Legal Fees and Expenses ................................
Transfer Agent and Registrar Fees and Expenses .........
Miscellaneous ..........................................
Total ............................................... $
=======
- ----------
(1} The amounts set forth, except for the SEC and NASD fees, are in each case
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware (the "DGCL") empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation ) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnify for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
II-1
<PAGE>
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director: (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from
which the director derived an improper personal benefit.
Articles Seventh and Eighth of the Company's Certificate of Incorporation,
as amended, states that:
"No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability: (1) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law; (3)
under Section 174 of the DGCL; or (4) for any transaction from which the
director derived an improper personal benefit,
The Corporation shall, to the fullest extent permitted by Section 145 of
the DGCL, as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.
In addition, Article II of the Company's Bylaws further provides that the
Company shall indemnify its officers, directors and employees to the fullest
extent permitted by law.
The Company intends to enter into indemnification agreements with each of
its executive officers and directors which indemnifies such person to the
fullest extent permitted by its Amended and Restated Certificate of
Incorporation, its Bylaws and the DGCL. The Company also intends to obtain
directors and officers liability insurance.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify, under certain
conditions, the Company against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to all securities of the Company issued
or sold by the Company within the past three years which were not registered
under the Securities Act.
(a) VPI was organized in September 1997 and issued 98 and 196 shares
of its Common Stock to its Founders, Capstone Partners, LLC and Alpine
Consolidated II, LLC, respectively, at a per share price of $.01. The offer
and sale of these shares was exempt from registration under the Securities
Act of 1933 in reliance on Section 4(2) thereof because the offers and
sales were made to sophisticated investors who had access to information
about VPI and were able to bear the risk of loss of their investment. In
November and December of 1997 and the first quarter of 1998, VPI issued
62 shares of its Common Stock to 18 individuals, including its executive
officers, at a per share price of $.01. The offer and sale of these shares
was exempt from registration under the Securities Act of 1933 in reliance
on Section 4(2) thereof because the offers and sales were made to
sophisticated investors who had access to information about VPI and were
able to bear the risk of loss of their investment. On March 9, 1998, the
number of these shares were increased by a 8,834.76- for-one stock split.
(b) See "Certain Transactions" for a discussion of the issuance of
shares of Common Stock and options to purchase shares of Common Stock in
connection with the Combinations. Each of these transactions was effected
or will be effected without registration of the relevant security under the
Securities Act in reliance upon the exemption provided by Section 4(2) of
the Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NUMBER
- --------
*1.1 -- Form of Underwriting Agreement.
2.1 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., HCP Acquisition
Corp., and Hotel Corporation of the Pacific, Inc. and Andre S.
Tatibouet.
2.2 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., B&B Acquisition
Corp., Brindley Acquisition Corp., B&B On The Beach, Inc.,
Brindley and Brindley Realty and Development, Inc., Douglas R.
Brindley and Betty Shotton Brindley.
2.3 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Coastal Realty
Acquisition LLC, Coastal Management Acquisition Corp. and Coastal
Resorts Realty LLC, Coastal Resorts Management, Inc., Joshua M.
Freeman, T. Michael McNally and CMF Coastal Resorts, L.L.C.
2.4 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc. and Collection
of Fine Properties, Inc., Ten Mile Holdings, Ltd., Luis Alonso,
Domingo R. Moreira, Brenda M. Lopez Ibanez and Ana Maria Moreira.
2.5 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc. and Houston and
O'Leary Company and Heidi O'Leary Houston.
2.6 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Jupiter
Acquisition Corp. and Jupiter Property Management at Park City,
Inc. and Jon R. Brinton.
2.7 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Maui
Acquisition Corp. and Maui Condominium and Home Realty, Inc.,
Daniel C. Blair and Paul T. Dobson.
2.8 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Maury
Acquisition Corp. and The Maury People, Inc. and Sharon Benson
Doucette.
2.9 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Priscilla
Acquisition Corp., Realty Consultants Acquisition Corp., Realty
Consultants, Inc., and Howey Acquisition, Inc., Charles O. Howey
and Dolores C. Howey.
2.10 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., RPM Acquisition
Corp. and Resort Property Management, Inc., Daniel L. Meehan,
Kimberlie C. Meehan and Nancy Hess.
2.11 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Telluride
Acquisition Corp., and Telluride Resort Accommodations, Inc. and
Steven A. Schein, Michael E. Gardner, Park Brady, Daniel Shaw,
Carolyn S. Shaw, Virginia C. Gordon, Joyce Allred, Ronald D.
Allred, A.J. Wells, Forrest Faulconer, Thomas McNamara, Donald J.
Peterson, Nancy McNamara, Charles E. Cobb, Jr., Sue M. Cobb,
Stephen A. Martori, Anthony F. Martori, Arthur John Matori and
Alan Miskin.
2.12 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Trupp
Acquisition Corp., Management Acquisition Corp. and Trupp-Hodnett
Enterprises, Inc., THE Management Company, Hans F. Trupp, Roy K.
Hodnett, Pat Hodnett Cooper and Austin Trupp.
2.13 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Whistler
Holding Corp. and Whistler Chalets Ltd. and J. Patrick McCurdy.
2.14 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., FRS Acquisition
Corp and First Resort Software, Inc., Thomas A. Leddy, Evan H.
Gull and Daniel Patrick Curry.
3.1 -- Certificate of Incorporation, as amended.
3.2 -- Bylaws.
*4.1 -- Specimen Common Stock Certificate.
II-3
<PAGE>
EXHIBIT
NUMBER
- ----------
*5.1 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as to the
legality of the securities being registered.
10.1 -- Form of 1998 Long-Term Incentive Plan of the Company.
*10.2 -- Employment and Non-Competition Agreement between the Company and
David M. Sullivan.
*10.3 -- Employment and Non-Competition Agreement between the Company and
Jeffery M. Jarvis.
*10.4 -- Employment and Non-Competition Agreement between the Company and
W. Michael Murphy.
*10.5 -- Employment and Non-Competition Agreement between the Company and
Jules S. Sowder.
10.6 -- Employment and Non-Competition Agreement between the Company and
Luis Alonso.
10.7 -- Employment Agreement between the Company and Douglas R. Brindley.
10.8 -- Employment Agreement between the Company and Paul T. Dobson.
10.9 -- Employment Agreement between the Company and Sharon Benson
Doucette.
10.10 -- Employment Agreement between the Company and Evan H. Gull.
10.11 -- Employment Agreement between the Company and Heidi O'Leary
Houston.
10.12 -- Employment Agreement between the Company and Daniel L. Meehan.
10.13 -- Management Services Agreement between the Company and J. Patrick
McCurdy.
10.14 -- Employment Agreement between the Company and Andre S. Tatibouet.
10.15 -- Employment Agreement between the Company and Hans F. Trupp.
*10.16 -- Form of Officer and Director Indemnification Agreement.
*10.17 -- Consulting Agreement between the Company and Park Brady.
10.18 -- Promissory Note.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Morrison, Brown, Argiz and Company.
*23.4 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (contained in
Exhibit 5.1).
23.5 -- Consents to become directors.
24 -- Powers of Attorney (included on signature page).
27 -- Financial Data Schedule.
- ----------
* To be filed by amendment.
(b) Financial Statement Schedules
None
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) The undersigned will provide to the underwriters at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.
(2) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
the initial bona fide offering thereof.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Washington, District of Columbia, on
the 12th day of March, 1998.
VACATION PROPERTIES INTERNATIONAL, INC.
By: /s/ Elan J. Blutinger
----------------------------------------
Elan J. Blutinger
President
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Elan J. Blutinger, Leonard A. Potter and D.
Fraser Bullock, and each of them, with full power to act without the other, such
person's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign this Registration Statement, any and all
amendments thereto (including post-effective amendments), any subsequent
Registration Statements pursuant to Rule 462 of the Securities Act of 1933, as
amended, and any amendments thereto and to file the same, with exhibits and
schedules thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing necessary or desirable 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 attorneys-in-fact and agents, or any of
them, or their 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 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
VACATION PROPERTIES INTERNATIONAL, INC.
SIGNATURE TITLE DATE
- -------------------------------- -------------------------- --------------
/s/ Elan J. Blutinger President, Director March 12, 1998
- ---------------------------
Elan J. Blutinger
(Principal Executive Officer)
/s/ D. Fraser Bullock Vice President, Director March 12, 1998
- ---------------------------
D. Fraser Bullock
(Principal Financial and
Accounting Officer)
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
- --------
*1.1 -- Form of Underwriting Agreement.
2.1 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., HCP Acquisition
Corp., and Hotel Corporation of the Pacific, Inc. and Andre S.
Tatibouet.
2.2 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., B&B Acquisition
Corp., Brindley Acquisition Corp., B&B On The Beach, Inc.,
Brindley and Brindley Realty and Development, Inc., Douglas R.
Brindley and Betty Shotton Brindley.
2.3 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Coastal Realty
Acquisition LLC, Coastal Management Acquisition Corp. and Coastal
Resorts Realty LLC, Coastal Resorts Management, Inc., Joshua M.
Freeman, T. Michael McNally and CMF Coastal Resorts, L.L.C.
2.4 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc. and Collection
of Fine Properties, Inc., Ten Mile Holdings, Ltd., Luis Alonso,
Domingo R. Moreira, Brenda M. Lopez Ibanez and Ana Maria Moreira.
2.5 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc. and Houston and
O'Leary Company and Heidi O'Leary Houston.
2.6 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Jupiter
Acquisition Corp. and Jupiter Property Management at Park City,
Inc. and Jon R. Brinton.
2.7 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Maui
Acquisition Corp. and Maui Condominium and Home Realty, Inc.,
Daniel C. Blair and Paul T. Dobson.
2.8 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Maury
Acquisition Corp. and The Maury People, Inc. and Sharon Benson
Doucette.
2.9 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Priscilla
Acquisition Corp., Realty Consultants Acquisition Corp., Realty
Consultants, Inc., and Howey Acquisition, Inc., Charles O. Howey
and Dolores C. Howey.
2.10 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., RPM Acquisition
Corp. and Resort Property Management, Inc., Daniel L. Meehan,
Kimberlie C. Meehan and Nancy Hess.
2.11 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Telluride
Acquisition Corp., and Telluride Resort Accommodations, Inc. and
Steven A. Schein, Michael E. Gardner, Park Brady, Daniel Shaw,
Carolyn S. Shaw, Virginia C. Gordon, Joyce Allred, Ronald D.
Allred, A.J. Wells, Forrest Faulconer, Thomas McNamara, Donald J.
Peterson, Nancy McNamara, Charles E. Cobb, Jr., Sue M. Cobb,
Stephen A. Martori, Anthony F. Martori, Arthur John Matori and
Alan Miskin.
2.12 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Trupp
Acquisition Corp., Management Acquisition Corp. and Trupp-Hodnett
Enterprises, Inc., THE Management Company, Hans F. Trupp, Roy K.
Hodnett, Pat Hodnett Cooper and Austin Trupp.
2.13 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Whistler
Holding Corp. and Whistler Chalets Ltd. and J. Patrick McCurdy.
2.14 -- Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., FRS Acquisition
Corp and First Resort Software, Inc., Thomas A. Leddy, Evan H.
Gull and Daniel Patrick Curry.
3.1 -- Certificate of Incorporation, as amended.
3.2 -- Bylaws.
*4.1 -- Specimen Common Stock Certificate.
<PAGE>
EXHIBIT
NUMBER
- ----------
*5.1 -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as to the
legality of the securities being registered.
10.1 -- Form of 1998 Long-Term Incentive Plan of the Company.
*10.2 -- Employment and Non-Competition Agreement between the Company and
David M. Sullivan.
*10.3 -- Employment and Non-Competition Agreement between the Company and
Jeffery M. Jarvis.
*10.4 -- Employment and Non-Competition Agreement between the Company and
W. Michael Murphy.
*10.5 -- Employment and Non-Competition Agreement between the Company and
Jules S. Sowder.
10.6 -- Employment and Non-Competition Agreement between the Company and
Luis Alonso.
10.7 -- Employment Agreement between the Company and Douglas R. Brindley.
10.8 -- Employment Agreement between the Company and Paul T. Dobson.
10.9 -- Employment Agreement between the Company and Sharon Benson
Doucette.
10.10 -- Employment Agreement between the Company and Evan H. Gull.
10.11 -- Employment Agreement between the Company and Heidi O'Leary
Houston.
10.12 -- Employment Agreement between the Company and Daniel L. Meehan.
10.13 -- Management Services Agreement between the Company and J. Patrick
McCurdy.
10.14 -- Employment Agreement between the Company and Andre S. Tatibouet.
10.15 -- Employment Agreement between the Company and Hans F. Trupp.
*10.16 -- Form of Officer and Director Indemnification Agreement.
*10.17 -- Consulting Agreement between the Company and Park Brady.
10.18 -- Promissory Note.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Morrison, Brown, Argiz and Company.
*23.4 -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (contained in
Exhibit 5.1).
23.5 -- Consents to become directors.
24 -- Powers of Attorney (included on signature page).
27 -- Financial Data Schedule.
- ----------
* To be filed by amendment.
[_______________] SHARES
VACATION PROPERTIES INTERNATIONAL, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
DATED [_______________ ___, 1998]
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Underwriting Agreement 1
Introductory 1
Section 1. Representations and Warranties of the Company 2
Compliance With Registration Requirements 2
Offering Materials Furnished To Underwriters 3
Distribution of Offering Material By the Company 3
The Underwriting Agreement 3
Authorization of the Common Shares 3
No Applicable Registration or Other Similar Rights 3
No Material Adverse Change 3
Independent Accountants 4
Preparation of the Financial Statements 4
Incorporation and Good Standing of the Company and Its Subsidiaries 5
Capitalization and Other Capital Stock Matters 5
Stock Exchange Listing 5
Non-Contravention of Existing Instruments; No Further Authorizations
or Approvals Required 6
No Material Actions or Proceedings 6
Intellectual Property Rights 7
All Necessary Permits, Etc 7
Title To Properties 7
Tax Law Compliance 7
Company Not An Investment Company 7
Insurance 8
No Price Stabilization or Manipulation 8
Related Party Transactions 8
No Unlawful Contributions or Other Payments 8
Company's Accounting System 8
Compliance With Environmental Laws 9
ERISA Compliance 10
Combination Agreements 10
Representations in Combination Agreements 10
Section 2. Purchase, Sale and Delivery of Common Shares 11
The Firm Common Shares 11
The First Closing Date 11
The Optional Common Shares; The Second Closing Date 11
Public Offering of the Common Shares 12
Payment for the Common Shares 12
Delivery of the Common Shares 12
<PAGE>
<CAPTION>
<S> <C>
Delivery of Prospectus to the Underwriters 12
Section 3. Additional Covenants of the Company 13
Representatives' Review of Proposed Amendments and Supplements 13
Securities Act Compliance 13
Amendments and Supplements to the Prospectus and Other Securities Act Matters 13
Copies of Any Amendments and Supplements to the Prospectus 14
Blue Sky Compliance 14
Use of Proceeds 14
Transfer Agent 14
Earnings Statement 14
Periodic Reporting Obligations 14
Agreement Not To Offer or Sell Additional Securities 14
Future Reports to the Representatives 15
Satisfaction of Founding Company Combination Conditions 15
Section 4. Payment of Expenses 15
Section 5. Conditions of the Obligations of the Underwriters 16
Accountants' Comfort Letter 16
Compliance With Registration Requirements; No Stop Order, No Objection From NASD 16
No Material Adverse Change 17
Opinion of Counsel for the Company 17
Opinion of Counsel for the Underwriters 17
Officers' Certificate 17
Bring-Down Comfort Letter 18
Combination Closings 18
Combination Agreements 18
Lock-Up Agreement from Certain Stockholders of the Company 19
Termination of Profit Sharing Agreements 19
Additional Documents 19
Section 6. Reimbursement of Underwriters' Expenses 19
Section 7. Effectiveness of this Agreement 20
Section 8. Indemnification 20
Indemnification of the Underwriters 20
Indemnification of the Company, its Directors and Officers 21
Notifications and Other Indemnification Procedures 22
Settlements 23
Section 9. Contribution 23
<PAGE>
<CAPTION>
<S> <C>
Section 10. Default of One or More of the Several Underwriters 25
Section 11. Termination of this Agreement 25
Section 12. Representations and Indemnities To Survive Delivery 26
Section 13. Notices 26
Section 14. Successors 27
Section 15. Partial Unenforceability 27
Section 16. Governing Law Provisions 28
Section 17. General Provisions 28
</TABLE>
<PAGE>
UNDERWRITING AGREEMENT
[_____________ __, 1998]
SMITH BARNEY INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
FURMAN SELZ LLC,
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, NY 10013
Ladies and Gentlemen:
Introductory. Vacation Properties International, Inc., a Delaware
corporation (the "Company), proposes to issue and sell to the several
underwriters named on Schedule A hereto (the "Underwriters") an aggregate of
[___] shares (the "Firm Common Shares") of its Common Stock, par value $.01 per
share (the "Common Stock"). In addition, the Company has granted to the
Underwriters an option to purchase up to an additional [___] shares (the
"Optional Common Shares") of Common Stock, as provided in Section 2. The Firm
Common Shares and, if and to the extent such option is exercised, the Optional
Common Shares are collectively called the "Common Shares." Smith Barney Inc.
("SB"), NationsBanc Montgomery Securities LLC and Furman Selz LLC have agreed to
act as representatives of the several Underwriters (in such capacity,
collectively, the "Representatives") in connection with the offering and sale of
the Common Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-[___]), which contains a form of prospectus to be used in connection with
the public offering and sale of the Common Shares. Such registration statement,
as amended, including the financial statements, exhibits and schedules thereto,
in the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement." Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement," and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Common Shares, is called the "Prospectus"; provided,
however, if the Company has, with the consent of SB, elected to rely upon Rule
434 under the Securities Act, the term "Prospectus" shall mean the Company's
prospectus subject to completion (each, a "preliminary prospectus") dated
[_______ __, 1998] (such preliminary prospectus, together with the applicable
term sheet (the "Term
<PAGE>
Sheet") prepared and filed by the Company with the Commission under Rules 434
and 424(b) under the Securities Act is called the "Rule 434 preliminary
prospectus") and all references in this underwriting agreement (this
"Agreement") to the date of the Prospectus shall mean the date of the Term
Sheet. All references in this Agreement to the Registration Statement, the Rule
462(b) Registration Statement, a preliminary prospectus, the Prospectus or the
Term Sheet, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A. Representations and Warranties of the Company. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional or
supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed complied in all
material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Common Shares.
Each of the Registration Statement, any Rule 462(b) Registration Statement and
any post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus, as
amended or supplemented, as of its date and at all subsequent times, did not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives expressly
for use therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has delivered
to the Representatives three complete manually signed copies of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration
<PAGE>
Statement (without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as defined below) and the completion of the Underwriters' distribution of
the Common Shares, any offering material in connection with the offering and
sale of the Common Shares other than a preliminary prospectus, the Prospectus or
the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to be purchased
by the Underwriters from the Company have been duly authorized for issuance and
sale pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is given
in the Prospectus: (i) there has been no material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions in the
ordinary course of business, of the Company and its subsidiaries, and Hotel
Corporation of the Pacific, Inc., Brindley & Brindley Realty and Development,
Inc., B&B On the Beach Inc., Coastal Resorts Realty L.L.C., Coastal Resorts
Management, Inc., Collection of Fine Properties, Inc., Ten Mile Holdings, Ltd.,
Houston and O'Leary Company, Jupiter Property Management at Park City, Inc.,
Maui Condominium and Home Realty, Inc., The Maury People, Inc., Priscilla Murphy
Realty, Inc., Realty Consultants Inc., Resort Property Management, Inc.,
Telluride Resort Accommodations, Inc.,Trupp Hodnett Enterprises, Inc., THE
Management Company, Whistler Chalets Limited and First Resort Software, Inc.
(together with their respective subsidiaries, collectively, the "Founding
Companies") considered as one entity (any such change is called a "Material
Adverse Change"); (ii) none of the Company, its subsidiaries and the Founding
Companies has incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business or entered into any material
transaction or agreement not in the ordinary course of business; (iii) there has
been no adverse change with respect to the goodwill and other intangible assets
of the Company and the Founding Companies (collectively, the "Intangible
Assets") such that, as of the date hereof, the Intangible Assets, net of
<PAGE>
accumulated amortization, do not have a value at least equal to the value
reflected in the combined financial statements of the Company and the Founding
Companies and no part of the Intangible Assets are required to be written down
in conformity with generally accepted accounting principles applied on a basis
consistent with prior periods; and (iv) there has been no dividend or
distribution of any kind declared, paid or made by the Company or any Founding
Company or, except for dividends paid to the Company or other subsidiaries, any
of its subsidiaries on any class of capital stock or repurchase or redemption by
the Company, any of its subsidiaries or any Founding Company of any class of
capital stock.
(h) Independent Accountants. Arthur Andersen LLP, who have expressed their
opinion with respect to the financial statements (which term as used in this
Agreement includes the related notes and schedules thereto) filed with the
Commission as a part of the Registration Statement and included in the
Prospectus, are independent public or certified public accountants with respect
to the Company and each of the Founding Companies as required by the Securities
Act.
(i) Preparation of the Financial Statements. The financial statements of
the Company, the separate financial statements of each of the Founding Companies
and the combined financial statements of the Company and the Founding Companies,
in each case together with related notes and schedules, filed with the
Commission as a part of the Registration Statement and included in the
Prospectus, present fairly the financial position, results of operations and
cash flows of the Company, of each of such Founding Companies and of the Company
and the Founding Companies combined, respectively, on the dates specified and
for the periods specified. The supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. Such
financial statements and supporting schedules have been prepared in conformity
with generally accepted accounting principles as applied in the United States
applied on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto, and all adjustments necessary for
a fair presentation of results for such periods have been made. No other
financial statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus under the
captions "Prospectus Summary--Summary Pro Forma Combined Financial Data,"
"--Summary Individual Founding Company Financial Data," "Selected Financial
Data" and "Capitalization" fairly present the information set forth therein on a
basis consistent with that of the audited and pro forma financial statements
contained in the Registration Statement and the books and records of the Company
and the Founding Companies, as applicable. The pro forma combined financial
statements of the Company and the Founding Companies together with the related
notes thereto included under the captions "Prospectus Summary-- Summary Pro
Forma Combined Financial Data", "Selected Financial Data," "Resort Properties
International, Inc. and Founding Companies Unaudited Pro Forma Combined
Financial Statements" and elsewhere in the Prospectus and in the Registration
Statement present fairly the information contained therein, have been prepared
in accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly presented on the pro forma
bases described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions and circumstances referred to therein.
(j) Incorporation and Good Standing of the Company, its Subsidiaries and
the Founding Companies. Each of the Company, its subsidiaries and the Founding
Companies has been duly
<PAGE>
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus and, in the case of the Company, to enter into
and perform its obligations under this Agreement. Each of the Company, each
subsidiary and each Founding Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change. All of the issued and
outstanding capital stock of each subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable and is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or claim. As of the First Closing Date (as
hereinafter defined), after giving effect to the Founding Company Combinations
(as defined in the Registration Statement), all of the outstanding shares of the
capital stock of each of the Founding Companies will be owned by the Company
free and clear of any security interest, mortgage, pledge, lien, encumbrance or
claim; and no options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, or agreements or other obligations to issue or
other rights to convert any obligations into, shares of capital stock of or
ownership interests in any of the Founding Companies are authorized or
outstanding. The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 21 to the Registration Statement.
(k) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" (other than for subsequent issuances, if any,
pursuant to employee benefit plans described in the Prospectus or upon exercise
of outstanding options or warrants described in the Prospectus). The Common
Stock (including the Common Shares) conforms in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable and have been issued in compliance with federal
and state securities laws. None of the outstanding shares of Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. Upon
completion of the Founding Company Combinations in the manner described in the
Registration Statement, the shares of Common Stock of the Company to be issued
in such Founding Company Combinations will be duly authorized, validly issued
and fully paid and non-assessable. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, or agreements or other obligations to issue or other rights to
convert any obligations into, shares of capital stock of or ownership interests
in any of the Company or any of its subsidiaries other than those accurately
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(l) Stock Exchange Listing. The Common Shares have been approved for
listing on the
<PAGE>
New York Stock Exchange (the "NYSE"), subject only to official notice of
issuance.
(m) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. Neither the Company or any of its subsidiaries nor any of
the Founding Companies is in violation of its charter or by-laws or is in
default (or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any of
its subsidiaries or any Founding Company is a party or by which it or any of
them may be bound, or to which any of the property or assets of the Company or
any of its subsidiaries or any Founding Company is subject (each, an "Existing
Instrument"), except for such Defaults as would not, individually or in the
aggregate, result in a Material Adverse Change. The Company's execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus (i) have been duly authorized by all
necessary corporate action and will not result in any violation of the
provisions of the charter or by-laws of the Company or any subsidiary or any
Founding Company, (ii) will not conflict with or constitute a breach of, or
Default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries or any Founding Company pursuant to, or require the consent of any
other part to, any Existing Instrument, except for such conflicts, breaches,
Defaults, liens, charges or encumbrances as would not, individually or in the
aggregate, result in a Material Adverse Change and (iii) will not result in any
violation of any law, administrative regulation or administrative or court
decree applicable to the Company or any subsidiary or any Founding Company. No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority or agency, is
required for the Company's execution, delivery and performance of this Agreement
or any Combination Agreement and consummation of the transactions contemplated
hereby or thereby and by the Prospectus, except such as have been obtained or
made by the Company and are in full force and effect under the Securities Act,
applicable state securities or blue sky laws and from the National Association
of Securities Dealers, Inc. (the "NASD").
(n) No Material Actions or Proceedings. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened (i) against or affecting the Company or any of its
subsidiaries or any Founding Company, (ii) which has as the subject thereof any
officer or director of, or property owned or leased by, the Company or any of
its subsidiaries or any Founding Company or (iii) relating to environmental or
discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined adversely
to the Company or such subsidiary or such Founding Company and (B) any such
action, suit or proceeding, if so determined adversely, would reasonably be
expected to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement. No material
labor dispute with the employees of the Company or any of its subsidiaries or
any Founding Company exists or, to the best of the Company's knowledge, is
threatened or imminent.
(o) Intellectual Property Rights. The Company, its subsidiaries and the
Founding Companies own or possess sufficient trademarks, service marks, trade
names, patent rights, copyrights, licenses, approvals, trade secrets,
technology, product designs, software programs, inventions, methods, processes,
systems, know how and other similar rights (collectively,
<PAGE>
"Intellectual Property Rights") reasonably necessary to conduct their businesses
as now conducted; and the expected expiration of any of such Intellectual
Property Rights would not result in a Material Adverse Change. Neither the
Company or any of its subsidiaries nor any of the Founding Companies has
received any notice of infringement or conflict with asserted Intellectual
Property Rights of others, which infringement or conflict, if the subject of an
unfavorable decision, would result in a Material Adverse Change.
(p) All Necessary Permits, etc. The Company and each subsidiary and each
Founding Company possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct their respective businesses, and neither the
Company or any subsidiary nor any of the Founding Companies has received any
notice of proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, could result in a Material Adverse Change.
(q) Title to Properties. The Company, each of its subsidiaries and each
Founding Company has good and marketable title to all the properties and assets
reflected as owned in the financial statements referred to in Section 1(i) above
(or elsewhere in the Prospectus), in each case free and clear of any security
interests, mortgages, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of such
property by the Company or such subsidiary or such Founding Company. The real
property, improvements, equipment and personal property held under lease by the
Company or any subsidiary or any Founding Company are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company or such
subsidiary or such Founding Company.
(r) Tax Law Compliance. The Company and its subsidiaries and each of the
Founding Companies have filed all necessary federal, state and foreign income
and franchise tax returns and have paid all taxes required to be paid by any of
them and, if due and payable, any related or similar assessment, fine or penalty
levied against any of them. The Company has made adequate charges, accruals and
reserves in the applicable financial statements referred to in Section 1(i)
above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company, any of its
subsidiaries or any Founding Company has not been finally determined.
(s) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Common Shares will not be, an "investment company" within the meaning of
the Investment Company Act and will conduct its business in a manner so that it
will not become subject to the Investment Company Act.
(t) Insurance. Each of the Company and its subsidiaries and the Founding
Companies are insured by recognized, financially sound and reputable
institutions with policies in such amounts and with such deductibles and
covering such risks as are generally deemed adequate and customary
<PAGE>
for their businesses including, but not limited to, policies covering real and
personal property owned or leased by the Company and its subsidiaries and the
Founding Companies against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it or any subsidiary or
any Founding Company will not be able (i) to renew its existing insurance
coverage as and when such policies expire or (ii) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not result in a Material
Adverse Change. Neither of the Company or any subsidiary nor any Founding
Company has been denied any insurance coverage which it has sought or for which
it has applied.
(u) No Price Stabilization or Manipulation. Neither the Company or any
subsidiary nor any Founding Company has taken or will take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Common Shares.
(v) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company, any subsidiary, any Founding
Company or any other person required to be described in the Prospectus which
have not been described as required.
(w) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its subsidiaries nor any Founding Company nor, to the best of the
Company's knowledge, any employee or agent of the Company or any subsidiary or
any Founding Company, has made any contribution or other payment to any official
of, or candidate for, any federal, state or foreign office in violation of any
law or of the character required to be disclosed in the Prospectus.
(x) Company's Accounting System. The Company and each of its subsidiaries
and each of the Founding Companies maintain a system of accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles as
applied in the United States and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(y) Compliance with Environmental Laws. Except as would not, individually
or in the aggregate, result in a Material Adverse Change (i) neither the Company
nor any of its subsidiaries nor any Founding Company is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products (collectively, "Materials of Environmental Concern"), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environment Concern
(collectively, "Environmental Laws"), including, but not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or its subsidiaries or the Founding
<PAGE>
Companies under applicable Environmental Laws, or noncompliance with the terms
and conditions thereof, nor has the Company or any of its subsidiaries or any
Founding Company received any written communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the Company
or any of its subsidiaries or any Founding Company is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed with
a court or governmental authority, no investigation with respect to which the
Company or any of its subsidiaries or any Founding Company has received written
notice, and no written notice by any person or entity alleging potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries, attorneys' fees
or penalties arising out of, based on or resulting from the presence, or release
into the environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries or any
Founding Company, now or in the past (collectively, "Environmental Claims"),
pending or, to the best of the Company's knowledge, threatened against the
Company or any of its subsidiaries or any Founding Company or any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries or any Founding Company has retained or assumed either
contractually or by operation of law; and (iii) to the best of the Company's
knowledge, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that reasonably could result in a violation of any Environmental Law or
form the basis of a potential Environmental Claim against the Company or any of
its subsidiaries or any Founding Company or against any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries or
any Founding Company has retained or assumed either contractually or by
operation of law.
(z) ERISA Compliance. The Company and each of the Founding Companies and
any "employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company or any of its subsidiaries, any Founding Company or their "ERISA
Affiliates" (as defined below) are in compliance in all material respects with
ERISA. "ERISA Affiliate" means, with respect to the Company or a Founding
Company, any member of any group of organizations described in Sections 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of which the
Company or such Founding Company is a member. No "reportable event" (as defined
under ERISA) has occurred or is reasonably expected to occur with respect to any
"employee benefit plan" established or maintained by the Company, any Founding
Company or any of their ERISA Affiliates. No "employee benefit plan" established
or maintained by the Company, any Founding Company or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfunded benefit liabilities" (as defined under ERISA). Neither the
Company, any Founding Company nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, any Founding Company or any of their
ERISA Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or failure to
act, which would cause the loss of such qualification.
<PAGE>
(aa) Combination Agreements. The Company has entered into the agreements
(the "Combination Agreements"), set forth as Exhibits 2.1, 2.2, 2.3, 2.4, 2.5,
2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13 and 2.14 to the Registration
Statement, pursuant to which the Company will acquire in separate transactions
all of the common stock and ownership interests of the Founding Companies. Each
of the Combination Agreements is in full force and effect, has been duly and
validly authorized, executed and delivered by the parties thereto, and is valid
and binding on the parties thereto in accordance with its terms and none of the
parties thereto is in default in any respect thereunder. A complete and correct
copy of each Combination Agreement (including exhibits and schedules) has been
delivered to the Representatives and no changes therein will be made subsequent
hereto and prior to the Closing Date.
(ab) Representations in Combination Agreements. The representations and
warranties made in each Combination Agreement by the Company and by each
Founding Company and/or its stockholders are true and correct in all material
respects, except for such changes permitted or contemplated by such Combination
Agreement.
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
The Firm Common Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Common Shares upon the terms herein set forth. On
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the
Underwriters agree, severally and not jointly, to purchase from the Company the
respective number of Firm Common Shares set forth opposite their names on
Schedule A hereto. The purchase price per Firm Common Share to be paid by the
several Underwriters to the Company shall be $[___] per share.
The First Closing Date. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriters and payment therefor shall be made at
the offices of SB, 388 Greenwich Street, New York, New York (or such other place
as may be agreed to by the Company and the Representatives) at 6:00 a.m. New
York time, on [______ __, 1998], or such other time and date not later than
10:30 a.m. New York time, on [______ __, 1998], as the Representatives shall
designate by notice to the Company (the time and date of such closing are called
the "First Closing Date"). The Company hereby acknowledges that circumstances
under which the Representatives may provide notice to postpone the First Closing
Date as originally scheduled include, but are in no way limited to, any
determination by the Company or the Representatives to recirculate to the public
copies of an amended or supplemented Prospectus or a delay as contemplated by
the provisions of Section 10 hereof.
The Optional Common Shares; the Second Closing Date. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters
<PAGE>
to purchase, severally and not jointly, up to an aggregate of [_______] Optional
Common Shares from the Company at the purchase price per share to be paid by the
Underwriters for the Firm Common Shares. The option granted hereunder is for use
by the Underwriters solely in covering any over-allotments in connection with
the sale and distribution of the Firm Common Shares. The option granted
hereunder may be exercised at any time (but not more than once) upon notice by
the Representatives to the Company, which notice may be given at any time within
30 days from the date of this Agreement. Such notice shall set forth (i) the
aggregate number of Optional Common Shares as to which the Underwriters are
exercising the option, (ii) the names and denominations in which the
certificates for the Optional Common Shares are to be registered and (iii) the
time, date and place at which such certificates will be delivered (which time
and date may be simultaneous with, but not earlier than, the First Closing Date;
and in such case the term "First Closing Date" shall refer to the time and date
of delivery of certificates for the Firm Common Shares and the Optional Common
Shares). Such time and date of delivery, if subsequent to the First Closing
Date, is called the "Second Closing Date" and shall be determined by the
Representatives and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Optional Common
Shares are to be purchased, each Underwriter agrees, severally and not jointly,
to purchase the number of Optional Common Shares (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) that bears the
same proportion to the total number of Optional Common Shares to be purchased as
the number of Firm Common Shares set forth on Schedule A opposite the name of
such Underwriter bears to the total number of Firm Common Shares. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
Public Offering of the Common Shares. The Representatives hereby
advise the Company that the Underwriters intend to offer for sale to the public,
as described in the Prospectus, their respective portions of the Common Shares
as soon after this Agreement has been executed and the Registration Statement
has been declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
Payment for the Common Shares. Payment for the Common Shares shall be
made at the First Closing Date (and, if applicable, at the Second Closing Date)
by wire transfer of immediately available funds to the order of the Company.
It is understood that the Representatives have been authorized, for
their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Common Shares and any Optional Common Shares the Underwriters have agreed
to purchase. SB, individually and not as a Representative of the Underwriters,
may (but shall not be obligated to) make payment for any Common Shares to be
purchased by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
Delivery of the Common Shares. The Company shall deliver, or cause to
be delivered, to the Representatives for the accounts of the several
Underwriters certificates for the Firm Common Shares at the First Closing Date,
against the irrevocable release of a wire transfer of
<PAGE>
immediately available funds for the amount of the purchase price therefor. The
Company shall also deliver, or cause to be delivered, to the Representatives for
the accounts of the several Underwriters, certificates for the Optional Common
Shares the Underwriters have agreed to purchase at the First Closing Date or the
Second Closing Date, as the case may be, against the irrevocable release of a
wire transfer of immediately available funds for the amount of the purchase
price therefor. The certificates for the Common Shares shall be in definitive
form and registered in such names and denominations as the Representatives shall
have requested at least two full business days prior to the First Closing Date
(or the Second Closing Date, as the case may be) and shall be made available for
inspection on the business day preceding the First Closing Date (or the Second
Closing Date, as the case may be) at a location in New York City as the
Representatives may designate. Time shall be of the essence, and delivery at the
time and place specified in this Agreement is a further condition to the
obligations of the Underwriters.
Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m.
on the second business day following the date the Common Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY. The Company further
covenants and agrees with each Underwriter as follows:
(a) Representatives' Review of Proposed Amendments and Supplements. During
such period beginning on the date hereof and ending on the later of the First
Closing Date or such date, as in the opinion of counsel for the Underwriters,
the Prospectus is no longer required by law to be delivered in connection with
sales by an Underwriter or dealer (the "Prospectus Delivery Period"), prior to
amending or supplementing the Registration Statement (including any registration
statement filed under Rule 462(b) under the Securities Act) or the Prospectus,
the Company shall furnish to the Representatives for review a copy of each such
proposed amendment or supplement, and the Company shall not file any such
proposed amendment or supplement to which the Representatives reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing (i) of the receipt
of any comments of, or requests for additional or supplemental information from,
the Commission, (ii) of the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or supplement to any
preliminary prospectus or the Prospectus, (iii) of the time and date that any
post-effective amendment to the Registration Statement becomes effective and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which the Common Stock is listed for trading or included or
designated for quotation, or of the threatening or initiation of any proceedings
for any of such purposes. If the Commission shall enter any such stop order at
any time, the Company will use its best efforts to obtain the lifting of such
order at the earliest
<PAGE>
possible moment. Additionally, the Company agrees that it shall comply with the
provisions of Rules 424(b), 430A and 434, as applicable, under the Securities
Act and will use its reasonable efforts to confirm that any filings made by the
Company under such Rule 424(b) were received in a timely manner by the
Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the opinion of the Representatives or counsel for the Underwriters it
is otherwise necessary to amend or supplement the Prospectus to comply with law,
the Company agrees to promptly prepare (subject to Section 3(a) hereof), file
with the Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the statements in
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The Company
agrees to furnish the Representatives, without charge, during the Prospectus
Delivery Period, as many copies of the Prospectus and any amendments and
supplements thereto as the Representatives may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register the
Common Shares for sale under (or obtain exemptions from the application of) the
state securities or blue sky laws or the provincial securities laws of Canada of
those jurisdictions designated by the Representatives, shall comply with such
laws and shall continue such qualifications, registrations and exemptions in
effect so long as required for the distribution of the Common Shares. The
Company shall not be required to qualify as a foreign corporation or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise the Representatives
promptly of the suspension of the qualification or registration of (or any such
exemption relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to obtain the
withdrawal thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds from the sale
of the Common Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Stock.
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [_______ __, 1999] that satisfies the provisions
<PAGE>
of Section 11(a) of the Securities Act.
(i) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the NYSE all
reports and documents required to be filed under the Exchange Act.
(j) Agreement Not To Offer or Sell Additional Securities. During the period
of 180 days following the date of the Prospectus, the Company will not, without
the prior written consent of SB (which consent may be withheld at the sole
discretion of SB), directly or indirectly, sell, offer, contract or grant any
option to sell, pledge, transfer or establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose
of or transfer, or announce the offering of, or file any registration statement
under the Securities Act in respect of, any shares of Common Stock, options or
warrants to acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than as
contemplated by this Agreement with respect to the Common Shares); provided,
however, that the Company may issue shares of its Common Stock or options to
purchase its Common Stock, or Common Stock upon exercise of options, pursuant to
any stock option, stock bonus or other stock plan or arrangement described in
the Prospectus, but only if the holders of such shares, options, or shares
issued upon exercise of such options, agree in writing not to sell, offer,
dispose of or otherwise transfer any such shares or options during such 180 day
period without the prior written consent of SB (which consent may be withheld at
the sole discretion of the SB).
(m) Future Reports to the Representatives. During the period of five years
after the date of this Agreement the Company will furnish to the
Representatives: (i) as soon as practicable after the end of each fiscal year,
copies of the Annual Report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public or certified public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of any
report or communication of the Company mailed generally to holders of its
capital stock.
(n) Satisfaction of Founding Company Combination Conditions. The Company
will: (i) use its best efforts to satisfy all conditions to consummation of the
Founding Company Combinations as set forth in the Combination Agreements with
respect thereto; (ii) use its best efforts to cause each other party to such
Combination Agreements to satisfy all conditions to the consummation of the
Founding Company Combinations; and (iii) promptly notify the Representatives of
the occurrence of any event which may result in the non-consummation of any of
the Founding Company Combinations on the First Closing Date.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby and in
connection with the Founding Company Combinations, including without limitation
(i) all expenses incident to the issuance and
<PAGE>
delivery of the Common Shares (including all printing and engraving costs), (ii)
all fees and expenses of the registrar and transfer agent of the Common Stock,
(iii) all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Common Shares to the Underwriters, (iv) all fees and
expenses of the Company's counsel, independent public or certified public
accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), each preliminary prospectus and the
Prospectus, and all amendments and supplements thereto, and this Agreement, (vi)
all filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Common Shares for offer and sale under the state securities or blue sky laws or
the provincial securities laws of Canada, and, if requested by the
Representatives, preparing and printing a "Blue Sky Survey" or memorandum, and
any supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (vii) the filing fees incident to, and the
reasonable fees and expenses of counsel for the Underwriters in connection with,
the NASD's review and approval of the Underwriters' participation in the
offering and distribution of the Common Shares, (viii) the fees and expenses
associated with listing the Common Shares on the NYSE, and (ix) all other fees,
costs and expenses referred to in Item 14 of Part II of the Registration
Statement. Except as provided in this Section 4, Section 6, Section 8 and
Section 9 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
purchase of the Optional Common Shares after the First Closing Date, the Second
Closing Date, shall be subject to the accuracy of the representations and
warranties on the part of the Company set forth in Section 1 hereof as of the
date hereof and as of the First Closing Date as though then made and, with
respect to the Optional Common Shares, as of the Second Closing Date as though
then made, to the timely performance by the Company of its covenants and other
obligations hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representatives
shall have received from Arthur Andersen LLP, independent public or certified
public accountants for the Company, a letter dated the date hereof addressed to
the Underwriters, in form and substance satisfactory to the Representatives,
containing statements and information of the type ordinarily included in
accountant's "comfort letters" to underwriters, delivered according to Statement
of Auditing Standards No. 72 (or any successor bulletin), with respect to the
audited and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representatives shall have received an additional [___] conformed copies of such
accountants' letter for each of the several Underwriters). The specified date
referred to therein for the carrying out of procedures shall be no more than
three business days prior to the date of this Agreement.
(b) Compliance with Registration Requirements; No Stop Order; No Objection
from NASD. For the period from and after effectiveness of this Agreement and
prior to the First
<PAGE>
Closing Date and, with respect to the purchase of the Optional Common Shares
after the First Closing Date, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities Act) in
the manner and within the time period required by Rule 424(b) under the
Securities Act; or the Company shall have filed a post-effective amendment to
the Registration Statement containing the information required by such Rule
430A, and such post-effective amendment shall have become effective; or, if the
Company elected to rely upon Rule 434 under the Securities Act and obtained the
Representatives' consent thereto, the Company shall have filed a Term Sheet with
the Commission in the manner and within the time period required by such Rule
424(b);
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no proceedings
for such purpose shall have been instituted or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change. For the period from and after the date of
this Agreement and prior to the First Closing Date and, with respect to the
purchase of the Optional Common Shares after the First Closing Date, the Second
Closing Date, in the judgment of the Representatives there shall not have
occurred any Material Adverse Change.
(d) Opinion of Counsel for the Company. On each of the First Closing Date
and the Second Closing Date the Representatives shall have received the
favorable opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the
Company, dated as of such Closing Date, the form of which is attached hereto as
Exhibit A (and the Representatives shall have received an additional [___]
conformed copies of such counsel's legal opinion for each of the several
Underwriters).
(e) Opinion of Counsel for the Underwriters. On each of the First Closing
Date and the Second Closing Date the Representatives shall have received the
favorable opinion of Kramer, Levin, Naftalis & Frankel, counsel for the
Underwriters, dated as of such Closing Date, with respect to the matters set
forth in paragraphs (i), (viii), (ix) and (xi) and the next-to-last paragraph of
Exhibit A hereto (and the Representatives shall have received an additional
[___] conformed copies of such counsel's legal opinion for each of the several
Underwriters).
(f) Officers' Certificate. On each of the First Closing Date and the Second
Closing Date the Representatives shall have received a written certificate
executed by the Chairman of the Board, Chief Executive Officer or President of
the Company and the Chief Financial Officer or Chief Accounting Officer of the
Company, dated as of such Closing Date, to the effect set forth in subsection
(b)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement and prior
to such Closing Date, there has not occurred any Material Adverse Change;
<PAGE>
(ii) the representations, warranties and covenants of the Company set
forth in Section 1 of this Agreement are true and correct with the same force
and effect as though expressly made on and as of such Closing Date; and
(iii) the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to such
Closing Date.
(g) Bring-down Comfort Letter. On each of the First Closing Date and the
Second Closing Date the Representatives shall have received from Arthur Andersen
LLP, independent public or certified public accountants for the Company, a
letter dated such date, in form and substance satisfactory to the
Representatives, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures
shall be no more than three business days prior to the First Closing Date or
Second Closing Date, as the case may be (and the Representatives shall have
received an additional [___] conformed copies of such accountants' letter for
each of the several Underwriters).
(h) Combination Closings.With respect to the Founding Company Combinations:
(i) Each condition to the obligations of the Company set forth in
Section 9 of each of the Combination Agreements shall have been satisfied,
without waiver or modification, except as may be approved by the
Representatives.
(ii) Each certificate delivered to the Company pursuant to each
Combination Agreement shall have also been delivered to the
Representatives.
(iii) Counsel for each of the Founding Companies shall have furnished
to the Representatives a letter, in form and substance satisfactory to the
Representatives, to the effect that they are entitled to rely on the
opinion of such counsel delivered to the Company pursuant to each
Combination Agreement as if such opinion were addressed to them.
(iv) On the First Closing Date the Representatives shall have received
opinions, in form and substance satisfactory to the Representatives, from
counsel for the Company and counsel for each of the Founding Companies, to
the effect that each Combination pursuant to the applicable, respective
Combination Agreement has become effective and that such Combination was
consummated in accordance with the provisions of such Combination
Agreement, which has been duly authorized by the Company, the respective
Founding Company and their respective stockholders, and comply in all
respects with applicable law.
(i) Combination Agreements. The Combination Agreements shall be in full
force and effect and none of the parties thereto shall be in default thereunder.
The Representatives shall have received assurances reasonably satisfactory to
them that all documents required to be filed in the respective states in order
to effectuate the consummation of each Combination shall have been approved for
filing by the appropriate authorities in each state and that all of such
Combination documents shall be filed substantially concurrently with the
consummation of the transactions
<PAGE>
pursuant to this Agreement.
(j) Lock-Up Agreement from Certain Stockholders of the Company. On the date
hereof, the Company shall have furnished to the Representatives an agreement in
the form of Exhibit B hereto from each director, officer and each beneficial
owner of Common Stock (as defined and determined according to Rule 13d-3 under
the Exchange Act, except that a one hundred eighty day period shall be used
rather than the sixty day period set forth therein), including, without
limitation, each person who will receive shares of Common Stock pursuant to the
terms of the Combination Agreements, and such agreement shall be in full force
and effect on each of the First Closing Date and the Second Closing Date.
(k) Termination of Profit-Sharing Agreements. On or before the First
Closing Date, the Representatives and counsel for the Underwriters shall have
received satisfactory evidence of the termination of all profit or revenue
sharing agreements or similar arrangements between any of the Founding Companies
and any other party.
(l) Additional Documents. On or before each of the First Closing Date and
the Second Closing Date, the Representatives and counsel for the Underwriters
shall have received such information, documents and opinions as they may
reasonably require for the purposes of enabling them to pass upon the issuance
and sale of the Common Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the purchase of the Optional Common Shares
after the First Closing Date, at any time prior to the Second Closing Date,
which termination shall be without liability on the part of any party to any
other party, except that Section 4, Section 6, Section 8 and Section 9 hereof
shall at all times be effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.
If this Agreement is terminated by the Representatives pursuant to
Section 5, Section 7, Section 10 or Section 11 hereof, or if the sale to the
Underwriters of the Common Shares on the First Closing Date is not consummated
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or to comply with any provision hereof, the Company
agrees to reimburse the Representatives and the other Underwriters (or such
Underwriters as have terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Representatives and the Underwriters in connection
with the proposed purchase and the offering and sale of the Common Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges.
<PAGE>
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company to any Underwriter,
except that the Company shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Section 4 and Section 6 hereof,
(b) of any Underwriter to the Company, or (c) of any party hereto to any other
party except that the provisions of Section 8 and Section 9 hereof shall at all
times be effective and shall survive such termination.
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Underwriters. The Company agrees to indemnify
and hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act or
the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment thereto,
including any information deemed to be a part thereof pursuant to Rule 430A or
Rule 434 under the Securities Act, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv) in whole
or in part upon any failure of the Company to perform it obligations hereunder
or under law; or (v) any act or failure to act or any alleged act or failure to
act by any Underwriter in connection with, or relating in any manner to, the
Common Stock or the offering contemplated hereby, and which is included as part
of or referred to in any loss, claim, damage, liability or action arising out of
or based upon any matter covered by clause (i) or clause (ii) above, provided
that the Company shall not be liable under this clause (v) to the extent that a
court of competent jurisdiction shall have determined by a final judgment that
such loss, claim, damage, liability or action resulted directly from any such
acts or failures to act undertaken or omitted to be taken by such Underwriter
through its bad faith or willful misconduct; and to reimburse each Underwriter
and each such controlling person for any and all expenses (including the fees
and disbursements of counsel chosen by SB) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling,
<PAGE>
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information relating to any Underwriter furnished to the
Company by the Representatives expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Common Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 8(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including settling, compromising or paying any such
loss, claim, damage, liability, expense or action, if such settlement,
compromise or payment is effected with the written consent of such Underwriter),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based upon any untrue or
alleged untrue statement of a material fact contained in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by the Representatives expressly for use therein; and
to reimburse the Company, or any such director, officer or controlling person
for any legal and other expense reasonably incurred by the Company, or any such
director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. The Company hereby acknowledges that the only
information that the Underwriters have furnished to the Company expressly for
use in the Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) are the statements set forth (A) as the
last [two] paragraphs on the inside front cover page of the Prospectus
concerning stabilization and passive market making by the Underwriters and (B)
in the table in the first paragraph and as the [second and [____] paragraphs]
under the caption "Underwriting" in the Prospectus; and the Underwriters confirm
that such statements are correct. The indemnity agreement
<PAGE>
set forth in this Section 8(b) shall be in addition to any liabilities that each
Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (SB in the case of Section 8(b) and Section 9 hereof),
representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request
<PAGE>
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement,
compromise or consent to the entry of judgment in any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity was or could have been sought hereunder by such
indemnified party, unless such settlement, compromise or consent includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 hereof is for any
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, from the offering of the Common Shares pursuant to this Agreement or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriters, on the other hand, in connection with the offering of the
Common Shares pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the Common
Shares pursuant to this Agreement (before deducting expenses) received by the
Company, and the total underwriting discount received by the Underwriters, in
each case as set forth on the front cover page of the Prospectus (or, if Rule
434 under the Securities Act is used, the corresponding location on the Term
Sheet) bear to the aggregate initial public offering price of the Common Shares
as set forth on such cover. The relative fault of the Company, on the one hand,
and the Underwriters, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact or any
such inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company, on the one hand, or the Underwriters, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c) hereof, any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) hereof with respect to notice of commencement of any action shall
apply if a claim for contribution is to be made under this Section 9; provided,
however, that no additional notice shall be required with respect to any action
for which notice has been given under Section 8(c) hereof for purposes of
indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if
<PAGE>
contribution pursuant to this Section 9 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names on
Schedule A hereto. For purposes of this Section 9, each officer and employee of
an Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS.
If, on the First Closing Date or the Second Closing Date, as the case
may be, any one or more of the several Underwriters shall fail or refuse to
purchase Common Shares that it or they have agreed to purchase hereunder on such
date, and the aggregate number of Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase does not
exceed 10% of the aggregate number of the Common Shares to be purchased on such
date, the other Underwriters shall be obligated, severally, in the proportions
that the number of Firm Common Shares set forth opposite their respective names
on Schedule A hereto bears to the aggregate number of Firm Common Shares set
forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as may be specified by the Representatives with the consent of
the non-defaulting Underwriters, to purchase the Common Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Common Shares and the aggregate number of Common Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Common Shares
to be purchased on such date, and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares are not
made within 48 hours after such default, this Agreement shall terminate without
liability of any party to any other party except that the provisions of Section
4, Section 8 and Section 9 hereof shall at all times be effective and shall
survive such termination. In any such case either the Representatives or the
Company shall have the right to postpone the First Closing Date or the Second
Closing Date, as the case may be, but in no event for longer than seven days in
order that the required changes, if any, to the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this
<PAGE>
Section 10 shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT.
Prior to the First Closing Date this Agreement maybe terminated by the
Representatives by notice given to the Company if at any time (i) trading or
quotation in any of the Company's securities shall have been suspended or
limited by the Commission or by the NYSE, or trading in securities generally on
either the Nasdaq Stock Market or the NYSE shall have been suspended or limited,
or minimum or maximum prices shall have been generally established on any of
such stock exchanges by the Commission or the NASD; (ii) a general banking
moratorium shall have been declared by any of federal, New York or Delaware
authorities; (iii) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any change
in the United States or international financial markets, or any substantial
change or development involving a prospective substantial change in United
States' or international political, financial or economic conditions, as in the
judgment of the Representatives is material and adverse and makes it
impracticable to market the Common Shares in the manner and on the terms
described in the Prospectus or to enforce contracts for the sale of securities;
(iv) in the judgment of the Representatives there shall have occurred any
Material Adverse Change; or (v) the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character as
in the judgment of the Representatives may interfere materially with the conduct
of the business and operations of the Company regardless of whether or not such
loss shall have been insured. Any termination pursuant to this Section 11 shall
be without liability on the part of (a) the Company to any Underwriter, except
that the Company shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Section 4 and Section 6 hereof,
(b) any Underwriter to the Company, or (c) of any party hereto to any other
party except that the provisions of Section 8 and Section 9 hereof shall at all
times be effective and shall survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Common Shares sold hereunder and any termination of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
Smith Barney Inc.
NationsBanc Montgomery Securities LLC
Furman Selz LLC
<PAGE>
c/o Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
Facsimile: (___) ___-____
Attention: ___________
with copies to:
Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
Facsimile: (212) 816-7912
Attention: Daniel E. Sell, Esq.
If to the Company:
Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, TN 38119
Facsimile: (___) ___-____
Attention: David C. Sullivan, Chairman and Chief Executive Officer
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, Suite 400
Washington, D.C. 20036
Facsimile: (202) 887-4288
Attention: Bruce S. Mendelsohn, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to each other party hereto.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9 hereof,
and in each case their respective successors and personal representatives, and
no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Common Shares as such from
any of the Underwriters merely by reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section,
<PAGE>
paragraph or provision of this Agreement is for any reason determined to be
invalid or unenforceable, there shall be deemed to be made such minor changes
(and only such minor changes) as are necessary to make it valid and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE ENTIRELY PERFORMED IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of New York or the
courts of the State of New York in each case located in the City and County of
New York (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9 hereof, and is fully informed regarding said provisions. Each of the
parties hereto further acknowledges that the provisions of Section 8 and Section
9 hereof fairly allocate the risks in light of the ability of the parties to
investigate the Company, its affairs and its business in order to assure that
adequate disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
VACATION PROPERTIES INTERNATIONAL, INC.
By:__________________________
Name:________________________
Title:_________________________
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives in New York, New York as of the date first above written.
SMITH BARNEY INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
FURMAN SELZ LLC
Acting as Representatives of the several Underwriters named on the attached
Schedule A.
By SMITH BARNEY INC.
By:__________________________
Name:________________________
Title:_________________________
<PAGE>
SCHEDULE A
NUMBER OF FIRM
COMMON SHARES TO BE
UNDERWRITER PURCHASED
SALOMON SMITH BARNEY INC...................................
NATIONSBANC MONTGOMERY SECURITIES LLC......................
FURMAN SELZ LLC ...........................................
TOTAL_________________
_________________
<PAGE>
EXHIBIT A
Opinion of Counsel for the Company
(To be delivered pursuant to Section 5(e) of the Underwriting Agreement.)
References to the Prospectus in this Exhibit A include any supplements
thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Underwriting
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.
(iv) Each significant subsidiary (as defined in Rule 405 under the
Securities Act) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and, to
the best knowledge of such counsel, is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.
(v) All of the issued and outstanding capital stock of each such
significant subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or, to the best knowledge of such counsel, any pending or threatened
claim.
(vi) The authorized, issued and outstanding capital stock of the Company
(including the Common Stock) conforms to the descriptions thereof set forth in
the Prospectus. All of the outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable and, to the best
of such counsel's knowledge, have been issued in compliance with the
registration and qualification requirements of federal and state securities
laws. The form of certificate used to evidence the Common Stock is in due and
proper form and complies with all applicable requirements of the charter and
by-laws of the Company and the General Corporation Law of the State of Delaware.
The description of the Company's stock option, stock bonus and other stock plans
or arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with
<PAGE>
respect to such plans, arrangements, options and rights.
(vii) No stockholder of the Company or any other person has any preemptive
right, right of first refusal or other similar right to subscribe for or
purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the General Corporation Law of the State of Delaware
or (ii) to the best knowledge of such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
in accordance with its terms, except as rights to indemnification thereunder may
be limited by applicable law and except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles.
(ix) The Common Shares to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale pursuant to the Underwriting
Agreement and, when issued and delivered by the Company pursuant to the
Underwriting Agreement against payment of the consideration set forth therein,
will be validly issued, fully paid and nonassessable.
(x) Each of the Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the Commission under the
Securities Act. To the best knowledge of such counsel, no stop order suspending
the effectiveness of either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the Securities Act and no
proceedings for such purpose have been instituted or are pending or are
contemplated or threatened by the Commission. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time period required
by such Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, as of their respective effective or issue dates
(other than the financial statements and supporting schedules included therein
or in exhibits to or excluded from the Registration Statement, as to which no
opinion need be rendered) comply as to form in all material respects with the
applicable requirements of the Securities Act.
(xii) The Common Shares have been approved for listing on the New York
Stock Exchange.
(xii) The statements (i) in the Prospectus under the captions "Risk
Factors--[___]," "Description of Capital Stock," "Management's Discussion and
Analysis and Results of Operations--Liquidity," "Business--Litigation,"
"Business--Intellectual Property," "Certain Relationships and Related
Transactions," "Shares Eligible for Future Sale," "Certain United States Income
Tax Considerations" and "Underwriting" and (ii) in Item 14 and Item 15 of the
Registration Statement, insofar as such statements constitute matters of law,
summaries of legal matters, the Company's charter or by-law provisions,
documents or legal proceedings, or legal conclusions, has been reviewed by such
counsel and fairly present and summarize, in all material respects, the matters
referred to therein.
<PAGE>
(xiii) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement, other than those
disclosed therein.
(xiv) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto;
and the descriptions thereof and references thereto are correct in all material
respects.
(xv) No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental authority or agency, is required
for the Company's execution, delivery and performance of the Underwriting
Agreement and consummation of the transactions contemplated thereby and by the
Prospectus, except as required under the Securities Act, applicable state
securities or blue sky laws and from the NASD.
(xvi) The execution and delivery of the Underwriting Agreement by the
Company and the performance by the Company of its obligations thereunder (other
than performance by the Company of its obligations under the indemnification
section of the Underwriting Agreement, as to which no opinion need be rendered)
(a) have been duly authorized by all necessary corporate action on the part of
the Company; (b) will not result in any violation of the provisions of the
charter or by-laws of the Company or any subsidiary; (c) will not constitute a
breach of, or Default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to any material Existing Instrument; and (d) to the
best knowledge of such counsel, will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company or any subsidiary.
(xvii) The Company is not, and after receipt of payment for the Common
Shares will not be, an "investment company" within the meaning of Investment
Company Act.
(xviii) Except for rights disclosed in the Prospectus under the caption
"Shares Eligible for Future Sale" which have been duly waived, to the best
knowledge of such counsel, there are no persons with registration or other
similar rights to have any equity or debt securities registered for sale under
the Registration Statement or included in the offering contemplated by the
Underwriting Agreement, except for such rights as have been duly waived.
(xix) To the best knowledge of such counsel, neither the Company nor any
subsidiary is in violation of its charter or by-laws or any law, administrative
regulation or administrative or court decree applicable to the Company or any
subsidiary or is in Default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material Existing Instrument,
except in each such case for such violations or Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments
<PAGE>
thereto, and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus (other than as specified above), and any supplements
or amendments thereto, on the basis of the foregoing, nothing has come to their
attention which would lead them to believe that either the Registration
Statement or any amendments thereto, at the time the Registration Statement or
such amendments became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Prospectus,
as of its date or at the First Closing Date or the Second Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief as to the financial
statements or schedules or other financial or statistical data derived
therefrom, included in the Registration Statement or the Prospectus or any
amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than [the General
Corporation Law of the State of Delaware or the federal law of the United
States], to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or the Second Closing Date,
as the case may be, shall be satisfactory in form and substance to the
Underwriters, shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them and shall be furnished to the
Representatives) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters; provided,
however, that such counsel shall further state that they believe that they and
the Underwriters are justified in relying upon such opinion of other counsel,
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials.
EXHIBIT 2.1
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March [___], 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
HOTEL ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
HOTEL CORPORATION OF THE PACIFIC, INC.
and
the STOCKHOLDER named herein
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Articles of Incorporation, Bylaws and Board of Directors of
Surviving Corporation...............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO..............................................4
1.5 Effect of Merger.....................................................4
2. CONVERSION OF STOCK......................................................5
2.1 Manner of Conversion.................................................5
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................7
4. CLOSING..................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER................9
(A) Representations and Warranties of COMPANY and STOCKHOLDER............9
5.1 Due Organization.................................................10
5.2 Authority........................................................11
5.3 Capital Stock of the COMPANY.....................................11
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................11
5.6 Subsidiaries.....................................................12
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANY..........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................14
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers...........................................17
5.16 Material Contracts and Commitments..............................17
5.17 Real Property...................................................18
5.18 Insurance.......................................................19
5.19 Compensation; Employment Agreements; Organized Labor Matters....19
5.20 Employee Plans..................................................20
5.21 Compliance with ERISA...........................................21
5.22 Conformity with Law; Litigation.................................23
5.23 Taxes...........................................................23
5.24 No Violations...................................................25
5.25 Government Contracts............................................26
5.26 Absence of Changes..............................................26
5.27 Accounts; Powers of Attorney....................................28
5.28 Validity of Obligations.........................................28
5.29 Relations with Governments......................................29
5.30 Disclosure......................................................29
5.31 Prohibited Activities...........................................30
(B) Representations and Warranties of STOCKHOLDER.......................30
5.32 Authority; Ownership............................................30
5.33 Preemptive Rights...............................................30
i
<PAGE>
5.34 No Intention to Dispose of VPI Stock...............................30
6. REPRESENTATIONS OF VPI AND NEWCO........................................31
6.1 Due Organization....................................................31
6.2 Authorization.......................................................32
6.3 Capital Stock of VPI and NEWCO......................................32
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................33
6.6 Financial Statements................................................33
6.7 Liabilities and Obligations.........................................33
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................34
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................35
6.12 No Side Agreements.................................................35
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................36
6.15 Completion of Due Diligence........................................38
6.16 Disclosure........................................................38
6.17 Tax Treatment......................................................38
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................40
7.3 Prohibited Activities...............................................41
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................43
7.6 Agreements..........................................................43
7.7 Notification of Certain Matters.....................................44
7.8 Amendment of Schedules..............................................44
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................47
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY..........49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................49
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................50
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
9.5 No Material Adverse Effect..........................................53
9.6 STOCKHOLDER's Release...............................................53
ii
<PAGE>
9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
9.18 Termination of Defined Benefit Plans...............................55
9.19 License Grant......................................................55
10. COVENANTS OF VPI AND THE STOCKHOLDER AFTER CLOSING.....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
10.8 Grant of License to VPI............................................58
11. INDEMNIFICATION........................................................59
11.1 General Indemnification by the STOCKHOLDER.........................59
11.2 Indemnification by VPI.............................................60
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................63
12. TERMINATION OF AGREEMENT...............................................64
12.1 Termination........................................................64
12.2 Liabilities in Event of Termination................................65
13. NONCOMPETITION.........................................................67
13.1 Prohibited Activities..............................................67
13.2 Damages............................................................69
13.3 Reasonable Restraint...............................................69
13.4 Severability; Reformation..........................................70
13.5 Independent Covenant...............................................70
13.6 Materiality........................................................70
13.7 Limitation.........................................................70
13.8 COMPANY Noninterference............................................70
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................70
14.1 STOCKHOLDER........................................................70
14.2 VPI AND NEWCO......................................................71
14.3 Damages............................................................71
14.4 Survival...........................................................72
14.5 Return of Data Submitted...........................................72
15. TRANSFER RESTRICTIONS..................................................72
15.1 Transfer Restrictions..............................................72
15.2 Certain Transfers..................................................73
16. SECURITIES LAW REPRESENTATIONS.........................................73
16.1 Compliance with Law................................................74
16.2 Economic Risk; Sophistication......................................74
17. REGISTRATION RIGHTS....................................................74
17.1 Piggyback Registration Rights......................................74
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17.2 Demand Registration Rights.........................................75
17.3 Registration Procedures............................................76
17.4 Underwriting Agreement.............................................77
17.5 Availability of Rule 144...........................................77
17.6 Registration Rights Indemnification................................77
18. GENERAL................................................................82
18.1 Press Releases.....................................................82
18.2 Cooperation........................................................83
18.3 Successors and Assigns; Third Party Beneficiaries..................83
18.4 Entire Agreement...................................................83
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................84
18.7 Expenses...........................................................84
18.8 Notices............................................................85
18.9 Governing Law......................................................86
18.10 Exercise of Rights and Remedies...................................86
18.11 Time..............................................................86
18.12 Reformation and Severability......................................86
18.13 Remedies Cumulative...............................................87
18.14 Captions..........................................................87
18.15 Amendments and Waivers............................................87
18.16 Incorporation by Reference........................................87
18.17 Defined Terms.....................................................87
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI-A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI-B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDER
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), HCP ACQUISITION CORP., a Delaware corporation ("NEWCO"),
HOTEL CORPORATION OF THE PACIFIC, INC., a Hawaii corporation (the "COMPANY"),
and Andre S. Tatibouet (the "STOCKHOLDER").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Houston and O'Leary
Company, a Colorado corporation, Jupiter Property Management at Park City,
Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii
corporation, The Maury People, Inc., a
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Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation,
Realty Consultants, Inc., a Florida corporation, Resort Property
Management, Inc., a Utah corporation, Telluride Resort Accommodations,
Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia
corporation, THE Management Company, a Georgia corporation, and Whistler
Chalets Limited, a British Columbia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDER and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDER and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDER and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State or the
Director of the Department of Commerce and Consumer Affairs, as applicable, of
the State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 ARTICLES OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING
CORPORATION. At the Effective Time of the Merger:
(i) the Articles of Incorporation of the COMPANY then in effect shall
be the Articles of Incorporation of the Surviving Corporation until changed
as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of the laws of the state in which the Surviving
Corporation is located and of the Articles of Incorporation and Bylaws of
the Surviving Corporation; and
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(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger the person designated by VPI to be such
officer shall be appointed as a vice president of the Surviving Corporation
and the person designated by VPI to be such officer shall be appointed as
an Assistant Secretary of the Surviving Corporation, each of such officers
to serve, subject to the provisions of the Articles of Incorporation and
Bylaws of the Surviving Corporation, until his or her successor is duly
elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the COMPANY shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
NEWCO shall be merged with and into
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the COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully
vested therewith. At the Effective Time of the Merger, the separate existence of
NEWCO shall cease and, in accordance with the terms of this Agreement, the
Surviving Corporation shall possess all of the rights, privileges, immunities
and franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all Taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectively the property of the
Surviving Corporation as they were of NEWCO and the COMPANY; and the title to
any real estate, or interest therein, whether by deed or otherwise, under the
laws of the states of incorporation vested in NEWCO and the COMPANY, shall not
revert or be in any way impaired by reason of the Merger. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all of the liabilities and obligations of NEWCO and the COMPANY and
any claim existing, or action or proceeding pending, by or against NEWCO or the
COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the
Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and
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outstanding immediately prior to the Effective Time of the Merger, respectively,
into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation,
respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and/or (2) the right to
receive the amount of cash, subject to adjustment pursuant to Section 3.3
hereof, set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDER pursuant to this Agreement shall,
except for restrictions on resale or transfer described in Sections 15 and 16
hereof, have the same rights as all of the other shares of outstanding VPI Stock
by reason of the provisions of the Certificate of Incorporation of VPI or as
otherwise provided by the Delaware GCL. All voting rights of such VPI Stock
received by the STOCKHOLDER shall be fully exercisable by the STOCKHOLDER and
the STOCKHOLDER shall not be deprived nor restricted in exercising those rights.
At the Effective Time
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of the Merger, VPI shall have no class of capital stock (including preferred
stock) issued and outstanding other than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDER, who is the holder of certificates
representing 75% of the outstanding shares of COMPANY Stock, shall, upon
surrender of such certificates and the certificates held by William W. Saunders
("Saunders") representing 25% of the outstanding shares of COMPANY Stock,
receive the number of shares of VPI Stock and the amount of cash (subject to
adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to
be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDER shall deliver and shall
cause Saunders to deliver to VPI at the Pre-Closing (subject to Section 4) the
certificates representing COMPANY Stock, duly endorsed in blank by the holders
thereof, or accompanied by blank stock powers, and with all necessary transfer
tax and other revenue stamps, acquired at the STOCKHOLDER's expense, affixed and
canceled. The STOCKHOLDER agrees promptly to cure and to cause to be cured any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDER pursuant to this Section 3 shall
be reduced by the amount required to cure any such failure.
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Indebtedness of the COMPANY in excess of the amount set forth on Annex III that
was incurred in connection with the acquisition of the COMPANY by the
STOCKHOLDER, or the acquisition of nonoperating assets by the COMPANY or the
STOCKHOLDER, shall result in a corresponding dollar-for-dollar reduction in the
cash portion of the consideration paid to the STOCKHOLDER pursuant to this
Section 3. If necessary, a post-Closing adjustment shall be made to effect the
intent of this Section 3.3.
Certain indebtedness of affiliates of the STOCKHOLDER to the COMPANY and of
the STOCKHOLDER to the COMPANY shall be reduced to unsecured promissory notes
bearing interest at a rate of ____% per annum payable to the COMPANY or its
order with interest-only payments over a ten-year term. STOCKHOLDER shall be the
primary obligor on or shall personally guarantee all such indebtedness. Four
million dollars ($4,000,000) in principal under these unsecured notes payable to
the COMPANY shall be treated as good assets of the COMPANY for purposes of
determination of whether the COMPANY has a positive net worth under clause (i)
above and the cash portion of the consideration to be paid to STOCKHOLDER shall
not be reduced on account of these receivables payable by the STOCKHOLDER.
STOCKHOLDER may, prior to or upon the Closing Date, assume selected
liabilities of the COMPANY evidenced by promissory notes or contracts. Any such
assumption shall be treated as being in repayment of the indebtedness of the
STOCKHOLDER to the COMPANY. STOCKHOLDER shall indemnify the COMPANY with respect
to all such liabilities of the COMPANY which may be so assumed by STOCKHOLDER.
Notwithstanding anything set forth above, VPI acknowledges (i) that the
COMPANY has established a reserve in the amount of $500,000 on its balance sheet
relating to contingent liabilities and (ii) that this reserve shall be deemed to
have not been established (i.e., shall be ignored and not counted) when
conducting the above-referenced balance sheet tests, including positive net
working capital, positive net worth and fully funded customer deposits.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares,
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the delivery of a certified check or checks or wire transfer(s) in an amount
equal to the cash portion of the consideration which the STOCKHOLDER shall be
entitled to receive and which shall be paid to Saunders pursuant to the Merger
referred to in Section 3 hereof shall occur and (z) the closing with respect to
the IPO shall be completed. The taking of the actions described in the preceding
clauses (x), (y) and (z) shall constitute the closing of the transactions
hereunder (the "Closing"), and the date on which the actions described in the
preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing
Date." Except as provided in Sections 8 and 9 hereof with respect to actions to
be taken on the Closing Date, during the period from the Pre-Closing Date to the
Closing Date this Agreement may only be terminated by a party if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Closing
Date has not occurred within 15 business days of the Pre-Closing Date. Time is
of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER.
Each of the COMPANY and the STOCKHOLDER jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDER agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually
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incurs liability under the 1933 Act, the 1934 Act or any other federal or state
securities laws as a result of a breach of a representation or warranty by the
COMPANY or the STOCKHOLDER, the representations and warranties set forth herein
shall survive until the expiration of any applicable limitations period, which
shall be deemed to be the Expiration Date for such purposes. For purposes of
this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all
of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDER, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Articles of Incorporation and
Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or any stockholder of the
COMPANY which have not been made available to VPI, and all of such minutes are
correct and complete in all material respects. Except as set forth on Schedule
5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten
business days prior to the date hereof, affirm and ratify all prior acts of the
COMPANY, and of its officers and directors on behalf of the COMPANY.
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5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDER and
Saunders in the amounts set forth in Annex IV and further, except as set forth
on Schedule 5.3, are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of the capital stock of the
COMPANY have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the STOCKHOLDER and
Saunders and further, such shares were offered, issued, sold and delivered by
the COMPANY in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present stockholder of the
COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
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5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's audited (i) Balance Sheets, if any, as of December 31,
1997 and 1996; (ii) Statements of Operations, if any, for each of the years in
the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter
referred to as the "Balance Sheet Date"); (iii) Statements of Changes in
Stockholders' Equity, if any, for each of the years in the two-year period ended
on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each
of the years in the two-year period ended on the Balance
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Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance
Sheets as of December 31, 1997 and 1996 present fairly the financial position of
such COMPANY as of the dates indicated thereon, and such Statements of
Operations, Statements of Changes in Stockholders' Equity and Statements of Cash
Flows present fairly the results of operations for the periods indicated
thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
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(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
stockholders of the COMPANY. The COMPANY shall also provide to VPI (x) an
accurate list of all receivables obtained subsequent to the Balance Sheet Date
up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except
to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI
in a writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
the COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. Except as set forth on Schedule 5.12, the
COMPANY holds all licenses, franchises, permits and other governmental
authorizations that are necessary for the operation of the business of the
COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list
and summary description (which is set forth on Schedule 5.12) of all such
licenses, franchises, permits and other governmental authorizations, including
permits, titles, licenses, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the COMPANY
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
5.13). The licenses, franchises, permits and other
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governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any
of the foregoing, except for inadvertent, immaterial noncompliance with such
requirements, standards, criteria and conditions (provided that any such
noncompliance shall be deemed a breach of this Section 5.12 for purposes of
Section 11 hereof). Except as specifically provided on Schedule 5.12, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the COMPANY by, any such licenses, franchises, permits or government
authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY
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except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site
or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) the COMPANY has no contingent liability in connection with any release of
any Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
in "depreciable plant, property and equipment" on the balance sheet of the
COMPANY as of the Balance Sheet Date or that will be included on any balance
sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other
personal property (except cash and cash equivalents) owned by the COMPANY with a
value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date and (z) all leases and agreements in respect of
personal property used in the operation of the COMPANY's business as now
conducted, including, true, complete and correct copies of all such leases and
agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed
thereon that are currently owned, or that were formerly owned, by the
stockholders of the COMPANY, relatives of the stockholders of the COMPANY, or
Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all
personal property used by the COMPANY in its business is either owned by the
COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14,
(ii) all of the personal property listed on Schedule 5.14 is in good working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on Schedule 5.14 are in full force and effect and, assuming
due execution and delivery thereof by the parties thereto other than the
COMPANY, the stockholders of the COMPANY and their respective Affiliates,
constitute valid and binding agreements
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of the COMPANY, the STOCKHOLDER and, to the knowledge of the COMPANY or the
STOCKHOLDER, the other parties (and their successors) thereto in accordance with
their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
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5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located (or with the Bureau of
Conveyances of the State of Hawaii or the Assistant Registrar of the Land
Court of the State of Hawaii, as applicable) which do not adversely affect
the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by the stockholders of the
COMPANY or business or personal affiliates of the COMPANY or the stockholders of
the COMPANY. Except as set forth on Schedule 5.17, all of such leases included
on Schedule 5.17 are in full force and effect and, assuming due execution and
delivery thereof by the parties thereto other than the COMPANY, the stockholders
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of the COMPANY and their respective affiliates, constitute valid and binding
agreements of the COMPANY, the STOCKHOLDER and, to the knowledge of the COMPANY
or the STOCKHOLDER, the other parties (and their successors) thereto in
accordance with their respective terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY has
ever been canceled by the insurer and the COMPANY has never been unable to
obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to) and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no
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employees of the COMPANY are represented by any labor union or covered by any
collective bargaining agreement, (iii) to the best of the COMPANY's knowledge,
no campaign to establish such representation is in progress and (iv) there is no
pending or, to the best of the COMPANY's knowledge, threatened labor dispute
involving the COMPANY and any group of its employees nor has the COMPANY
experienced any labor interruptions over the past three years. The COMPANY
believes its relationship with employees to be good.
The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20, the
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) nor has the
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COMPANY any obligation to contribute to or accrue or pay any benefits under any
deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation
arrangement). The COMPANY has not sponsored, maintained or contributed to any
employee pension benefit plan other than the plans, agreements, arrangements and
trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
COMPANY's employees.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor the COMPANY, nor the
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STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the COMPANY has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDER further
represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
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5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the COMPANY and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations, and is not in
violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
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Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor any
stockholder of the COMPANY have entered into an agreement or waiver or have been
requested to enter into an agreement or waiver extending any statute of
limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth in Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth in Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on
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behalf of any other person or entity any Taxes arising from or which may be
asserted on the basis of any Tax treatment adopted with respect to all or any
aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16
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or 5.17, or any other material agreement to which it is a party or by which its
properties are bound (the "Material Documents"); and, except as set forth on
Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any violation or breach or constitute a default under, any of the
terms or provisions of the Material Documents or the Charter Documents. Except
as set forth on Schedule 5.24, none of the Material Documents requires notice
to, or the consent or approval of, any governmental agency or other third party
with respect to any of the transactions contemplated hereby in order to remain
in full force and effect, and consummation of the transactions contemplated
hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit. Except as set forth on Schedule
5.24, none of the Material Documents prohibits the use or publication by the
COMPANY, VPI or NEWCO of the name of any other party to such Material Document,
and none of the Material Documents prohibits or restricts the COMPANY from
freely providing services to any other customer or potential customer of the
COMPANY, VPI, NEWCO or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
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(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the stockholders of the COMPANY
and their respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the stockholders of the COMPANY or any
affiliate thereof, except for inadvertent, immaterial cancellations of or
agreements to cancel any such indebtedness or obligation (provided that any
such cancellation or agreement to cancel shall be deemed a breach of this
Section 5.26 for purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
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(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an
accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting
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the enforcement of creditors' rights generally or (ii) the discretionary power
of a court exercising equity jurisdiction. The individual signing this Agreement
on behalf of the COMPANY has the legal power, authority and capacity to bind the
COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDER acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDER or any other person
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affiliated or associated with the COMPANY for any failure of the Registration
Statement to become effective, the IPO to occur at a particular price or within
a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
The STOCKHOLDER represents and warrants that the representations and
warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. The STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. The STOCKHOLDER and Saunders own
beneficially and of record all of the shares of the COMPANY Stock identified on
Annex IV as being owned by the STOCKHOLDER and Saunders, and, except as set
forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.33 PREEMPTIVE RIGHTS. The STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
No other stockholder of the COMPANY has any preemptive or other right to acquire
shares of COMPANY Stock or VPI Stock.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDER does not have
any present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDER or the COMPANY actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI
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Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the Merger, and
all required approvals of the shareholders and board of directors of VPI and
NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
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6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this
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Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated
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hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDER pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDER pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
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6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to
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be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by VPI and NEWCO for Taxes have been so
deposited, withheld or collected, and such deposit, withholding or collection
has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
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(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDER of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDER set
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forth in the letter of representations (referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof) are true and correct in all
material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI,
NEWCO, the STOCKHOLDER and the COMPANY shall treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
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(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
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(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or, if not in the
normal course of business, involves an amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDER, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDER and the COMPANY shall terminate or cause to
be terminated, on or prior to the Closing Date, (i) any stockholders agreements,
voting agreements, voting trusts, options, warrants and employment agreements
between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any
existing agreement between the COMPANY and any stockholder of the COMPANY not
reflecting fair market terms, except such existing agreements as are set forth
on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and
copies thereof are attached hereto.
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7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDER and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDER contained herein to
be untrue or inaccurate in any material respect at or prior to the Pre-Closing
and (ii) any material failure of the STOCKHOLDER or the COMPANY to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of VPI or NEWCO contained herein to be untrue or inaccurate in any material
respect at or prior to the Pre-Closing and (ii) any material failure of VPI or
NEWCO to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. The delivery of any notice pursuant
to this Section 7.7 that is not accompanied by a proposed amendment or
supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.8, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or
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occurrence that would have a Material Adverse Effect may be made unless VPI and
a majority of the Founding Companies other than the COMPANY consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the Other
Founding Companies seeks to amend or supplement a schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, VPI shall give the COMPANY notice promptly after it
has knowledge thereof. If VPI and a majority of the Founding Companies consent
to such amendment or supplement, but the COMPANY does not give its consent, the
COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the
event that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours
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following receipt of notice of such amendment or supplement (or sooner if
required by the circumstances under which such consent is requested and so
requested in the notice). The provisions of this Section 7.8 shall be contained
in the Other Agreements executed in connection with the VPI Plan of
Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDER shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the stockholders of the
COMPANY required for inclusion in, and will cooperate with VPI and the
Underwriters in the preparation of, the Registration Statement and the
prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement). The
COMPANY and the STOCKHOLDER agree promptly to advise VPI if, at any time during
the period in which a prospectus relating to the offering is required to be
delivered under the 1933 Act, any information contained in the prospectus
concerning the COMPANY or the stockholders of the COMPANY becomes incorrect or
incomplete in any material respect, and to provide the information needed to
correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDER an
opportunity and a reasonable amount of time to review and comment on a
substantially final draft of the Registration Statement prior to filing, and
with respect to all amendments thereto, VPI will give the COMPANY and
STOCKHOLDER an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the stockholders of
the COMPANY, as of the effective date of the Registration Statement the COMPANY
represents and warrants as to such information with respect to itself, and the
STOCKHOLDER represents and warrants, as to such information with respect to the
COMPANY and himself or Saunders, that the Registration Statement will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading and that the
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STOCKHOLDER and the COMPANY have had the opportunity to review and approve such
information. If, prior to the 25th day after the date of the final prospectus of
VPI utilized in connection with the IPO, the COMPANY or the STOCKHOLDER become
aware of any fact or circumstance which would change (or, if after the Closing
Date, would have changed) a representation or warranty of the COMPANY or the
STOCKHOLDER in this Agreement or would affect any document delivered pursuant
hereto in any material respect, the COMPANY and the STOCKHOLDER shall
immediately give notice of such fact or circumstance to VPI. However, subject to
the provisions of Section 7.8, such notification shall not relieve either the
COMPANY or the STOCKHOLDER of their respective obligations under this Agreement,
and, subject to the provisions of Section 7.8, at the sole option of VPI, the
truth and accuracy of any and all warranties and representations of the COMPANY,
or on behalf of the COMPANY and of STOCKHOLDER at the date of this Agreement and
on the Pre-Closing Date and on the Closing Date, contained in this Agreement
(including the Schedules and Annexes hereto) shall be a precondition to the
consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 30, 1998, unless the Closing Date shall have occurred on or before April
30, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the
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COMPANY for the periods indicated thereon and shall be for such dates and time
periods as required by Regulation S-X under the 1933 Act and the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for
such changes in authorized capital stock as are made to respond to comments made
by the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY
The obligations of the STOCKHOLDER and the COMPANY with respect to actions
to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on
or prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDER and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDER.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDER.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash
and/or the number of shares of VPI Stock to be received by the STOCKHOLDER and
Saunders is not less than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDER and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDER shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDER (including
but not limited to the delivery to VPI of stock certificates representing all of
the issued and outstanding Stock of the COMPANY) and the COMPANY on or before
the Pre-Closing Date or the Closing Date, as the case may be, shall have been
duly performed or complied with in all material respects; and the STOCKHOLDER
shall have delivered to VPI certificates dated the Pre-Closing Date and the
Closing Date, respectively, and signed by them to such effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
COMPANY's Charter Documents and resolutions of the board of directors and the
stockholders of the COMPANY approving the COMPANY's entering into this Agreement
and the consummation of the transactions contemplated hereby. Such certificate
also shall be addressed to the Underwriters and a copy thereof shall be
delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDER'S RELEASE. The STOCKHOLDER shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDER against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDER, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDER, (y) continuing obligations to the STOCKHOLDER
relating to his employment by the COMPANY and (z) obligations arising under this
Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the stockholders
of the COMPANY not reflecting fair market terms shall have been canceled
effective prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDER, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. The STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. Except as set forth on Schedule 9.15, VPI shall have been
named as an additional insured on all insurance policies of the COMPANY, and
certificates of insurance to that effect shall have been delivered to VPI. VPI
shall reimburse the COMPANY for the incremental cost of having VPI so named as
an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDER shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDER covenants to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDER and/or immediate family members, who agree
to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. The STOCKHOLDER shall have delivered the
letter of representations referenced in the tax opinion letter to be delivered
pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
9.19 LICENSE GRANT. The COMPANY shall have been granted, for a period of
twenty (20) years following the Closing Date, a royalty-free exclusive license
(pursuant to the License Agreement attached to Schedule 9.19) to use the name
"Aston" in Hawaii in connection with the vacation property management business
operated in Hawaii.
10. COVENANTS OF VPI AND THE STOCKHOLDER AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDER released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that he
personally guaranteed and from any and all pledges of assets that he pledged to
secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDER from the payment of any
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guaranties on any indebtedness or contractual obligations that the STOCKHOLDER
had incurred prior to the Pre-Closing Date provided that such indebtedness or
obligations are related to the business of the COMPANY as being conducted at the
Pre-Closing Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDER.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. The STOCKHOLDER shall pay or cause to be
paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
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(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide explanation
of any documents or information so provided. Subject to the preceding
sentence, each party required to file Tax Returns pursuant to this
Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and the STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDER hereby designates Andre S.
Tatibouet to serve as a director of VPI effective as of the Closing Date. Such
designated person also shall be a member of the Executive Committee of the Board
of Directors effective as of the Closing Date, to serve subject to and in
accordance with the Certificate of Incorporation and Bylaws of VPI.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time
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as VPI is able to replace such plan with a plan that is applicable to VPI and
all of its then existing subsidiaries. VPI shall have no obligation to provide
replacement plans that have the same terms and provisions as the existing plans,
except as may be required by ERISA or other applicable law; provided, however,
that any new health insurance plan shall provide for coverage for preexisting
conditions for employees of the COMPANY who were covered by the COMPANY's health
insurance plan immediately prior to the Closing Date or as otherwise required by
law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDER for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDER pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
10.8 GRANT OF LICENSE TO VPI. Upon the payment of $400,000 to AST Brands,
LLC (which is wholly-owned by the STOCKHOLDER) in cash or shares of VPI Stock
(valued at the IPO price per share), or any combination thereof at the election
of the STOCKHOLDER, VPI shall have the exclusive right to negotiate, for a
period of eighteen (18) months following the Closing, an exclusive license to
use the name "Aston" in the mainland United States in connection with the
vacation management business. The parties hereto agree that they shall negotiate
in good faith and that such exclusive license shall be on commercially
reasonable terms. If VPI does not exercise this right by payment of $400,000 in
cash and/or stock to AST Brands, LLC at or prior to the Closing, or if VPI makes
such payment but VPI and AST Brands, LLC are unable in good faith to enter into
a license agreement within such eighteen-month period, AST Brands, LLC shall
have the right to license the name "Aston" in connection with the vacation
property management business to any third party.
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Nothing herein shall prohibit AST Brands, LLC from licensing the name "Aston"
for use to any third party outside the United States.
11. INDEMNIFICATION
The STOCKHOLDER, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The STOCKHOLDER covenants
and agrees that he will indemnify, defend, protect and hold harmless VPI, NEWCO
and the COMPANY (as the Surviving Corporation) at all times, from and after the
date of this Agreement until the Expiration Date, from and against all losses,
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the
COMPANY (as the Surviving Corporation) as a result of or arising from (i) any
breach of the representations and warranties of the STOCKHOLDER or the COMPANY
set forth herein or on the Schedules or certificates delivered in connection
herewith, (ii) any breach of any agreement on the part of the STOCKHOLDER or the
COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934
Act or other federal or state law or regulation, at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating solely to the COMPANY or the stockholders of the
COMPANY, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDER,
contained in the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
relating solely to the COMPANY or the stockholders of the COMPANY required to be
stated therein or necessary to make the statements therein not misleading, or
(iv) the matters described on Schedule 11.1(iv) (relating to specifically
identified matters such as ongoing claims and/or litigation), which Schedule
shall be prepared by VPI, provided, however, that in the case of any indemnity
arising pursuant to clause (iii)
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such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the STOCKHOLDER provided, in writing, corrected
information to VPI counsel and to VPI for inclusion in the final prospectus, and
such information was not so included or properly delivered.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDER at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDER as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDER
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that VPI or NEWCO has claims against the STOCKHOLDER under Section 11.1
hereof by reason of such liabilities); (iv) any liability under the 1933 Act,
the 1934 Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to VPI, NEWCO or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified
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Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person"), or the commencement of any action or
proceeding by a Third Person, the Indemnified Party shall, as a condition
precedent to a claim with respect thereto being made against any party obligated
to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter
the "Indemnifying Party"), give the Indemnifying Party written notice of such
claim or the commencement of such action or proceeding. Such notice shall state
the nature and the basis of such claim and a reasonable estimate of the amount
thereof. The Indemnifying Party shall have the right to defend and settle
(subject to the consent of the Indemnified Party, as hereinafter provided), at
its own expense and by its own counsel, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by the Indemnifying Party, provided that if
counsel to the Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and the Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. Further,
absent a conflict, the Indemnified Party may select counsel and have such
counsel participate in such matter at the sole cost of the Indemnified Party.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such
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asserted liability, except (i) as set forth in the preceding sentence and (ii)
to the extent such participation is requested in writing by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim in which no admission of wrongdoing is
required of the Indemnified Party and the Indemnified Party refuses to consent
to such settlement, then the Indemnifying Party's liability under this Section
with respect to such Third Person claim shall be limited to the amount so
offered in settlement by said Third Person. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed. All settlements hereunder shall effect a complete
release of the Indemnified Party, unless the Indemnified Party otherwise agrees
in writing. The parties hereto will make appropriate adjustments for insurance
proceeds in determining the amount of any indemnification obligation under this
Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
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11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDER until
such time as, and solely to the extent that, the aggregate of all claims which
such persons may have against the STOCKHOLDER shall exceed 2.0% of the sum of
(i) the cash paid to the STOCKHOLDER and Saunders and (ii) the value of the VPI
Stock delivered to the STOCKHOLDER (the "Indemnification Threshold"), provided,
however, that VPI, NEWCO, the Surviving Corporation and the other persons or
entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.l(iv) at any time, regardless of
whether the aggregate of all claims which such persons may have against the
STOCKHOLDER exceeds the Indemnification Threshold, it being understood that the
amount of any such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDER shall not assert any claim for
indemnification hereunder against VPI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which the STOCKHOLDER may have
against VPI and NEWCO shall exceed $50,000, provided, however, that the
STOCKHOLDER and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether the aggregate of all claims which such persons
may have against any of VPI and NEWCO exceeds $50,000, it being understood that
the amount of any such claim under Section 11.2(v) shall not be counted towards
such $50,000 amount. No person shall be entitled to indemnification under this
Section 11 if and to the extent that: (a) such person's claim for
indemnification is directly or indirectly related to a breach by such person of
any representation, warranty, covenant or other agreement set forth in this
Agreement; or (b) such person receives a tax benefit as a result of the claim or
loss for which indemnification is sought (i.e., the amount of such claim or loss
for which indemnification is provided hereunder shall be reduced by the amount
of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), STOCKHOLDER shall not be liable under this Section 11 for an
amount which exceeds the amount of
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proceeds received by the STOCKHOLDER and Saunders in connection with the Merger,
provided that the STOCKHOLDER's indemnification obligations pursuant to Section
11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied
through the payment of cash or the delivery of VPI Stock, or a combination
thereof, at the STOCKHOLDER's election. For purposes of calculating the value of
the VPI Stock received or delivered by the STOCKHOLDER (for purposes of
determining the Indemnification Threshold, the limitation on indemnity set forth
in the second preceding sentence and the amount of any indemnity paid), VPI
Stock shall be valued at its initial public offering price as set forth in the
Registration Statement. Any indemnification payment made by the STOCKHOLDER
pursuant to this Section 11 shall be deemed to be a reduction in the
consideration received by the STOCKHOLDER pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the
COMPANY;
(ii) by the STOCKHOLDER or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
June 30, 1998, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement
to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Closing Date;
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(iii) by the STOCKHOLDER or COMPANY, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein (including but not
limited to the condition that the aggregate value of the cash and the
number of shares of VPI Stock to be received by the STOCKHOLDER is not less
than the Minimum Value set forth on Annex III), which breach or default has
a Material Adverse Effect, and the curing of such default shall not have
been made on or before the Closing Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDER pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDER shall reimburse VPI for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement in
the event that this Agreement is terminated by VPI pursuant to Section
12.1(iii).
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13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDER shall have received payment in full of the consideration described
in Section 3, the STOCKHOLDER shall not, during the Noncompetition Period, for
any reason whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any condominium property management business in the
United States or hotel management business in the State of Hawaii (with
respect to condominium property management business in the United States or
hotel management business in the State of Hawaii, as applicable, the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that the STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
condominium property management services or hotel management services to
property owners and/or renters in direct competition with VPI within the
Territory;
(iv) call upon any prospective acquisition candidate, on the
STOCKHOLDER's own behalf or on behalf of any competitor, with respect to
business in the Territory, in the condominium property management or hotel
management business, which candidate, to the
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actual knowledge of the STOCKHOLDER after due inquiry, was called upon by
VPI (including the subsidiaries thereof) or for which, to the actual
knowledge of the STOCKHOLDER after due inquiry, VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring such
entity, unless VPI (or any subsidiary thereof) has expressly declined to
pursue such acquisition candidate or at least one (1) year has elapsed
since VPI (or any subsidiary thereof) has taken any action with respect to
pursuing such acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the STOCKHOLDER from (a) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter, (b) engaging in any
business, other than the business of the COMPANY, currently owned by such
STOCKHOLDER, including the business of AST International, L.L.C. or Northwest
Lodging, Inc., (c) engaging in the hotel management business outside the State
of Hawaii or (d) engaging in licensing or franchising activities through AST
Brands, LLC or any other business entity, including licensing of the name "Aston
Hotels & Resorts," provided that such licensing or franchising activities do not
contravene the provisions of Section 10.8 hereof.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, the STOCKHOLDER agrees that the foregoing covenant may be
enforced by VPI in the event of breach by the STOCKHOLDER, by injunctions and
restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDER in light of the activities and
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business of VPI (including the subsidiaries thereof) on the date of the
execution of this Agreement and the current plans of VPI (including VPI's
subsidiaries); but it is also the intent of VPI and the STOCKHOLDER that such
covenants be construed and enforced in accordance with the changing locations of
VPI (including VPI's other subsidiaries) from the date hereof through the
Noncompetition Period. For example, if, during the Noncompetition Period, VPI
(including VPI's other subsidiaries) establishes new locations for its current
activities or business in addition to the locations currently established
therefor, then the STOCKHOLDER will be precluded from soliciting customers or
employees from such new location and from directly competing within 100 miles of
such new location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that the
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of the STOCKHOLDER's obligations under this Section 13, if any, the
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of the STOCKHOLDER against
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VPI (including the subsidiaries thereof), whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by VPI of such
covenants. It is specifically agreed that the Noncompetition Period, during
which the agreements and covenants of the STOCKHOLDER made in this Section 13
shall be effective, shall be computed by excluding from such computation any
time during which a court of competent jurisdiction or other arbitrator or
mediator has determined that the STOCKHOLDER is in violation of any provision of
this Section 13. The covenants contained in Section 13 shall have no effect if
the transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDER hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that the STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if the STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
13.8 COMPANY NONINTERFERENCE. The parties hereto agree that the Surviving
Corporation and the surviving corporations under the Other Agreements that
operate in the State of Hawaii shall cooperate with each other and shall not
interfere with each other's business relationships. This provision shall be
included in the Other Agreements of the Other Founding Companies that operate in
the State of Hawaii.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
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14.1 STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that he had
in the past, currently has, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDER agrees that he
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDER as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDER, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDER shall, if possible, give two days'
prior written notice thereof to VPI and provide VPI with the opportunity within
such two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by the STOCKHOLDER of the provisions of this Section, VPI
shall be entitled to an injunction restraining the STOCKHOLDER from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting VPI from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated, the STOCKHOLDER
shall have none of the above-mentioned restrictions on his ability to
disseminate confidential information with respect to the COMPANY.
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14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI or NEWCO, (ii) disclosure is required
by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI and NEWCO shall, unless otherwise required by law or such order, give two
days' prior written notice thereof to the COMPANY and the STOCKHOLDER and
provide the COMPANY and the STOCKHOLDER with the opportunity within such two-day
period to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. VPI will disclose confidential information
relating to the COMPANY to the Other Founding Companies only if such companies
have agreed, in advance, to treat such information as confidential. In the event
of a breach or threatened breach by VPI or NEWCO of the provisions of this
Section, the COMPANY and the STOCKHOLDER shall be entitled to an injunction
restraining VPI and NEWCO from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANY and the STOCKHOLDER from pursuing any other available remedy for as such
breach or threatened breach, including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and
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irreparable damage that would be caused for which they would have no other
adequate remedy, the parties hereto agree that, in the event of a breach by any
of them of the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDER or family members, the trustees of
which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, the STOCKHOLDER shall not sell, assign, exchange,
transfer, distribute or otherwise dispose of any shares of VPI Stock received by
the STOCKHOLDER pursuant to Section 3.1. The certificates evidencing the VPI
Stock delivered to the STOCKHOLDER pursuant to Section 3 of this Agreement shall
bear a legend substantially in the form set forth below and containing such
other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
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15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDER or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDER shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDER pursuant to
Section 3.1 except in accordance with this Section 15.2. If the STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and the STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
of the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
the STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock, and the
STOCKHOLDER shall be entitled to pledge his shares of VPI Stock in increments of
such amounts as STOCKHOLDER, in his sole discretion, may determine. Any
restrictive legend placed upon the certificates of VPI Stock shall indicate this
ability to pledge the VPI Stock subject to any other restriction set forth
therein. VPI shall cooperate with the STOCKHOLDER and issue or cause to be
issued such certificates of shares representing the VPI Stock promptly and in
such amounts as requested by the STOCKHOLDER. VPI agrees to acknowledge any
pledge of the VPI Stock made by the STOCKHOLDER and comply with the terms of the
security agreement or other instrument creating or evidencing such pledge to the
extent not inconsistent with this Agreement or law, including without limitation
(a) providing the pledgee/secured party with appropriate financial information
concerning VPI, (b) notifying the pledgee/secured party of the amount of VPI
Stock previously sold or to be sold by the STOCKHOLDER and (c) allowing the
pledgee/secured party to rely on VPI for a determination of whether a transfer
of such VPI Stock would not violate Rule 144(e)(2) of the 1933 Act in the event
VPI authorizes the transfer by the pledgee/secured party of the pledged VPI
Stock. VPI agrees to respond promptly to requests by the STOCKHOLDER or any
pledgee/secured party to transfer or sell the VPI Stock; provide that VPI
receives customary broker's representations and opinion of counsel that such
transfer or sales are exempt from registration under the 1933 Act. STOCKHOLDER
shall reimburse VPI for reasonable costs incurred by VPI in complying with any
obligation relating to a pledgee/secured party arising under this Section 15.2.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDER acknowledges that the shares of VPI Stock to be delivered
to the STOCKHOLDER pursuant to this Agreement have not been registered under the
1933 Act and therefore may not be resold without compliance with the 1933 Act.
The VPI Stock to be acquired by the STOCKHOLDER pursuant to this Agreement is
being acquired solely for his own account,
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for investment purposes only, and with no present intention of distributing,
selling or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDER covenants, warrants and
represents that none of the shares of VPI Stock issued to the STOCKHOLDER will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDER is able to bear the
economic risk of an investment in the VPI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the proposed investment in the VPI Stock. The
STOCKHOLDER has had an adequate opportunity to ask questions and receive answers
from the officers of VPI concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of VPI, the plans
for the operations of the business of VPI, the business, operations and
financial condition of the Other Founding Companies, and any plans for
additional acquisitions and the like. The STOCKHOLDER has asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to his satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than
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(i) any shelf registration of shares to be used as consideration for
acquisitions of additional businesses by VPI and (ii) registrations relating to
employee benefit plans, VPI shall give the STOCKHOLDER prompt written notice of
its intent to do so. Upon the written request of the STOCKHOLDER given within 30
days after receipt of such notice, VPI shall cause to be included in such
registration all of the VPI Stock issued to the STOCKHOLDER pursuant to this
Agreement which the STOCKHOLDER requests, provided that VPI shall have the right
to reduce the number of shares included in such registration to the extent that
inclusion of such shares could, in the reasonable opinion of tax counsel to VPI
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Registration Statement as an exchange pursuant to
which gain is not recognized under Section 351(a) of the Code. In addition, if
VPI is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 17.1 that the number of shares to be
sold by persons other than VPI is greater than the number of such shares which
can be offered without adversely affecting the offering, VPI may reduce pro rata
the number of shares offered for the accounts of such persons (based upon the
number of shares desired to be sold by such person) to a number deemed
satisfactory by such managing underwriter, provided, however, that for each such
offering made by VPI after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than VPI, the
STOCKHOLDER and the stockholders of the Other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements (collectively, the
STOCKHOLDER and the stockholders of the other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the Founding
Stockholders on a pro rata basis based on the number of shares proposed to be
registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders
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pursuant to this Agreement and the Other Agreements which have not been
previously registered or sold and which are not entitled to be sold under Rule
144(k) (or any similar or successor provision) promulgated under the 1933 Act
may request in writing (the "Demand Registration Request") that VPI file a
registration statement under the 1933 Act covering the registration of up to all
of the shares of VPI Stock issued to the STOCKHOLDER pursuant to this Agreement
and the Other Agreements then held by such Founding Stockholders (a "Demand
Registration"). Within ten (10) days of the receipt of the Demand Registration
Request, VPI shall give written notice of such request to all other Founding
Stockholders and shall, as soon as practicable but in no event later than 45
days after the Demand Registration Request, file and use its best efforts to
cause to become effective a registration statement covering all shares requested
to be registered pursuant to this Section 17.2. VPI shall be obligated to effect
only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
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registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by the STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to the STOCKHOLDER with respect to the
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDER pursuant to this Agreement (the "Registrable Securities") are
included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who
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controls such seller or any such underwriter within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller or any such director or officer or underwriter or controlling Person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
1933 Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and VPI will
reimburse such seller and each such director, officer, underwriter and
controlling Person for any expenses (including but not limited to reasonable
attorneys' fees) reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
VPI shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to VPI by such seller expressly for use in the preparation thereof, and provided
further that VPI shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the 1933
Act, in any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the same may
be then supplemented or amended, to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission
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was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, underwriter or controlling Person and
shall survive the transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of any underwriter, VPI or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller. In no event shall
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the liability of any selling holder of Registrable Securities under this Section
17.6(b) be greater in amount than the dollar amount of the proceeds received by
such holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of
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securities under any federal or state law or regulation of any governmental
authority other than the 1933 Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall
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be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY and the STOCKHOLDER hereby
agree that they shall not issue any press release or otherwise make any public
announcement (including communications with trade publications and other media),
or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDER.
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18.2 COOPERATION. The COMPANY, the STOCKHOLDER, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDER. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDER, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDER, the COMPANY, NEWCO and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld,
L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDER shall pay the fees,
expenses and disbursements of the STOCKHOLDER, the COMPANY and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by the COMPANY and the STOCKHOLDER under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDER. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, VPI shall reimburse the STOCKHOLDER for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, the STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger, other than
Transfer Taxes, if any, imposed by the State of Delaware. The STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, the STOCKHOLDER acknowledges that he, and not the COMPANY or
VPI, shall pay all taxes due upon receipt of the consideration payable pursuant
to Section 3 hereof, and shall
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assume all tax risks and liabilities of the STOCKHOLDER in connection with the
transactions contemplated hereby; provided, however, that the foregoing shall
not in any way prejudice the ability of the STOCKHOLDER and the COMPANY to rely
upon the opinions contained in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDER, addressed to him at his address set forth on
Annex IV, with copies to such counsel as is set forth with respect to the
STOCKHOLDER on such Annex IV;
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(c) If to the COMPANY, addressed to it at:
Hotel Corporation of the Pacific, Inc.
2155 Kalakaua Avenue
Suite 500
Honolulu, Hawaii 96815
Facsimile no.: (808) 931-1444
Attention: Andre S. Tatibouet
and marked "Personal and Confidential"
with copies to:
Cades Schutte Fleming & Wright
1000 Bishop Street
Suite 1200
Honolulu, HI 96813
Facsimile no.: (808) 521-9210
Attention: Mark A. Hazlett
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining
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provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDER (as defined in the
introductory paragraph of this Agreement). Any amendment or waiver effected in
accordance with this Section 18.15 shall be binding upon each of the parties
hereto, any other person receiving VPI Stock in connection with the Merger and
each future holder of such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
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"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
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"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
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"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect
to a limited liability company unless the context otherwise requires, the
membership interests of such limited liability company, and otherwise have their
respective ordinary meanings.
"STOCKHOLDER" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability
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company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
HCP ACQUISITION CORP.
By:/s/ Leonard Potter
-------------------------------
Leonard Potter
Vice President
HOTEL CORPORATION OF THE PACIFIC, INC.
By:/s/ Andre S. Tatibouet
-------------------------------
Name: Andre S. Tatibouet
-------------------------------
Title: President
------------------------------
STOCKHOLDER:
/s/ Andre S. Tatibouet
- ----------------------------------
Andre S. Tatibouet
EXHIBIT 2.2
- ----------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
B&B ACQUISITION CORP. and
BRINDLEY ACQUISITION CORP.
(each a subsidiary of Vacation Properties International, Inc.)
B&B ON THE BEACH, INC.
BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC.
and
the STOCKHOLDERS named herein
- ----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporations..............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANIES, VPI and NEWCOS...........................................4
1.5 Effect of Merger.....................................................5
2. CONVERSION OF STOCK......................................................6
2.1 Manner of Conversion.................................................6
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................8
4. CLOSING..................................................................9
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS............10
(A) Representations and Warranties of COMPANIES and STOCKHOLDERS........10
5.1 Due Organization.................................................11
5.2 Authority........................................................11
5.3 Capital Stock of the COMPANIES...................................11
5.4 Transactions in Capital Stock....................................12
5.5 No Bonus Shares..................................................12
5.6 Subsidiaries.....................................................12
5.7 Predecessor Status; etc..........................................13
5.8 Spin-off by the COMPANIES........................................13
5.9 Financial Statements.............................................13
5.10 Liabilities and Obligations.....................................14
5.11 Accounts and Notes Receivable...................................15
5.12 Permits and Intangibles.........................................15
5.13 Environmental Matters...........................................16
5.14 Personal Property...............................................17
5.15 Significant Customers...........................................18
5.16 Material Contracts and Commitments..............................18
5.17 Real Property...................................................18
5.18 Insurance.......................................................20
5.19 Compensation; Employment Agreements; Organized Labor Matters....20
5.20 Employee Plans..................................................21
5.21 Compliance with ERISA...........................................22
5.22 Conformity with Law; Litigation.................................23
5.23 Taxes...........................................................24
5.24 No Violations...................................................26
5.25 Government Contracts............................................27
5.26 Absence of Changes..............................................27
5.27 Deposit Accounts; Powers of Attorney............................29
5.28 Validity of Obligations.........................................29
5.29 Relations with Governments......................................30
5.30 Disclosure......................................................30
5.31 Prohibited Activities...........................................31
(B) Representations and Warranties of STOCKHOLDERS......................31
5.32 Authority; Ownership............................................31
5.33 Preemptive Rights...............................................31
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5.34 No Intention to Dispose of VPI Stock............................31
6. REPRESENTATIONS OF VPI AND NEWCOS.......................................32
6.1 Due Organization....................................................32
6.2 Authorization.......................................................33
6.3 Capital Stock of VPI and NEWCOS.....................................33
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................34
6.6 Financial Statements................................................34
6.7 Liabilities and Obligations.........................................34
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................35
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................36
6.12 No Side Agreements.................................................36
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................37
6.15 Completion of Due Diligence........................................39
6.16 Disclosure........................................................39
6.17 Tax Treatment......................................................39
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................41
7.3 Prohibited Activities...............................................42
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................44
7.6 Agreements..........................................................44
7.7 Notification of Certain Matters.....................................44
7.8 Amendment of Schedules..............................................45
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................48
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................50
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................51
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS...................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
9.5 No Material Adverse Effect..........................................53
9.6 STOCKHOLDERS' Release...............................................53
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9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
9.18 Termination of Defined Benefit Plans...............................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
11. INDEMNIFICATION........................................................58
11.1 General Indemnification by the STOCKHOLDERS........................58
11.2 Indemnification by VPI.............................................59
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................62
12. TERMINATION OF AGREEMENT...............................................64
12.1 Termination........................................................64
12.2 Liabilities in Event of Termination................................64
13. NONCOMPETITION.........................................................65
13.1 Prohibited Activities..............................................65
13.2 Damages............................................................67
13.3 Reasonable Restraint...............................................67
13.4 Severability; Reformation..........................................67
13.5 Independent Covenant...............................................68
13.6 Materiality........................................................68
13.7 Limitation.........................................................68
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69
14.1 STOCKHOLDERS.......................................................69
14.2 VPI AND NEWCOS.....................................................70
14.3 Damages............................................................71
14.4 Survival...........................................................71
14.5 Return of Data Submitted...........................................71
15. TRANSFER RESTRICTIONS..................................................71
15.1 Transfer Restrictions..............................................71
15.2 Certain Transfers..................................................72
16. SECURITIES LAW REPRESENTATIONS.........................................72
16.1 Compliance with Law................................................73
16.2 Economic Risk; Sophistication......................................73
17. REGISTRATION RIGHTS....................................................74
17.1 Piggyback Registration Rights......................................74
17.2 Demand Registration Rights.........................................75
17.3 Registration Procedures............................................76
17.4 Underwriting Agreement.............................................76
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17.5 Availability of Rule 144...........................................76
17.6 Registration Rights Indemnification................................77
18. GENERAL................................................................81
18.1 Press Releases.....................................................81
18.2 Cooperation........................................................82
18.3 Successors and Assigns; Third Party Beneficiaries..................82
18.4 Entire Agreement...................................................82
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................83
18.7 Expenses...........................................................83
18.8 Notices............................................................84
18.9 Governing Law......................................................85
18.10 Exercise of Rights and Remedies...................................85
18.11 Time..............................................................85
18.12 Reformation and Severability......................................85
18.13 Remedies Cumulative...............................................86
18.14 Captions..........................................................86
18.15 Amendments and Waivers............................................86
18.16 Incorporation by Reference........................................86
18.17 Defined Terms.....................................................86
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI-A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI-B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), B&B ACQUISITION CORP., a Delaware corporation, BRINDLEY
ACQUISITION CORP., a Delaware corporation (individually, a "NEWCO" and
collectively, the "NEWCOS"), B&B ON THE BEACH, INC., a North Carolina
corporation, and BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC., a North
Carolina corporation (each, a "COMPANY" and collectively, the "COMPANIES"), and
DOUGLAS R. BRINDLEY, an individual residing in Corolla, North Carolina, and
BETTY SHOTTON BRINDLEY, an individual residing in Duck, North Carolina (the
"STOCKHOLDERS").
WHEREAS, each NEWCO is a corporation duly organized and existing under
the laws of the State of Delaware, each having been incorporated on March
4, 1998, solely for the purpose of completing the transactions set forth
herein, and each NEWCO is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of each NEWCO and each
COMPANY (which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that (i) B&B
ACQUISITION CORP. merge with and into B&B ON THE BEACH, INC. and (ii)
BRINDLEY ACQUISITION CORP. merge with and into BRINDLEY & BRINDLEY REALTY &
DEVELOPMENT, INC., pursuant to this Agreement and the applicable provisions
of the laws of the State of Delaware and the State in which each of the
COMPANIES is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of Coastal Resorts
Realty L.L.C., a Delaware limited
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liability company, Coastal Resorts Management, Inc., a Delaware
corporation, Collection of Fine Properties, Inc., a Colorado corporation,
Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software,
Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a
Hawaii corporation, Houston and O'Leary Company, a Colorado corporation,
Jupiter Property Management at Park City, Inc., a Utah corporation, Maui
Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People,
Inc., a Massachusetts corporation, Howey Acquisition, Inc., a Florida
corporation, Realty Consultants, Inc., a Florida corporation, Resort
Property Management, Inc., a Utah corporation, Telluride Resort
Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises,
Inc., a Georgia corporation, THE Management Company, a Georgia corporation,
and Whistler Chalets Limited, a British Columbia corporation, and their
respective stockholders in order to acquire additional businesses (the
COMPANIES, together with each of the entities with which VPI has entered
into the Other Agreements, are collectively referred to herein as the
"Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Boards of Directors of the
COMPANIES have
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approved this Agreement as part of the VPI Plan of Organization in order to
transfer the capital stock of the COMPANIES to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGERS
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which each of the COMPANIES is incorporated and will deliver stamped
receipt copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Mergers, (i)
B&B ACQUISITION CORP. shall be merged with and into B&B ON THE BEACH, INC. and
(ii) BRINDLEY ACQUISITION CORP. shall be merged with and into BRINDLEY &
BRINDLEY REALTY & DEVELOPMENT, INC., each in accordance with the Articles of
Merger, the separate existence of each NEWCO shall cease and each COMPANY shall
be the surviving party in the Mergers (each COMPANY is sometimes hereinafter
referred to as the "Surviving Corporation" and collectively the COMPANIES are
sometimes hereinafter referred to as the "Surviving Corporations"). Each Merger
will be effected in a single transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATIONS. At the Effective Time of each Merger:
(i) the Certificate of Incorporation then in effect of each COMPANY
shall be the Certificate of Incorporation of the Surviving Corporation in
such Merger until changed as provided by law;
(ii) the Bylaws of each NEWCO then in effect shall become the Bylaws
of the Surviving Corporation in such Merger; and subsequent to the
Effective Time of such Merger,
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such Bylaws shall be the Bylaws of the Surviving Corporation in such Merger
until they shall thereafter be duly amended;
(iii) the Board of Directors of each Surviving Corporation shall
consist of the persons who are, immediately prior to the Effective Time of
the Merger, on the Board of Directors of the COMPANY merging into such
Surviving Corporation, provided that the Chief Executive Officer of VPI
shall be elected as a director of each Surviving Corporation effective as
of the Effective Time of each Merger; the Board of Directors of each
Surviving Corporation shall hold office subject to the provisions of the
laws of the state in which the Surviving Corporation is located and of the
Certificate of Incorporation and Bylaws of the Surviving Corporation; and
(iv) the officers of each COMPANY immediately prior to the Effective
Time of each Merger shall continue as the officers of the Surviving
Corporation into which such COMPANY is merged in the same capacity or
capacities, and effective upon the Effective Time of each Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of each Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of each Surviving Corporation, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES,
VPI AND NEWCOS. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the COMPANIES,
VPI and the NEWCOS as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto;
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(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10)
shares are issued and outstanding.
1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of
the Mergers shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which each COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of each COMPANY shall continue unaffected and
unimpaired by the Mergers and the corporate franchises, existence and rights of
each NEWCO shall be merged with and into the respective COMPANIES, and the
COMPANIES, as the Surviving Corporations, shall be fully vested therewith. At
the Effective Time of the Mergers, the separate existence of each NEWCO shall
cease and, in accordance with the terms of this Agreement, the Surviving
Corporations shall possess all of the rights, privileges, immunities and
franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all Taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to each NEWCO and each COMPANY shall be taken and deemed to
be transferred to, and vested in, the respective Surviving Corporations without
further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectively
the property of the respective Surviving Corporations as they were of each NEWCO
and each COMPANY; and the title to any real estate, or interest therein, whether
by deed or otherwise, under the laws of the states of incorporation vested in
each respective NEWCO and COMPANY, shall not revert or be in any way impaired by
reason of the Mergers. Except as otherwise provided herein, each Surviving
Corporation shall thenceforth be responsible and
5
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liable for all of the liabilities and obligations of the respective NEWCO and
COMPANY and any claim existing, or action or proceeding pending, by or against a
NEWCO or COMPANY may be prosecuted as if the Merger involving such NEWCO or
COMPANY had not taken place, or the respective Surviving Corporation may be
substituted in their place. Neither the rights of creditors nor any liens upon
the property of a NEWCO or COMPANY shall be impaired by the Merger involving
such NEWCO or COMPANY, and all debts, liabilities and duties of such NEWCO and
COMPANY shall attach to the respective Surviving Corporation, and may be
enforced against such Surviving Corporation to the same extent as if said debts,
liabilities and duties had been incurred or contracted by such Surviving
Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of each COMPANY (collectively, "COMPANY Stock") and
(ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time
of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock
of the Surviving Corporations, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock of each COMPANY issued and
outstanding immediately prior to the Effective Time of each respective
Merger, by virtue of such Merger and without any action on the part of the
holder thereof, automatically shall be deemed to represent (l) the right to
receive the number of fully paid and nonassessable shares of VPI Stock set
forth on Annex III hereto with respect to such holder and (2) the right to
receive the amount of cash, subject to adjustment pursuant to Section 3.3
hereof, set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by each COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
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(iii) each share of NEWCO Stock of each NEWCO issued and outstanding
immediately prior to the Effective Time of each respective Merger, shall,
by virtue of such Merger and without any action on the part of VPI,
automatically be converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation involved in such Merger which
shall constitute all of the issued and outstanding shares of common stock
of such Surviving Corporation immediately after the Effective Time of such
Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Mergers, VPI shall have no
class of capital stock (including preferred stock) issued and outstanding other
than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers
and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the
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endorsement of the stock certificates or other documents of conveyance with
respect to such COMPANY Stock or with respect to the stock powers accompanying
any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of each COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall
result in a corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3. Notwithstanding the foregoing balance sheet requirements, it is understood
that the COMPANY's earnings for the three months ended March 31, 1998 will
reflect, with respect to B&B On The Beach, Inc., an amount equal to 25% of the
projected earnings for B&B On The Beach, Inc. for the twelve months ended
December 31, 1998. The COMPANY's earnings so determined for the three months
ended March 31, 1998 will be distributed to the STOCKHOLDERS on the Closing Date
and all other revenues including rentals or management fees or commissions (but
not any portion thereof previously paid to property owners) related to any
periods after March 31, 1998 shall be retained by the COMPANY and acquired by
VPI in the transaction contemplated hereunder. The COMPANY's earnings after
March 31, 1998 will be retained by the COMPANY. The form of the distribution to
the STOCKHOLDERS will be mutually agreed upon by the STOCKHOLDERS and VPI. The
parties also will consider entering into a mutual indemnification agreement
regarding the tax consequences of such distribution.
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4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Mergers (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Mergers) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Mergers or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
the NEWCOS hereby covenant and agree to do all things required by Delaware law
and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are
required by applicable laws of the State in which the COMPANIES are incorporated
in order to rescind the effects, if any, of the filing of the Articles of Merger
as described in this Section and to pay all related costs of the COMPANIES
directly associated with such rescission. The taking of the actions described in
clauses (i) and (ii) above (the "Pre-Closing") shall take place on the
pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036.
On the Closing Date (x) the Articles of Merger shall have been filed with the
appropriate state authorities so that they shall be or, as of 8:00 a.m. New York
City time on the Closing Date, shall become effective and the Mergers shall
thereby be effected, (y) all transactions contemplated by this Agreement,
including the conversion and delivery of shares, the delivery of a certified
check or checks or wire transfer(s) in an amount equal to the cash portion of
the consideration which the STOCKHOLDERS shall be entitled to receive pursuant
to the Mergers referred to in Section 3 hereof shall occur and (z) the closing
with respect to the IPO shall be completed. The taking of the actions described
in the preceding clauses (x), (y) and (z) shall constitute the closing of the
transactions hereunder (the "Closing"), and the date on which the actions
described in the preceding clauses (x), (y) and (z) occur shall be referred to
as the "Closing
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Date." Except as provided in Sections 8 and 9 hereof with respect to actions to
be taken on the Closing Date, during the period from the Pre-Closing Date to the
Closing Date this Agreement may only be terminated by a party if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Closing
Date has not occurred within 15 business days of the Pre-Closing Date. Time is
of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.
Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANIES and the STOCKHOLDERS agrees that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 5.23 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
5.23 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, VPI actually incurs
liability under the 1933 Act, the 1934 Act or any other federal or state
securities laws as a result of a breach of a representation or warranty by the
COMPANIES or the STOCKHOLDERS, the representations and warranties set forth
herein shall survive until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for such purposes. For purposes
of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and
all of its Subsidiaries, if any.
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5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and such COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY
taken as a whole (as used herein with respect to such COMPANY, or with respect
to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which each COMPANY is incorporated and contains a list of all
such jurisdictions in which each COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of each COMPANY, as
heretofore made available to VPI, are correct and complete in all material
respects. There are no minutes in the possession of each COMPANY or the
STOCKHOLDERS which have not been made available to VPI, and all of such minutes
are correct and complete in all material respects. Except as set forth on
Schedule 5.1, the most recent minutes of each COMPANY, which are dated no
earlier than ten business days prior to the date hereof, affirm and ratify all
prior acts of such COMPANY, and of its officers and directors on behalf of such
COMPANY.
5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority
to enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued
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and outstanding shares of the capital stock of each COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by such COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates any of the COMPANIES to issue any
of its capital stock; (ii) neither COMPANY has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (iii) neither the voting stock structure of each COMPANY
nor the relative ownership of shares among any of their respective stockholders
has been altered or changed in contemplation of the Mergers and/or the VPI Plan
of Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of each COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each
COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as
set forth on Schedule 5.6, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions,
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encumbrances and claims of every kind. Except as set forth on Schedule 5.6, each
COMPANY does not presently own, of record or beneficially, or control, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity nor
is any COMPANY, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of each COMPANY, including the names of any
entities acquired by each COMPANY (by stock purchase, merger or otherwise) or
owned by each COMPANY or from whom the COMPANIES previously acquired material
assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of any of the
COMPANIES since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of each of
the COMPANIES: the COMPANY's (i) audited Balance Sheet, if any, as of December
31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii)
audited Statement of Operations, if any, for the period ended December 31, 1997
(December 31, 1997 being hereinafter referred to as the "Balance Sheet Date")
and unaudited Statement of Operations, if any, for the period ended December 31,
1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for
the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash
Flows, if any, for the period ended on the Balance Sheet Date. Except as set
forth on Schedule 5.9, such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
5.9 and, with respect to unaudited COMPANY Financial Statements, except for the
requirement of footnote disclosures). Except as set forth on Schedule 5.9,
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such Balance Sheets as of December 31, 1997 and 1996 present fairly the
financial position of such COMPANY as of the dates indicated thereon, and such
Statements of Operations, Statements of Changes in Stockholders' Equity and
Statements of Cash Flows present fairly the results of operations for the
periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance
Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the
COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of such COMPANY (including all liabilities in excess of $10,000) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements, together with true, correct and
complete copies of such documents. Except as set forth on Schedule 5.10, since
the Balance Sheet Date neither COMPANY has incurred any material liabilities of
any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business. Each of the COMPANIES has also delivered to VPI on
Schedule 5.10, in the case of those contingent liabilities related to pending
or, to the knowledge of the COMPANIES, threatened litigation, or other
liabilities which are not fixed or are being contested, the following
information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
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5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of such COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate
list of all receivables obtained subsequent to the Balance Sheet Date up to the
Pre-Closing Date and (y) an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the
extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a
writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
each COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of such COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses,
franchises, permits and other governmental authorizations that are necessary for
the operation of the business of such COMPANY as now conducted, and such COMPANY
has delivered to VPI an accurate list and summary description (which is set
forth on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by such COMPANY (including interests in software or
other technology systems, programs and intellectual property) (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 5.13). The licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 are valid, and such COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. Each of the
COMPANIES has
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conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
and is not in violation of any of the foregoing, except for inadvertent,
immaterial noncompliance with such requirements, standards, criteria and
conditions (provided that any such noncompliance shall be deemed a breach of
this Section 5.12 for purposes of Section 11 hereof). Except as specifically
provided on Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to each COMPANY by, any such licenses,
franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each
of the COMPANIES has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) each COMPANY has obtained and adhered to all permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.13, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by each COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by such
COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no
on-site or off-site location to which such COMPANY has transported or disposed
of Hazardous Wastes and Hazardous Substances or arranged for the transportation
of Hazardous Wastes and Hazardous
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Substances, which site is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost, remedial
work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) such
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of such COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
such COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by such COMPANY with a value
in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of such COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that
are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by each COMPANY in its business is either
owned by such COMPANY or leased by such COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the
knowledge of such COMPANY or the
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STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
such COMPANY's annual revenues as of the Balance Sheet Date. Except to the
extent set forth on Schedule 5.15, none of any COMPANY's significant customers
(or persons or entities that are sources of a significant number of customers)
have canceled or substantially reduced or, to the knowledge of any COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by such COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on
Schedule 5.16 all material contracts, commitments and similar agreements to
which such COMPANY currently is a party or by which it or any of its properties
are bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. Each COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. Each COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by such COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet
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Date, and all other real property, if any, used by each COMPANY in the conduct
of its business. Each COMPANY has good and insurable title to the real property
owned by it, including those reflected on Schedule 5.14, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of each COMPANY with respect to real property owned by such COMPANY.
Each COMPANY has also delivered to VPI an accurate list of real property
leased by such COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by such COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by the STOCKHOLDERS or
business or personal affiliates of such COMPANY or the STOCKHOLDERS. Except as
set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in
full force and effect and, assuming due execution and delivery thereof by the
parties thereto other than such COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of such COMPANY, the
STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the
other parties (and their successors) thereto in accordance with their respective
terms.
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5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by such COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that such COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Closing Date. No insurance carried by such
COMPANY has ever been canceled by the insurer and such COMPANY has never been
unable to obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of such COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or
subject to (and none of their respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of any
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign
to establish such representation is in progress and (iv) there is no pending or,
to the best of each COMPANY's knowledge, threatened labor dispute involving any
COMPANY and any group of its
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employees nor has any COMPANY experienced any labor interruptions over the past
three years. Each COMPANY believes its relationship with employees to be good.
Each COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of such COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20,
neither COMPANY sponsors, maintains or contributes to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or
accrue or pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation
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arrangement). Neither COMPANY has sponsored, maintained or contributed to any
employee pension benefit plan other than the plans, agreements, arrangements and
trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of such
COMPANY's employees.
All accrued contribution obligations of each COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of such COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of each COMPANY that are currently maintained or contributed to by such
COMPANY or cover employees or former employees of such COMPANY listed on
Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No such plan
listed on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to
any such plan or any COMPANY, has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each
COMPANY has not incurred any liability
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for excise tax or penalty due to the Internal Revenue Service nor any liability
to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS
further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) each COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) each COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which any COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than a COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes such COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be
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deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and
except to the extent set forth on Schedules 5.10 or 5.13, there are no claims,
actions, suits or proceedings, commenced or, to the knowledge of the COMPANIES,
threatened, against or affecting any of the COMPANIES, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
such COMPANY and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. Each COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations, and is not in
violation of any of the foregoing.
5.23 TAXES.
(a) Each COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANIES or their respective officers or
employees responsible for maintaining the financial records of such COMPANY
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 5.23, there are no
examinations in progress (and the COMPANIES and their respective employees are
not aware of any proposed examinations) or claims against any COMPANY (including
liens against the COMPANY's assets) for federal, state, local and other Taxes
(including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for Taxes, whether
pending or threatened, has been received. Except as set forth on Schedule 5.23,
neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
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(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by any COMPANY, any member of an affiliated or
consolidated group which includes or included any of the COMPANIES, or with
respect to any payment made or deemed made by any COMPANY, required to be paid
by the date hereof, have been paid. All amounts required to be deposited,
withheld or collected under applicable federal, state, local or other Tax laws
and regulations by any COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements(and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, neither COMPANY has been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). Neither COMPANY is a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, neither COMPANY has (i)
assumed or is liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which any COMPANY
or such person or entity was the surviving corporation or a consolidation) or
(ii) indemnified any other person or entity or otherwise agreed to pay on behalf
of any other person or entity any Taxes arising from or which may be asserted on
the basis of any Tax treatment adopted with respect to all or any aspect of such
business acquisition transaction.
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(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of each COMPANY for its last three (3) fiscal years or
such shorter period of time as such COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) Each COMPANY has a taxable year ended on the date set forth as
such on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, each COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) Neither COMPANY is an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) Neither COMPANY has filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code or agreed to have section
341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as
defined in section 341(f) of the Code) owned by such COMPANY.
5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter
Document. Neither COMPANY or, to the knowledge of either COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of each
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COMPANY under the Material Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.24, none
of the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.24, none of the Material Documents
prohibits the use or publication by any COMPANY, VPI or any NEWCO of the name of
any other party to such Material Document, and none of the Material Documents
prohibits or restricts either COMPANY from freely providing services to any
other customer or potential customer of such COMPANY, VPI, the NEWCOS or any
Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither
COMPANY is now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of any COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of any
COMPANY;
(iii) any change in the authorized capital of any COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
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(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANIES to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of any COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by any COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of any COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of any COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to any COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of any COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
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(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of any COMPANY's business;
(xi) any waiver of any material rights or claims of any COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which any COMPANY is a party;
(xiii) any transaction by any COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by any COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has
delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as
of the date of the Agreement of:
(i) the name of each financial institution in which each COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from each COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of the COMPANIES and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of each
of the COMPANIES and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of each
COMPANY, enforceable against such COMPANY in accordance with its terms except as
may be limited by (i) bankruptcy, insolvency or other similar laws of general
application relating to or affecting
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the enforcement of creditors' rights generally or (ii) the discretionary power
of a court exercising equity jurisdiction. The individual signing this Agreement
on behalf of each COMPANY has the legal power, authority and capacity to bind
such COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause any COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of each COMPANY
for the time periods with respect to which such information was requested. Each
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which any COMPANY is a party, or to which their respective properties are
subject, or (ii) any other fact or circumstance regarding any COMPANY (which
fact or circumstance was, or should reasonably, after due inquiry, have been
known to any COMPANY) that is not disclosed pursuant to this Agreement or to
such delivered documents.
(b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree
(i) that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to any COMPANY, the
STOCKHOLDERS or any other
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person affiliated or associated with any COMPANY for any failure of the
Registration Statement to become effective, the IPO to occur at a particular
price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither
COMPANY has, between the Balance Sheet Date and the date hereof, taken any of
the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCOS
VPI and the NEWCOS jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and, subject to Section 7.8 hereof, shall be true at the
time of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS
(the "VPI Charter Documents") are all attached hereto as Annex II. The VPI
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Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS
executing this Agreement have the authority to enter into and bind VPI and the
NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full
legal right, power and authority to enter into and perform this Agreement and
the Mergers, and all required approvals of the shareholders and board of
directors of VPI and NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date,
the authorized capital stock of VPI and the NEWCOS is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of each NEWCO are owned by VPI and all of the issued and
outstanding shares of the capital stock of VPI are owned by the persons set
forth on Annex V hereof, and further are owned, in each case, free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. Upon consummation of the IPO, the number
of outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and each
NEWCO have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by VPI and the persons set
forth on Annex V, respectively, and further, such shares were offered, issued,
sold and delivered by VPI and the NEWCOS in compliance with all applicable state
and federal laws concerning the issuance of securities. Further, none of such
shares was issued in violation of the preemptive rights of any past or present
stockholder of VPI or the NEWCOS.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or the NEWCOS to
issue any of their respective authorized but unissued capital stock; and (ii)
neither VPI nor the NEWCOS has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend
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or make any distribution in respect thereof. Schedule 6.4 also includes complete
and accurate copies of all stock option or stock purchase plans, including a
list, accurate as of the date hereof, of all outstanding options, warrants or
other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries
except for the NEWCOS and each of the companies identified as "NEWCO" in each of
the Other Agreements. Except as set forth in the preceding sentence, neither VPI
nor any NEWCO presently owns, of record or beneficially, or controls, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity nor
is VPI or any NEWCO, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and the NEWCOS have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or
regulation, or of any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
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instrumentality having jurisdiction over either of them; and except to the
extent set forth on Schedule 6.8, there are no material claims, actions, suits
or proceedings, pending or, to the knowledge of VPI or the NEWCOS, threatened,
against or affecting VPI or the NEWCOS, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over either of them and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. VPI and the NEWCOS have conducted and are conducting their
respective businesses in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and are not in violation of any of the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI
Charter Document. None of VPI, the NEWCOS or, to the knowledge of VPI and the
NEWCOS, any other party thereto, is in default under any lease, instrument,
agreement, license or permit to which VPI or any NEWCO is a party, or by which
VPI or any NEWCO, or any of their respective properties, are bound
(collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and
the NEWCOS under the VPI Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the VPI Documents
or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the
VPI Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect and consummation
of the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and the NEWCOS and the performance of the transactions contemplated
herein have been duly and validly
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authorized by the respective Boards of Directors of VPI and the NEWCOS and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of VPI and the NEWCOS, enforceable
against each of VPI and the NEWCOS in accordance with its terms except as
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights generally, and the
individuals signing this Agreement on behalf of VPI and the NEWCOS have the
legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will
enter into any agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies or VPI other than the Other Agreements
and the agreements specifically contemplated by each of the Other Agreements,
including the employment agreements referred to therein, and none of VPI, the
NEWCOS, their equity owners or affiliates have received any cash compensation or
payments in connection with this transaction except for reimbursement of
out-of-pocket expenses which are necessary or appropriate to this transaction.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any
NEWCO has conducted any operations or business since inception other than
activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO
owns or has at any time owned any real property or any material personal
property or is a party to any other agreement, except as listed on Schedule 6.13
and
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except that VPI is a party to the Other Agreements and the agreements
contemplated thereby and to such agreements as will be filed as Exhibits to the
Registration Statement.
6.14 TAXES .
(a) VPI and the NEWCOS have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or the NEWCOS or their officers or employees
responsible for maintaining the financial records of VPI and the NEWCOS
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 6.14, there are no
examinations in progress (and VPI and the NEWCOS and their employees are not
aware of any proposed examinations) or claims against VPI or the NEWCOS
(including liens against assets of VPI or the NEWCOS) for federal, state, local
and other Taxes (including penalties and interest) for any period or periods
prior to and including the date hereof and no notice of any claim for Taxes,
whether pending or threatened, has been received. Except as set forth on
Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or
consolidated group which includes or included VPI or the NEWCOS, or with respect
to any payment made or deemed made by VPI or the NEWCOS, required to be paid by
the date hereof, have been paid. All amounts required to be deposited, withheld
or collected under applicable federal, state, local or other Tax laws and
regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or
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secured and reserved against and entered on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
has been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to
or bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
(i) has assumed or is liable for any Taxes of any other person or entity,
including any predecessor corporation or partnership, as a result of any
purchase of assets or other business acquisition transaction (other than a
merger in which VPI or the NEWCOS or such person or entity was the surviving
corporation or a consolidation) and (ii) has indemnified any other person or
entity or otherwise agreed to pay on behalf of any other person or entity any
Taxes arising from or which may be asserted on the basis of any Tax treatment
adopted with respect to all or any aspect of such business acquisition
transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and the NEWCOS for its last three (3) fiscal years
or such shorter period of time as VPI or the NEWCOS shall have existed, (ii) any
Tax examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
(g) VPI and the NEWCOS have a taxable year ended on the date set forth
as such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor the
NEWCOS' methods of accounting have changed in the past five years. No adjustment
to taxable income by reason of a change of accounting method is required in
respect of any period for which the statute
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of limitations has not expired.
(i) Neither VPI nor the NEWCOS is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on
Schedule 6.14.
(k) Neither VPI nor the NEWCOS has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANIES as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDERS set forth in the letter of representations
(referenced in the tax opinion letter to be delivered pursuant to Section 8.4
hereof) are true and correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, each COMPANY will afford to the officers and
authorized representatives of
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VPI and the Other Founding Companies (including the Underwriters and their
counsel) access to all of such COMPANY's sites, properties, books and records
and will furnish VPI with such additional financial and operating data and other
information as to the business and properties of such COMPANY as VPI or the
Other Founding Companies may from time to time reasonably request. Each COMPANY
will reasonably cooperate with VPI and the Other Founding Companies and their
respective representatives, including VPI's auditors and counsel, in the
preparation of any documents or other material (including the Registration
Statement) which may be required in connection with any documents or materials
required by this Agreement. VPI, the NEWCOS, the STOCKHOLDERS and the COMPANIES
shall treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Other Founding Companies as confidential in accordance with the
provisions of Section 14 hereof. In addition, VPI will cause each of the Other
Founding Companies to enter into a provision similar to this Section 7.1
requiring each such Other Founding Company, its stockholders, directors,
officers, representatives, employees and agents to keep confidential any
information regarding the COMPANY obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of each COMPANY access to
all of VPI's and the NEWCOS' sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish each COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and
the NEWCOS will cooperate with each COMPANY, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. VPI will provide complete access to its operations and key officers
and employees to each COMPANY, its representatives and advisors on a continuing
basis through the Closing Date. Each
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COMPANY will cause all information obtained in connection with the negotiation
and performance of this Agreement to be treated as confidential in accordance
with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with such COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, neither COMPANY shall, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANIES to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
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(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of such COMPANY, provided
that such COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of such COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANIES,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the COMPANIES'
capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
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(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, any COMPANY or a merger, consolidation or business
combination of any COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide VPI on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between such COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between each COMPANY and any STOCKHOLDER not reflecting fair market terms,
except such existing agreements as are set forth on Schedule 9.7. Such
termination agreements are listed on Schedule 7.6 and copies thereof are
attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY
shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of any COMPANY or any STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the
Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. VPI and the NEWCOS shall give prompt
notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of VPI or the NEWCOS contained herein to be untrue or
inaccurate in any material respect at or prior to the Pre-Closing and (ii) any
material failure of VPI or the NEWCOS to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.7 that is not
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accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by any COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANIES consent to such amendment or supplement; and provided further, that no
amendment or supplement to a schedule prepared by VPI or the NEWCOS that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless a majority of the Founding Companies consent
to such amendment or supplement. For all purposes of this Agreement, including
without limitation for purposes of determining whether the conditions set forth
in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be
deemed to be the schedules as amended or supplemented pursuant to this Section
7.8. In the event that one of the Other Founding Companies seeks to amend or
supplement a schedule pursuant to Section 7.8 of one of the Other Agreements,
and such amendment or supplement constitutes or reflects an event or occurrence
that would have a Material Adverse Effect on such Other Founding Company, VPI
shall give the COMPANIES notice promptly after it has knowledge thereof. If VPI
and a majority of the
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Founding Companies consent to such amendment or supplement, but the COMPANIES do
not give their consent, the COMPANIES collectively may terminate this Agreement
pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to
amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a
majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that VPI or any NEWCO seeks to
amend or supplement a Schedule pursuant to this Section 7.8 and a majority of
the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
7.8. No amendment of or supplement to a Schedule shall be made later than 24
hours prior to the anticipated effectiveness of the Registration Statement. For
purposes of this Section 7.8, consent to an amendment or supplement to a
schedule pursuant to Section 7.8 of this Agreement or one of the Other
Agreements shall have been deemed given by VPI or any Founding Company if no
response is received within 24 hours following receipt of notice of such
amendment or supplement (or sooner if required by the circumstances under which
such consent is requested and so requested in the notice). The provisions of
this Section 7.8 shall be contained in the Other Agreements executed in
connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and
the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the
Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with VPI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS
agree promptly to advise VPI if, at any time during the period in which a
prospectus relating to the offering is required to be delivered
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under the 1933 Act, any information contained in the prospectus concerning any
COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy. VPI
will give the COMPANIES and the STOCKHOLDERS an opportunity and a reasonable
amount of time to review and comment on a substantially final draft of the
Registration Statement prior to filing, and with respect to all amendments
thereto, VPI will give the COMPANIES and STOCKHOLDERS an opportunity to review
and comment on those portions of such amendments that relate to the COMPANIES.
Insofar as the information contained in the Registration Statement relates
solely to the COMPANIES or the STOCKHOLDERS, as of the effective date of the
Registration Statement each COMPANY represents and warrants as to such
information with respect to itself, and each STOCKHOLDER represents and
warrants, as to such information with respect to the COMPANIES and himself or
herself, that the Registration Statement will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading and that the STOCKHOLDERS and the COMPANIES
have had the opportunity to review and approve such information. If, prior to
the 25th day after the date of the final prospectus of VPI utilized in
connection with the IPO, the COMPANIES or the STOCKHOLDERS become aware of any
fact or circumstance which would change (or, if after the Closing Date, would
have changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS
in this Agreement or would affect any document delivered pursuant hereto in any
material respect, the COMPANIES and the STOCKHOLDERS shall immediately give
notice of such fact or circumstance to VPI. However, subject to the provisions
of Section 7.8, such notification shall not relieve either the COMPANIES or the
STOCKHOLDERS of their respective obligations under this Agreement, and, subject
to the provisions of Section 7.8, at the sole option of VPI, the truth and
accuracy of any and all warranties and representations of the COMPANIES, or on
behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on
the Pre-Closing Date and on the Closing Date, contained in this Agreement
(including the Schedules and Annexes
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hereto) shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANIES as of the end of all fiscal
quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANIES for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANIES or the results of its
operations from the financial statements as of the Balance Sheet Date. For the
fiscal quarter ending March 31, 1998, such financial statements shall be
delivered to VPI on or before April 21, 1998, unless the Closing Date shall have
occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the COMPANIES for the periods indicated thereon and shall be for
such dates and time periods as required by Regulation S-X under the 1933 Act and
the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business
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of VPI as described in the Registration Statement. In connection with the
closings of the transactions under the Other Agreements, VPI agrees that it will
not waive any closing condition under any Other Agreement that would result in a
Material Adverse Effect to VPI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES
The obligations STOCKHOLDERS and the COMPANIES with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and the NEWCOS contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and the NEWCOS contained in Section 6 shall be true and correct in all
material respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and the NEWCOS on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
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8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Mergers or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANIES as a result of which
the management of the COMPANIES deems it inadvisable to proceed with the
transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have
delivered to the COMPANIES a certificate, dated as of a date no later than ten
days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of
State and in each state in which VPI or the NEWCOS are authorized to do
business, showing that each of VPI and the NEWCOS is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for VPI and the NEWCOS, respectively, for all periods prior to the
Pre-Closing Date have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or the NEWCOS which would constitute a Material
Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material
loss or damages to any of its properties or assets,
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whether or not covered by insurance, which change, loss or damage materially
affects or impairs the ability of VPI and/or the NEWCOS to conduct their
respective businesses.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a
certificate or certificates, dated the Pre-Closing Date and signed by the
secretary of VPI and of each NEWCO, certifying the truth and correctness of
attached copies of VPI's and the NEWCOS' respective Certificates of
Incorporation (including amendments thereto), Bylaws (including amendments
thereto), and resolutions of the boards of directors and, if required, the
stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into
this Agreement and the consummation of the transactions contemplated hereby.
Such certificate or certificates also shall be addressed to the Underwriters and
copies thereof shall be delivered to the Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The
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terms set forth in the preceding sentence and all other terms of the options
shall be no less favorable than the options made available to the Other Founding
Companies.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS
The obligations of VPI and the NEWCOS with respect to actions to be taken
on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to
the Pre-Closing Date of all of the following conditions. The obligations of VPI
and the NEWCOS with respect to actions to be taken on the Closing Date are
subject to the satisfaction or waiver on or prior to the Closing Date of the
conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the
Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2,
9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied
shall be deemed to have been waived, except that no such waiver shall be deemed
to affect the survival of the representations and warranties of the COMPANY
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO
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and no governmental agency or body shall have taken any other action or made any
request of VPI as a result of which the management of VPI deems it inadvisable
to proceed with the transactions hereunder.
9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
each COMPANY, certifying the truth and correctness of attached copies of each
COMPANY's Charter Documents and resolutions of the board of directors and the
STOCKHOLDERS approving each COMPANY's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate also
shall be addressed to the Underwriters and a copy thereof shall be delivered to
the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to any COMPANY which would constitute a Material Adverse
Effect, and neither COMPANY shall have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of any COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i)
any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii)
obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANIES and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between any of the COMPANIES and the
STOCKHOLDERS not reflecting fair market terms shall have been canceled effective
prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form
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annexed hereto as Annex VII, and the Underwriters shall have received a copy of
the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI
certificates, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in each
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which each COMPANY is authorized to do business, showing each COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for each COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of each COMPANY, and certificates of insurance to that effect
shall have been delivered to
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VPI. VPI shall reimburse the COMPANIES for the incremental cost of having VPI so
named as an additional insured.
9.16 LOCKUP AGREEMENT Each of the COMPANIES and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANIES, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had
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incurred prior to the Pre-Closing Date provided that such indebtedness or
obligations are related to the business of the COMPANIES as being conducted at
the Pre-Closing Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANIES shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
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(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANIES, as defined in Section 1563 of the Code, to, provide to each of
the other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide explanation
of any documents or information so provided. Subject to the preceding
sentence, each party required to file Tax Returns pursuant to this
Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the transaction
as an exchange pursuant to which gain is not recognized under Section
351(a) of the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Douglas R.
Brindley to serve as a director of VPI effective as of the Closing Date.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at any COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and
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provisions as the existing plans, except as may be required by ERISA or other
applicable law; provided, however, that any new health insurance plan shall
provide for coverage for preexisting conditions for employees of each COMPANY
who were covered by such COMPANY's health insurance plan immediately prior to
the Closing Date or as otherwise required by law.
10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the
books and records of such COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, the NEWCOS and each COMPANY (as the Surviving Corporations)
at all times, from and after the date of this Agreement until the Expiration
Date, from and against all losses, claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving
Corporations) as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or each COMPANY set forth
herein or on the Schedules or certificates delivered in connection herewith,
(ii)
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any breach of any agreement on the part of the STOCKHOLDERS or the COMPANIES
under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating solely to any COMPANY or the STOCKHOLDERS, and provided
to VPI or its counsel by the COMPANIES or the STOCKHOLDERS, contained in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating solely to
the COMPANIES or the STOCKHOLDERS required to be stated therein or necessary to
make the statements therein not misleading, or (iv) the matters described on
Schedule 11.1(iv) (relating to specifically identified matters such as ongoing
claims and/or litigation), which Schedule shall be prepared by VPI, provided,
however, (A) that in the case of any indemnity arising pursuant to clause (iii)
such indemnity shall not inure to the benefit of VPI, the NEWCOS, the COMPANIES
or the Surviving Corporations to the extent that such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in
writing, corrected information to VPI counsel and to VPI for inclusion in the
final prospectus, and such information was not so included or properly
delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification
obligation pursuant to this Section 11.1 to the extent attributable to a breach
of any representation, warranty or agreement made herein individually by any
other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS
of their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii)
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any breach of any agreement on the part of VPI or the NEWCOS under this
Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's
or the NEWCOS' failure to be responsible for the liabilities and obligations of
the COMPANIES as provided in Section 1 hereof (except to the extent that VPI or
the NEWCOS have claims against the STOCKHOLDERS under Section 11.1 hereof by
reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act
or other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to VPI, the NEWCOS or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or the NEWCOS or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to
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defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by the Indemnifying Party, provided that if
counsel to the Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and the Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. Further,
absent a conflict, the Indemnified Party may select counsel and have such
counsel participate in such matter at the sole cost of the Indemnified Party.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested in writing by the Indemnifying Party, in
which event the Indemnified Party shall be reimbursed by the Indemnifying Party
for reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim in which no admission of wrongdoing is required of the
Indemnified Party and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. If the Indemnifying Party does not undertake to
defend such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnifying Party shall reimburse the
Indemnified
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Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld, conditioned or delayed. All
settlements hereunder shall effect a complete release of the Indemnified Party,
unless the Indemnified Party otherwise agrees in writing. The parties hereto
will make appropriate adjustments for insurance proceeds in determining the
amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving
Corporations and the other persons or entities indemnified pursuant to Section
11.1 shall not assert any claim for indemnification hereunder against the
STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of
all claims which such persons may have against the STOCKHOLDERS shall exceed
2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of
the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"),
provided, however, that VPI, the NEWCOS, the Surviving Corporations and the
other persons or entities indemnified pursuant to Section 11.1 may assert and
shall be indemnified for any claim under Section 11.l(iv) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any such claim under Section 11.1(iv) shall not be
counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert
any claim for indemnification hereunder against VPI or the
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NEWCOS until such time as, and solely to the extent that, the aggregate of all
claims which the STOCKHOLDERS may have against VPI and the NEWCOS shall exceed
$50,000, provided, however, that the STOCKHOLDERS and the other persons or
entities indemnified pursuant to Section 11.2 may assert and shall be
indemnified for any claim under Section 11.2(v) at any time, regardless of
whether the aggregate of all claims which such persons may have against any of
VPI and the NEWCOS exceeds $50,000, it being understood that the amount of any
such claim under Section 11.2(v) shall not be counted towards such $50,000
amount. No person shall be entitled to indemnification under this Section 11 if
and to the extent that: (a) such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement; or (b) such
person receives a tax benefit as a result of the claim or loss for which
indemnification is sought (i.e., the amount of such claim or loss for which
indemnification is provided hereunder shall be reduced by the amount of such tax
benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to
be a reduction in the consideration received by the STOCKHOLDERS pursuant to
Section 3.
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12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANIES;
(ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or the COMPANIES, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth
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therein), (iv) or (v), provided, however (and notwithstanding anything in
Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement in
the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS
pursuant to Section 12.1(iii); and further provided, however (and
notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and
the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and
expenses of its attorneys and accountants incurred in connection with the
transactions contemplated by this Agreement in the event that this Agreement is
terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or sales
business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of the locations in which VPI or the
COMPANIES, or any of their subsidiaries, conduct a noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the
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purpose or with the intent of enticing such employee away from or out of
the employ of VPI (including the subsidiaries thereof), provided that each
STOCKHOLDER shall be permitted to call upon and hire any member of his or
her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of any COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that such COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
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13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other
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covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree
that the covenants in this Section 13 are a material and substantial part of
this transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or any COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANIES, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANIES', the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by
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this Agreement are not consummated, STOCKHOLDERS shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the COMPANIES, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the COMPANIES` businesses. VPI and
the NEWCOS agree that, prior to the Closing, or if the transactions contemplated
by this Agreement are not consummated, they will not use, except in connection
with the transactions contemplated hereby, or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except disclosures (a) to authorized
representatives of the COMPANIES, (b) to counsel and other advisors; provided,
however, that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 14.2 and (c) to the Other Founding Companies and
their representatives pursuant to Section 7.1(a), unless (i) such information
becomes known to the public generally through no fault of VPI or any NEWCO, (ii)
disclosure is required by law or the order of any governmental authority under
color of law; provided, however, that prior to disclosing any information
pursuant to this clause (ii), VPI and the NEWCOS shall, unless otherwise
required by law or such order, give two days' prior written notice thereof to
the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the
STOCKHOLDERS with the opportunity within such two-day period to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. VPI will disclose confidential information relating to the
COMPANIES to the Other Founding Companies only if such companies have agreed, in
advance, to treat such information as confidential. In the event of a breach or
threatened breach by VPI or the NEWCOS of the provisions of this Section, the
COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining
VPI and the NEWCOS from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as
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prohibiting the COMPANIES and the STOCKHOLDERS from pursuing any other available
remedy for as such breach or threatened breach, including the recovery of
damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANIES of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
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ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR
OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by
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such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their
own respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANIES, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
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17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the
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Founding Stockholders on a pro rata basis based on the number of shares proposed
to be registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
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Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
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17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
VPI will reimburse such seller and each such director, officer, underwriter and
controlling Person for any expenses (including but not limited to reasonable
attorneys' fees) reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
VPI shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to VPI by such seller expressly for use in the preparation thereof, and provided
further that VPI shall not be liable to any Person
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who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the 1933 Act, in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or
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expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any underwriter, VPI or
any such director, officer or controlling Person and shall survive the transfer
of such securities by such seller. In no event shall the liability of any
selling holder of Registrable Securities under this Section 17.6(b) be greater
in amount than the dollar amount of the proceeds received by such holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall,
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without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to
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above shall be deemed to include, subject to the limitations set forth in
Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to
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consummate the transactions contemplated hereby and by the Other Agreements.
VPI, each COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue
any press release or otherwise make any public announcement (including
communications with trade publications and other media), or disclose information
to any third party (except those agents or representatives of a party directly
involved in the transactions contemplated hereby and except as required by law)
concerning VPI, the Founding Companies or the transactions contemplated hereby
or by the Other Agreements without the prior approval of VPI, the COMPANIES and
the STOCKHOLDERS.
18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and the NEWCOS shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of each COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement, including but
not limited to any letter of intent entered into by any of the parties hereto.
This Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable
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in accordance with its terms and may be modified or amended only by a written
instrument executed by the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer &
Feld, L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this
Agreement, including the fees and expenses of accountants and legal counsel to
the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the
transactions contemplated by this Agreement are consummated, VPI shall reimburse
the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the
closing of the
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IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
Mergers, other than Transfer Taxes, if any, imposed by the State of Delaware.
Each STOCKHOLDER shall file all necessary documentation and Tax Returns with
respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that
he or she, and not the COMPANIES or VPI, shall pay all taxes due upon receipt of
the consideration payable pursuant to Section 3 hereof, and shall assume all tax
risks and liabilities of such STOCKHOLDER in connection with the transactions
contemplated hereby; provided, however, that the foregoing shall not in any way
prejudice the ability of the STOCKHOLDERS and the COMPANIES to rely upon the
opinions contained in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or the NEWCOS, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
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(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANIES, addressed to it at:
B&B On The Beach, Inc.
Brindley & Brindley Realty & Development, Inc.
1023 Ocean Trail
Corolla, North Carolina 27927
Facsimile no.: (919) 453-2318
Attention: Douglas R. Brindley and Betty Shotton Brindley
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
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18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the respective Mergers. Any amendment or waiver effected in accordance with this
Section 18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Mergers and each future holder of
such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means any COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean the NEWCOS and each of the other
Delaware companies wholly-owned by VPI prior to the Closing Date.
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"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph
of this Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Mergers" shall mean the time as of which the Mergers
become effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
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"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Mergers" means the mergers of (i) B&B ACQUISITION CORP. with and into B&B
ON THE BEACH, INC. and (ii) BRINDLEY ACQUISITION CORP. with and into BRINDLEY &
BRINDLEY REALTY & DEVELOPMENT, INC., pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and other applicable
state laws.
"NEWCO" or "NEWCOS" has the meaning set forth in the first paragraph of
this Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of each
respective NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANIES.
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"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANIES and any affiliated, combined,
consolidated, unitary or similar group of which any COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
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"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporations" shall mean each of the COMPANIES as the surviving
parties in the Mergers.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
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"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
B&B ACQUISITION CORP.
BRINDLEY ACQUISITION CORP.
By:/s/ Leonard Potter
----------------------------------
Leonard Potter
Vice President
B&B ON THE BEACH, INC.
BRINDLEY & BRINDLEY REALTY & DEVELOPMENT, INC.
By:/s/ Douglas R. Brindley
----------------------------------
Name: Douglas R. Brindley
---------------------------
Title: President
--------------------------
STOCKHOLDERS:
/s/ Douglas R. Brindley
- ----------------------------------
Douglas R. Brindley
/s/ Betty Shotton Brindley
- ----------------------------------
Betty Shotton Brindley
EXHIBIT 2.3
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.,
COASTAL REALTY ACQUISITION LLC and
COASTAL MANAGEMENT ACQUISITION CORP.
(each a subsidiary of Vacation Properties International, Inc.),
COASTAL RESORTS REALTY L.L.C.
COASTAL RESORTS MANAGEMENT, INC.
and
the STOCKHOLDERS named herein
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Charter Documents and Board of Directors of Surviving Corporations...4
1.4 Certain Information With Respect to the Capital Stock of the
COMPANIES, VPI and NEWCOS..........................................5
1.5 Effect of Merger.....................................................6
2. CONVERSION OF STOCK......................................................7
2.1 Manner of Conversion.................................................7
3. DELIVERY OF MERGER CONSIDERATION.........................................9
3.1 Delivery of VPI Stock and Cash.......................................9
3.2 Delivery of COMPANY Stock............................................9
3.3 Balance Sheet Test..................................................10
4. CLOSING.................................................................10
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS............12
(A) Representations and Warranties of COMPANIES and STOCKHOLDERS........12
5.1 Due Organization.................................................12
5.2 Authority........................................................13
5.3 Capital Stock of the COMPANIES...................................13
5.4 Transactions in Capital Stock....................................14
5.5 No Bonus Shares..................................................14
5.6 Subsidiaries.....................................................14
5.7 Predecessor Status; etc..........................................15
5.8 Spin-off by the COMPANIES........................................15
5.9 Financial Statements.............................................15
5.10 Liabilities and Obligations.....................................16
5.11 Accounts and Notes Receivable...................................17
5.12 Permits and Intangibles.........................................18
5.13 Environmental Matters...........................................19
5.14 Personal Property...............................................20
5.15 Significant Customers...........................................21
5.16 Material Contracts and Commitments..............................21
5.17 Real Property...................................................22
5.18 Insurance.......................................................23
5.19 Compensation; Employment Agreements; Organized Labor Matters....23
5.20 Employee Plans..................................................24
5.21 Compliance with ERISA...........................................25
5.22 Conformity with Law; Litigation.................................27
5.23 Taxes...........................................................28
5.24 No Violations...................................................31
5.25 Government Contracts............................................31
5.26 Absence of Changes..............................................31
5.27 Deposit Accounts; Powers of Attorney............................33
5.28 Validity of Obligations.........................................34
5.29 Relations with Governments......................................34
5.30 Disclosure......................................................35
5.31 Prohibited Activities...........................................36
(B) Representations and Warranties of STOCKHOLDERS......................36
5.32 Authority; Ownership............................................36
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5.33 Preemptive Rights.................................................
5.34 No Intention to Dispose of VPI Stock............................36
6. REPRESENTATIONS OF VPI AND NEWCOS.......................................37
6.1 Due Organization....................................................37
6.2 Authorization.......................................................38
6.3 Capital Stock of VPI and NEWCOS.....................................38
6.4 Transactions in Capital Stock.......................................39
6.5 Subsidiaries........................................................39
6.6 Financial Statements................................................39
6.7 Liabilities and Obligations.........................................40
6.8 Conformity with Law; Litigation.....................................40
6.9 No Violations.......................................................40
6.10 Validity of Obligations............................................41
6.11 VPI Stock..........................................................41
6.12 No Side Agreements.................................................42
6.13 Business; Real Property; Material Agreements.......................42
6.14 Taxes..............................................................42
6.15 Completion of Due Diligence........................................45
6.16 Disclosure........................................................45
6.17 Tax Treatment......................................................45
7. COVENANTS PRIOR TO CLOSING..............................................46
7.1 Access and Cooperation; Due Diligence...............................46
7.2 Conduct of Business Pending Closing.................................47
7.3 Prohibited Activities...............................................48
7.4 No Shop.............................................................50
7.5 Notice to Bargaining Agents.........................................51
7.6 Agreements..........................................................51
7.7 Notification of Certain Matters.....................................51
7.8 Amendment of Schedules..............................................52
7.9 Cooperation in Preparation of Registration Statement................54
7.10 Final Financial Statements.........................................55
7.11 Further Assurances.................................................56
7.12 Authorized Capital.................................................56
7.13 Best Efforts to Consummate Transaction.............................56
7.14 Additional Purchase of VPI Stock...................................56
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......57
8.1 Representations and Warranties......................................57
8.2 Performance of Obligations..........................................57
8.3 No Litigation.......................................................58
8.4 Opinion of Counsel..................................................58
8.5 Registration Statement..............................................58
8.6 Consents and Approvals..............................................58
8.7 Good Standing Certificates..........................................58
8.8 No Material Adverse Change..........................................59
8.9 Closing of IPO......................................................59
8.10 Secretary's Certificate............................................59
8.11 Employment Agreements..............................................59
8.12 Directors and Officers Insurance...................................60
8.13 Stock Options......................................................60
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS...................60
9.1 Representations and Warranties......................................61
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9.2 Performance of Obligations..........................................61
9.3 No Litigation.......................................................61
9.4 Secretary's Certificate.............................................61
9.5 No Material Adverse Effect..........................................62
9.6 STOCKHOLDERS' Release...............................................62
9.7 Termination of Related Party Agreements.............................62
9.8 Opinion of Counsel..................................................62
9.9 Consents and Approvals..............................................62
9.10 Good Standing Certificates.........................................63
9.11 Registration Statement.............................................63
9.12 Employment Agreements..............................................63
9.13 Closing of IPO.....................................................63
9.14 FIRPTA Certificate.................................................63
9.15 Insurance..........................................................63
9.16 Lockup Agreement...................................................64
9.17 Letter of Representation...........................................64
9.18 Termination of Defined Benefit Plans...............................64
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................64
10.1 Release From Guarantees; Repayment of Certain Obligations..........64
10.2 Preservation of Tax and Accounting Treatment.......................65
10.3 Preparation and Filing of Tax Returns..............................65
10.4 Appointment of Directors...........................................67
10.5 Preservation of Employee Benefit Plans.............................67
10.6 Maintenance of Books...............................................67
10.7 Securities Covenants...............................................67
10.8 VPI Noncompetition Covenant........................................68
10.9 VPI Right to Manage................................................68
11. INDEMNIFICATION........................................................70
11.1 General Indemnification by the STOCKHOLDERS........................70
11.2 Indemnification by VPI.............................................71
11.3 Third Person Claims................................................72
11.4 Exclusive Remedy...................................................74
11.5 Limitations on Indemnification.....................................75
12. TERMINATION OF AGREEMENT...............................................76
12.1 Termination........................................................76
12.2 Liabilities in Event of Termination................................77
13. NONCOMPETITION.........................................................78
13.1 Prohibited Activities..............................................78
13.2 Damages............................................................80
13.3 Reasonable Restraint...............................................80
13.4 Severability; Reformation..........................................81
13.5 Independent Covenant...............................................82
13.6 Materiality........................................................82
13.7 Limitation.........................................................82
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................83
14.1 STOCKHOLDERS.......................................................83
14.2 VPI AND NEWCOS.....................................................84
14.3 Damages............................................................85
14.4 Survival...........................................................85
14.5 Return of Data Submitted...........................................85
15. TRANSFER RESTRICTIONS..................................................86
15.1 Transfer Restrictions..............................................86
15.2 Certain Transfers..................................................86
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16. SECURITIES LAW REPRESENTATIONS.........................................87
16.1 Compliance with Law................................................87
16.2 Economic Risk; Sophistication......................................88
17. REGISTRATION RIGHTS....................................................88
17.1 Piggyback Registration Rights......................................88
17.2 Demand Registration Rights.........................................89
17.3 Registration Procedures............................................91
17.4 Underwriting Agreement.............................................91
17.5 Availability of Rule 144...........................................91
17.6 Registration Rights Indemnification................................92
18. GENERAL................................................................97
18.1 Press Releases.....................................................97
18.2 Cooperation........................................................98
18.3 Successors and Assigns; Third Party Beneficiaries..................98
18.4 Entire Agreement...................................................98
18.5 Counterparts.......................................................99
18.6 Brokers and Agents.................................................99
18.7 Expenses...........................................................99
18.8 Notices...........................................................100
18.9 Governing Law.....................................................102
18.10 Exercise of Rights and Remedies..................................102
18.11 Time.............................................................102
18.12 Reformation and Severability.....................................102
18.13 Remedies Cumulative..............................................102
18.14 Captions.........................................................102
18.15 Amendments and Waivers...........................................102
18.16 Incorporation by Reference.......................................103
18.17 Defined Terms....................................................103
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), COASTAL REALTY ACQUISITION LLC, a Delaware limited
liability company, and COASTAL MANAGEMENT ACQUISITION CORP., a Delaware
corporation (individually, a "NEWCO," and collectively, the "NEWCOS"), COASTAL
RESORTS REALTY L.L.C., a Delaware limited liability company, COASTAL RESORTS
MANAGEMENT, INC., a Delaware corporation (each, a "COMPANY," and collectively,
the "COMPANIES"), and Joshua M. Freeman, T. Michael Nally and CMF Coastal
Resorts L.L.C., a Delaware limited liability company (the "STOCKHOLDERS").
WHEREAS, each NEWCO is a corporation or a limited liability company
duly organized and existing under the laws of the State of Delaware, with
Coastal Realty Acquisition, L.L.C., having been formed on March 5, 1998,
and Coastal Management Acquisition Corp. having been formed on March 4,
1998, solely for the purpose of completing the transactions set forth
herein, and each NEWCO is a wholly-owned subsidiary of VPI;
WHEREAS, the Board of Directors of each NEWCO and each COMPANY (which
together are hereinafter collectively referred to as the "Constituent
Corporations") deem it advisable and in the best interests of the
Constituent Corporations and their respective stockholders that (i) COASTAL
REALTY ACQUISITION LLC merge with and into COASTAL RESORTS REALTY L.L.C.
and (ii) COASTAL MANAGEMENT ACQUISITION CORP. merge with and into COASTAL
RESORTS MANAGEMENT, INC., pursuant to this Agreement and the applicable
provisions of the laws of the State of Delaware;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and
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Plan of Organization," with each of B&B On The Beach, Inc., a North
Carolina corporation, Brindley & Brindley Realty & Development, Inc., a
North Carolina corporation, Collection of Fine Properties, Inc., a Colorado
corporation, Ten Mile Holdings, Ltd., a Colorado corporation, First Resort
Software, Inc., a Colorado corporation, Hotel Corporation of the Pacific,
Inc., a Hawaii corporation, Houston and O'Leary Company, a Colorado
corporation, Jupiter Property Management at Park City, Inc., a Utah
corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation,
The Maury People, Inc., a Massachusetts corporation, Howey Acquisition,
Inc., a Florida corporation, Realty Consultants, Inc., a Florida
corporation, Resort Property Management, Inc., a Utah corporation,
Telluride Resort Accommodations, Inc., a Colorado corporation,
Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management
Company, a Georgia corporation, and Whistler Chalets Limited, a British
Columbia corporation, and their respective stockholders in order to acquire
additional businesses (the COMPANIES, together with each of the entities
with which VPI has entered into the Other Agreements, are collectively
referred to herein as the "Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
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WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of each
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANIES to VPI; NOW,
THEREFORE, in consideration of the premises and of the mutual agreements,
representations, warranties, provisions and covenants herein contained, the
parties hereto hereby agree as follows:
1. THE MERGERS
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGERS. At the Effective Time of the Mergers,
(i) COASTAL REALTY ACQUISITION LLC shall be merged with and into COASTAL RESORTS
REALTY L.L.C. and (ii) COASTAL MANAGEMENT ACQUISITION CORP. shall be merged with
and into COASTAL RESORTS MANAGEMENT, INC., each in accordance with the Articles
of Merger, the separate existence of each NEWCO shall cease and each COMPANY
shall be the surviving party in the Mergers (each COMPANY is sometimes
hereinafter referred to as the "Surviving Corporation" and collectively the
COMPANIES are sometimes hereinafter referred to as the "Surviving
Corporations"). Each Merger will be effected in a single transaction.
1.3 CHARTER DOCUMENTS AND BOARD OF DIRECTORS OF SURVIVING CORPORATIONS. At
the Effective Time of each Merger:
(i) the Certificate of Incorporation then in effect of each COMPANY
that is a corporation shall be the Certificate of Incorporation of the
Surviving Corporation in such Merger until changed as provided by law, and
the Limited Liability Company Operating Agreement (as may be amended and
restated pursuant hereto) of each COMPANY that is a
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limited liability company shall be the Limited Liability Company Operating
Agreement of the Surviving Corporation in such Merger until changed as
provided by law;
(ii) the Bylaws then in effect of each NEWCO that is a corporation
shall become the Bylaws of the Surviving Corporation in such Merger; and
subsequent to the Effective Time of such Merger, such Bylaws shall be the
Bylaws of the Surviving Corporation in such Merger until they shall
thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation that is a
corporation shall consist of the persons who are on the Board of Directors,
immediately prior to the Effective Time of the Merger, of the COMPANY
merging into such Surviving Corporation, provided that the Chief Executive
Officer of VPI shall be elected as a director of each Surviving Corporation
effective as of the Effective Time of each Merger; the Board of Directors
of each Surviving Corporation shall hold office subject to the provisions
of the laws of the state in which the Surviving Corporation is located and
of the Certificate of Incorporation and Bylaws of the Surviving
Corporation; the Managing Member of the Surviving Corporation that is a
limited liability company shall be as set forth in such Surviving
Corporation's amended and restated Limited Liability Company Operating
Agreement (unless the context otherwise requires, the term "Board of
Directors" when used in this Agreement with respect to Coastal Resorts
Realty L.L.C. shall mean such entity's Managing Member); and
(iv) the officers of each COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation into which such COMPANY is merged in the same capacity or
capacities, and effective upon the Effective Time of each Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of each Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of each Surviving Corporation, each of such officers to serve,
subject to the provisions of the
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Certificate of Incorporation and Bylaws of the Surviving Corporation, until
his or her successor is duly elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES,
VPI AND NEWCOS. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the COMPANIES,
VPI and the NEWCOS as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10)
shares are issued and outstanding.
1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of
the Mergers shall be as provided in the applicable provisions of the General
Corporation Law and the Limited Liability Company Act of the State of Delaware
(the "Delaware GCL"). Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of the COMPANIES shall continue unaffected and unimpaired by the
Mergers and the corporate franchises, existence and rights of each NEWCO shall
be merged with and into the respective COMPANIES, and the COMPANIES, as the
Surviving Corporations, shall be fully vested therewith. At the Effective Time
of the Mergers, the separate existence of each NEWCO shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporations shall
possess all of the rights, privileges, immunities and franchises, of a public,
as well as of a private, nature, and all property, real, personal and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
Taxes, including those due and owing and those accrued, and all other choses in
action, and all and
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every other interest of or belonging to or due to each NEWCO and each COMPANY
shall be taken and deemed to be transferred to, and vested in, the respective
Surviving Corporations without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectively the property of the respective Surviving Corporations
as they were of each NEWCO and each COMPANY; and the title to any real estate,
or interest therein, whether by deed or otherwise, under the laws of the state
of incorporation vested in each respective NEWCO and COMPANY, shall not revert
or be in any way impaired by reason of the Mergers. Except as otherwise provided
herein, each Surviving Corporation shall thenceforth be responsible and liable
for all of the liabilities and obligations of the respective NEWCO and COMPANY
and any claim existing, or action or proceeding pending, by or against a NEWCO
or COMPANY may be prosecuted as if the Merger involving such NEWCO or COMPANY
had not taken place, or the respective Surviving Corporation may be substituted
in their place. Neither the rights of creditors nor any liens upon the property
of a NEWCO or COMPANY shall be impaired by the Merger involving such NEWCO or
COMPANY, and all debts, liabilities and duties of such NEWCO and COMPANY shall
attach to the respective Surviving Corporation, and may be enforced against such
Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of each COMPANY (collectively, "COMPANY Stock") and
(ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time
of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock
of the Surviving Corporations, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock of each COMPANY issued and
outstanding immediately prior to the Effective Time of each respective
Merger, by virtue of
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such Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and (2) the right to receive
the amount of cash, subject to adjustment pursuant to Section 3.3 hereof,
set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by each COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefore; and
(iii) each share of NEWCO Stock of each NEWCO issued and outstanding
immediately prior to the Effective Time of each respective Merger, shall,
by virtue of such Merger and without any action on the part of VPI,
automatically be converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation involved in such Merger, which
shall constitute all of the issued and outstanding shares of common stock
of such Surviving Corporation immediately after the Effective Time of such
Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Mergers, VPI shall have no
class of capital stock (including preferred stock) issued and outstanding other
than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers
and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates (except in the
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case of uncertificated membership interests) representing shares of COMPANY
Stock, shall, upon surrender of such certificates (or, in the case of
uncertificated membership interests, the rights representing such interests),
receive the respective number of shares of VPI Stock and the amount of cash
(subject to adjustment pursuant to Section 3.3) set forth on Annex III hereto,
said cash to be payable by wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock
of the COMPANY that is a corporation, duly endorsed in blank by the
STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense,
affixed and canceled. With respect to the COMPANY that is a limited liability
company, the STOCKHOLDERS and VPI shall execute and deliver at the Pre-Closing
(subject to Section 4) an amended and restated Limited Liability Company
Operating Agreement providing for the transfer of all such COMPANY's membership
interests. The STOCKHOLDERS agree promptly to cure any deficiencies with respect
to the endorsement of the stock certificates or other documents of conveyance
with respect to such COMPANY Stock or with respect to the stock powers
accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of each COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall
result in a corresponding
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dollar-for-dollar reduction in the cash portion of the consideration paid to the
STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment
shall be made to effect the intent of this Section 3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Mergers (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Mergers) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Mergers or the conversion and delivery of the shares and wire
transfer(s) referred to in Section 3 hereof, each of which actions shall only be
taken upon the Closing Date as herein provided. In the event that there is no
Closing Date and this Agreement terminates, VPI and the NEWCOS hereby covenant
and agree to do all things required by Delaware law and all things which counsel
for the COMPANIES advise VPI and/or the NEWCOS are required by applicable laws
of the State in which the COMPANIES are incorporated in order to rescind the
effects, if any, of the filing of the Articles of Merger as described in this
Section and to pay all related costs of the COMPANIES directly associated with
such rescission. The taking of the actions described in clauses (i) and (ii)
above (the "Pre-Closing") shall take place on the pre-closing date (the
"Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x)
the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Mergers shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a wire transfer(s) in an amount equal to
the cash portion of the consideration which the STOCKHOLDERS shall be entitled
to receive pursuant to the Mergers referred to in Section 3 hereof shall occur
and (z) the closing with respect to the IPO shall be completed. The taking of
the actions
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described in the preceding clauses (x), (y) and (z) shall constitute the closing
of the transactions hereunder (the "Closing"), and the date on which the actions
described in the preceding clauses (x), (y) and (z) occur shall be referred to
as the "Closing Date." Except as provided in Sections 8 and 9 hereof with
respect to actions to be taken on the Closing Date, during the period from the
Pre-Closing Date to the Closing Date this Agreement may only be terminated by a
party if the underwriting agreement in respect of the IPO is terminated pursuant
to the terms of such agreement. This Agreement shall in any event terminate if
the Closing Date has not occurred within 15 business days of the Pre-Closing
Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.
Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANIES and the STOCKHOLDERS agrees that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 5.23 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
5.23 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, VPI actually incurs
liability under the 1933 Act, the 1934 Act or any other federal or state
securities laws as a result of a breach of a representation or warranty by the
COMPANIES or the STOCKHOLDERS, the representations and warranties set forth
herein shall survive until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for such purposes. For purposes
of
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this Section 5, the term "COMPANY" shall mean and refer to each COMPANY and all
of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. Each COMPANY is a corporation or limited liability
company, as the case may be, duly organized, validly existing and in good
standing under the laws of the state of its incorporation or formation, and such
COMPANY is duly authorized and qualified to do business under all applicable
laws, regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except (i) as set
forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified
would not have a material adverse effect on the business, operations, affairs,
properties, assets, condition (financial or otherwise) or, to the knowledge of
such COMPANY or the STOCKHOLDERS, prospects of such COMPANY taken as a whole (as
used herein with respect to such COMPANY, or with respect to any other person, a
"Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which
each COMPANY is incorporated or formed and contains a list of all such
jurisdictions in which each COMPANY is authorized or qualified to do business.
True, complete and correct copies of the Certificate of Incorporation and Bylaws
or the Certificate of Formation and Operating Agreement, each as amended, of
each COMPANY (the "Charter Documents") are all attached hereto as Schedule 5.1.
The stock records of each COMPANY, as heretofore made available to VPI, are
correct and complete in all material respects. There are no minutes in the
possession of each COMPANY or the STOCKHOLDERS which have not been made
available to VPI, and all of such minutes are correct and complete in all
material respects. Except as set forth on Schedule 5.1, the most recent minutes
of each COMPANY, which are dated no earlier than ten business days prior to the
date hereof, affirm and ratify all prior acts of such COMPANY, and of its
officers and directors on behalf of such COMPANY.
5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority
to enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital
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stock of each COMPANY are owned by the STOCKHOLDERS in the amounts set forth in
Annex IV and further, except as set forth on Schedule 5.3, are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of each COMPANY have been duly
authorized and validly issued, are (in the case of the COMPANY that is a
corporation) fully paid and nonassessable, are owned of record and beneficially
by the STOCKHOLDERS and further, such shares were offered, issued, sold and
delivered by such COMPANY in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder
of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates any of the COMPANIES to issue any
of its capital stock; (ii) neither COMPANY has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (iii) neither the voting stock structure of each COMPANY
nor the relative ownership of shares among any of their respective stockholders
has been altered or changed in contemplation of the Mergers and/or the VPI Plan
of Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of each COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each
COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary
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and the number of shares or interests of each Subsidiary which are issued and
outstanding, all of which shares (except as set forth on Schedule 5.6) are owned
by the COMPANIES as set forth on Schedule 5.6, free and clear of all liens,
security interests, pledges, voting trusts, equities, restrictions, encumbrances
and claims of every kind. Except as set forth on Schedule 5.6, each COMPANY does
not presently own, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity nor is
any COMPANY, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of each COMPANY, including the names of any
entities acquired by each COMPANY (by stock purchase, merger or otherwise) or
owned by each COMPANY or from whom any of the COMPANIES previously acquired
material assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of any of the
COMPANIES since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of each of
the COMPANIES: the COMPANY's audited (i) Balance Sheets, if any, as of December
31, 1997 and 1996; (ii) Statements of Operations, if any, for each of the years
in the two-year period ended December 31, 1997 (December 31, 1997 being
hereinafter referred to as the "Balance Sheet Date"); (iii) Statements of
Changes in Stockholders' Equity, if any, for each of the years in the two-year
period ended on the Balance Sheet Date; and (iv) Statements of Cash Flows, if
any, for each of the years in the two-year period ended on the Balance Sheet
Date. Except as set forth on Schedule 5.9, such Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated (except as noted thereon or
on Schedule 5.9). Except as set forth on
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Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present
fairly the financial position of such COMPANY as of the dates indicated thereon,
and such Statements of Operations, Statements of Changes in Stockholders' Equity
and Statements of Cash Flows present fairly the results of operations for the
periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance
Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the
COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of such COMPANY (including all liabilities in excess of $10,000) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements, together with true, correct and
complete copies of such documents. Except as set forth on Schedule 5.10, since
the Balance Sheet Date neither COMPANY has incurred any material liabilities of
any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business. Each of the COMPANIES has also delivered to VPI on
Schedule 5.10, in the case of those contingent liabilities related to pending
or, to the knowledge of the COMPANIES, threatened litigation, or other
liabilities which are not fixed or are being contested, the following
information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
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5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of such COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate
list of all receivables obtained subsequent to the Balance Sheet Date up to the
Pre-Closing Date and (y) an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the
extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a
writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
each COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of such COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses,
franchises, permits and other governmental authorizations that are necessary for
the operation of the business of such COMPANY as now conducted, and such COMPANY
has delivered to VPI an accurate list and summary description (which is set
forth on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by such COMPANY (including interests in software or
other technology systems, programs and intellectual property) (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 5.13). The licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 are valid, and such COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. Each of the
COMPANIES has
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conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
and is not in violation of any of the foregoing, except for inadvertent,
immaterial noncompliance with such requirements, standards, criteria and
conditions (provided that any such noncompliance shall be deemed a breach of
this Section 5.12 for purposes of Section 11 hereof). Except as specifically
provided on Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to each COMPANY by, any such licenses,
franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each
of the COMPANIES has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) each COMPANY has obtained and adhered to all permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.13, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by each COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by such
COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no
on-site or off-site location to which such COMPANY has transported or disposed
of Hazardous Wastes and
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Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) such
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of such COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
such COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by such COMPANY with a value
in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that
are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by each COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the
knowledge of such COMPANY or the
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STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
each COMPANY's annual revenues as of the Balance Sheet Date. Except to the
extent set forth on Schedule 5.15, none of any COMPANY's significant customers
(or persons or entities that are sources of a significant number of customers)
have canceled or substantially reduced or, to the knowledge of any COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by such COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on
Schedule 5.16 all material contracts, commitments and similar agreements to
which such COMPANY currently is a party or by which it or any of its properties
are bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. Each COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. Each COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by such COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet
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Date, and all other real property, if any, used by each COMPANY in the conduct
of its business. Each COMPANY has good and insurable title to the real property
owned by it, including those reflected on Schedule 5.14, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of each COMPANY with respect to real property owned by such COMPANY.
Each COMPANY has also delivered to VPI an accurate list of real property
leased by such COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by such COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery thereof by the parties
thereto other than such COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of such COMPANY, the
STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the
other parties (and their successors) thereto in accordance with their respective
terms.
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5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by such COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that such COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Closing Date. No insurance carried by such
COMPANY has ever been canceled by the insurer and such COMPANY has never been
unable to obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of such COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or
subject to (and none of their respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of any
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign
to establish such representation is in progress and (iv) there is no pending or,
to the best of each COMPANY's knowledge, threatened labor dispute involving any
COMPANY and any group of its
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employees nor has any COMPANY experienced any labor interruptions over the past
three years. Each COMPANY believes its relationship with employees to be good.
Each COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of such COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20,
neither COMPANY sponsors, maintains or contributes to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or
accrue or pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation
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arrangement). Neither COMPANY has sponsored, maintained or contributed to any
employee pension benefit plan other than the plans, agreements, arrangements and
trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of such
COMPANY's employees.
All accrued contribution obligations of each COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of such COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of each COMPANY that are currently maintained or contributed to by such
COMPANY or cover employees or former employees of such COMPANY listed on
Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to any such
plan or any COMPANY, has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each
COMPANY has not incurred any liability
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for excise tax or penalty due to the Internal Revenue Service nor any liability
to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS
further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) each COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) each COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which any COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than a COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes such COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
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shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Each COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations,
and is not in violation of any of the foregoing.
5.23 TAXES.
(a) Each COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANIES or their respective officers or
employees responsible for maintaining the financial records of such COMPANY
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 5.23, there are no
examinations in progress (and the COMPANIES and their respective employees are
not aware of any proposed examinations) or claims against any COMPANY (including
liens against the COMPANY's assets) for federal, state, local and other Taxes
(including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for Taxes, whether
pending or threatened, has been received. Except as set forth on Schedule 5.23,
neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
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(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by any COMPANY, any member of an affiliated or
consolidated group which includes or included any of the COMPANIES, or with
respect to any payment made or deemed made by any COMPANY, required to be paid
by the date hereof, have been paid. All amounts required to be deposited,
withheld or collected under applicable federal, state, local or other Tax laws
and regulations by any COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, neither COMPANY has been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). Neither COMPANY is a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, neither COMPANY has (i)
assumed or is liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which any COMPANY
or such person or entity was the surviving corporation or a consolidation) or
(ii) indemnified any other person or entity or otherwise agreed to pay on behalf
of any other person or entity any Taxes arising from or which may be asserted on
the basis of any Tax treatment adopted with respect to all or any aspect of such
business acquisition transaction.
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(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of each COMPANY for its last three (3) fiscal years or
such shorter period of time as such COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) Each COMPANY has a taxable year ended on the date set forth as
such on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, each COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) Neither COMPANY is an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) Neither COMPANY has filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code or agreed to have section
341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as
defined in section 341(f) of the Code) owned by such COMPANY.
5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter
Document. Neither COMPANY or, to the knowledge of either COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of each
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COMPANY under the Material Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.24, none
of the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.24, none of the Material Documents
prohibits the use or publication by any COMPANY, VPI or any NEWCO of the name of
any other party to such Material Document, and none of the Material Documents
prohibits or restricts either COMPANY from freely providing services to any
other customer or potential customer of such COMPANY, VPI, the NEWCOS or any
Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither
COMPANY is now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of any COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of any
COMPANY;
(iii) any change in the authorized capital of any COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
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(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANIES to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of any COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by any COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of any COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of any COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to any COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of any COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
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(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of any COMPANY's business;
(xi) any waiver of any material rights or claims of any COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which any COMPANY is a party;
(xiii) any transaction by any COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by any COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has
delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as
of the date of the Agreement of:
(i) the name of each financial institution in which each
COMPANY has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held; (iii)
the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from each COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of the COMPANIES and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of each
of the COMPANIES and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of each
COMPANY, enforceable against such COMPANY in accordance with its terms except as
may be limited by (i) bankruptcy, insolvency or other similar laws of general
application relating to or affecting
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the enforcement of creditors' rights generally or (ii) the discretionary power
of a court exercising equity jurisdiction. The individual signing this Agreement
on behalf of each COMPANY has the legal power, authority and capacity to bind
such COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause any COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of each COMPANY
for the time periods with respect to which such information was requested. Each
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which any COMPANY is a party, or to which their respective properties are
subject, or (ii) any other fact or circumstance regarding any COMPANY (which
fact or circumstance was, or should reasonably, after due inquiry, have been
known to any COMPANY) that is not disclosed pursuant to this Agreement or to
such delivered documents.
(b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree
(i) that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to any COMPANY, the
STOCKHOLDERS or any other
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person affiliated or associated with any COMPANY for any failure of the
Registration Statement to become effective, the IPO to occur at a particular
price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither
COMPANY has, between the Balance Sheet Date and the date hereof, taken any of
the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCOS
VPI and the NEWCOS jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and, subject to Section 7.8 hereof, shall be true at the
time of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS
(the "VPI Charter Documents") are all attached hereto as Annex II. The VPI
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Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS
executing this Agreement have the authority to enter into and bind VPI and the
NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full
legal right, power and authority to enter into and perform this Agreement and
the Merger, and all required approvals of the shareholders and board of
directors of VPI and NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date,
the authorized capital stock of VPI and the NEWCOS is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of each NEWCO are owned by VPI and all of the issued and
outstanding shares of the capital stock of VPI are owned by the persons set
forth on Annex V hereof, and further are owned, in each case, free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. Upon consummation of the IPO, the number
of outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and each
NEWCO have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by VPI and the persons set
forth on Annex V, respectively, and further, such shares were offered, issued,
sold and delivered by VPI and the NEWCOS in compliance with all applicable state
and federal laws concerning the issuance of securities. Further, none of such
shares was issued in violation of the preemptive rights of any past or present
stockholder of VPI or the NEWCOS.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or the NEWCOS to
issue any of their respective authorized but unissued capital stock; and (ii)
neither VPI nor the NEWCOS has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend
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or make any distribution in respect thereof. Schedule 6.4 also includes complete
and accurate copies of all stock option or stock purchase plans, including a
list, accurate as of the date hereof, of all outstanding options, warrants or
other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries
except for the NEWCOS and each of the companies identified as "NEWCO" in each of
the Other Agreements. Except as set forth in the preceding sentence, neither VPI
nor any NEWCO presently owns, of record or beneficially, or controls, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity nor
is VPI or any NEWCO, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and the NEWCOS have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or
regulation, or of any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
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instrumentality having jurisdiction over either of them; and except to the
extent set forth on Schedule 6.8, there are no material claims, actions, suits
or proceedings, pending or, to the knowledge of VPI or the NEWCOS, threatened,
against or affecting VPI or the NEWCOS, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over either of them and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. VPI and the NEWCOS have conducted and are conducting their
respective businesses in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and are not in violation of any of the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI
Charter Document. None of VPI, the NEWCOS, or, to the knowledge of VPI and the
NEWCOS, any other party thereto, is in default under any lease, instrument,
agreement, license or permit to which VPI or any NEWCO is a party, or by which
VPI or any NEWCO, or any of their respective properties, are bound
(collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and
the NEWCOS under the VPI Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the VPI Documents
or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the
VPI Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect and consummation
of the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and the NEWCOS and the performance of the transactions contemplated
herein have been duly and validly
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authorized by the respective Boards of Directors of VPI and the NEWCOS and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of VPI and the NEWCOS, enforceable
against each of VPI and the NEWCOS in accordance with its terms except as
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights generally, and the
individuals signing this Agreement on behalf of VPI and the NEWCOS have the
legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will
enter into any agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies or VPI other than the Other Agreements
and the agreements specifically contemplated by each of the Other Agreements,
including the employment agreements referred to therein, and none of VPI, the
NEWCOS, their equity owners or affiliates have received any cash compensation or
payments in connection with this transaction except for reimbursement of
out-of-pocket expenses which are necessary or appropriate to this transaction.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any
NEWCO has conducted any operations or business since inception other than
activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO
owns or has at any time owned any real property or any material personal
property or is a party to any other agreement, except as listed on Schedule 6.13
and
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except that VPI is a party to the Other Agreements and the agreements
contemplated thereby and to such agreements as will be filed as Exhibits to the
Registration Statement.
6.14 TAXES
(a) VPI and the NEWCOS have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or the NEWCOS or their officers or employees
responsible for maintaining the financial records of VPI and the NEWCOS
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 6.14, there are no
examinations in progress (and VPI and the NEWCOS and their employees are not
aware of any proposed examinations) or claims against VPI or the NEWCOS
(including liens against assets of VPI or the NEWCOS) for federal, state, local
and other Taxes (including penalties and interest) for any period or periods
prior to and including the date hereof and no notice of any claim for Taxes,
whether pending or threatened, has been received. Except as set forth on
Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or
consolidated group which includes or included VPI or the NEWCOS, or with respect
to any payment made or deemed made by VPI or the NEWCOS, required to be paid by
the date hereof, have been paid. All amounts required to be deposited, withheld
or collected under applicable federal, state, local or other Tax laws and
regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the
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respective governmental agencies or set aside and secured in accounts for such
purpose or secured and reserved against and entered on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
has been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to
or bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
(i) has assumed or is liable for any Taxes of any other person or entity,
including any predecessor corporation or partnership, as a result of any
purchase of assets or other business acquisition transaction (other than a
merger in which VPI or the NEWCOS or such person or entity was the surviving
corporation or a consolidation) and (ii) has indemnified any other person or
entity or otherwise agreed to pay on behalf of any other person or entity any
Taxes arising from or which may be asserted on the basis of any Tax treatment
adopted with respect to all or any aspect of such business acquisition
transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and the NEWCOS for their last three (3) fiscal
years or such shorter period of time as VPI or the NEWCOS shall have existed,
(ii) any Tax examinations commenced or closed or outstanding during their three
(3) most recent fiscal years, and (iii) currently outstanding extensions of
statutory limitations, are attached hereto as Schedule 6.14.
(g) VPI and the NEWCOS have a taxable year ended on the date set forth
as such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor the
NEWCOS' methods of accounting have changed in the past five years. No adjustment
to taxable income by
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reason of a change of accounting method is required in respect of any period for
which the statute of limitations has not expired.
(i) Neither VPI nor the NEWCOS is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on
Schedule 6.14.
(k) Neither VPI nor the NEWCOS has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANIES as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or the NEWCOS, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 The receipt by the STOCKHOLDERS of the shares of VPI Stock pursuant to
Section 3 hereof will qualify as an exchange pursuant to which gain is not
recognized under Section 351(a) of the Code, provided that the representations
of the STOCKHOLDERS set forth in the letter of representations (referenced in
the tax opinion letter to be delivered pursuant to Section 8.4 hereof) are true
and correct in all material respects.
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7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, each COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of such COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of such COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. Each COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI, the
NEWCOS, the STOCKHOLDERS and each COMPANY shall treat all information obtained
in connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of each COMPANY access to
all of VPI's and the NEWCOS' sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish each COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and
the NEWCOS will cooperate with each COMPANY, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
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Agreement. VPI will provide complete access to its operations and key officers
and employees to each COMPANY, its representatives and advisors on a continuing
basis through the Closing Date. Each COMPANY will cause all information obtained
in connection with the negotiation and performance of this Agreement to be
treated as confidential in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with such COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
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(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, neither COMPANY shall, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANIES to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $25,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $25,000 necessary or desirable for the conduct of the
businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of such COMPANY, provided
that such COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of such COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANIES
(except as set forth herein), including, but not limited to, the issuance
of any option, warrant, call, conversion
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right or commitment of any kind with respect to the COMPANIES' capital
stock or the purchase or other reacquisition of any outstanding shares for
treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, any COMPANY
or a merger, consolidation or business combination of any COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide VPI on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between such COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between each COMPANY and any STOCKHOLDER not reflecting fair market terms,
except such existing agreements as are set forth on Schedule 9.7. Such
termination agreements are listed on Schedule 7.6 and copies thereof are
attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY
shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any
event the occurrence or
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non-occurrence of which would be likely to cause any representation or warranty
of any COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate
in any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI and the NEWCOS shall give prompt notice to the COMPANIES of (i)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be likely to cause any representation or warranty of VPI or the
NEWCOS contained herein to be untrue or inaccurate in any material respect at or
prior to the Pre-Closing and (ii) any material failure of VPI or the NEWCOS to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 7.7 that is not accompanied by a proposed amendment or supplement to a
schedule pursuant to Section 7.8 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to Section 7.8, (ii) modify the
conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by any COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANIES consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or the NEWCOS that constitutes or reflects an event or occurrence that would
have a Material Adverse Effect may be made unless a majority of the Founding
Companies consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules
hereto shall be deemed to be the schedules as amended or supplemented pursuant
to this Section 7.8. In the event that one of the Other Founding Companies seeks
to amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANIES notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANIES do not give their consent, the
COMPANIES collectively may terminate this Agreement pursuant to Section 12.l(iv)
hereof. In the event that the COMPANIES seek to amend or supplement a Schedule
pursuant to this Section 7.8, and VPI and a majority of the Other Founding
Companies do not consent to such amendment or supplement, this Agreement shall
be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof.
In the event that VPI or any NEWCO seeks to amend or supplement a Schedule
pursuant to this Section 7.8 and a majority of the Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8. No amendment of or
supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement. For purposes of this
Section 7.8, consent to an amendment or supplement to a schedule pursuant to
Section 7.8 of this Agreement or one of the Other Agreements shall have been
deemed given by VPI or any Founding Company if no response is received within 24
hours following receipt by STOCKHOLDERS (including any parties designated herein
to receive copies of notices to STOCKHOLDERS) of notice of such amendment or
supplement (or sooner
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if required by the circumstances under which such consent is requested and so
requested in the notice). The provisions of this Section 7.8 shall be contained
in the Other Agreements executed in connection with the VPI Plan of
Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and
the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the
Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with VPI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS
agree promptly to advise VPI if, at any time during the period in which a
prospectus relating to the offering is required to be delivered under the 1933
Act, any information contained in the prospectus concerning any COMPANY or the
STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. VPI will give the
COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to
review and comment on a substantially final draft of the Registration Statement
prior to filing, and with respect to all amendments thereto, VPI will give the
COMPANIES and STOCKHOLDERS an opportunity to review and comment on those
portions of such amendments that relate to the COMPANIES. Insofar as the
information contained in the Registration Statement relates solely to the
COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration
Statement each COMPANY represents and warrants as to such information with
respect to itself, and each STOCKHOLDER represents and warrants, as to such
information with respect to the COMPANIES and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the
opportunity to review and approve such information. If, prior to the 25th
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day after the date of the final prospectus of VPI utilized in connection with
the IPO, the COMPANIES or the STOCKHOLDERS become aware of any fact or
circumstance which would change (or, if after the Closing Date, would have
changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS in
this Agreement or would affect any document delivered pursuant hereto in any
material respect, the COMPANIES and the STOCKHOLDERS shall immediately give
notice of such fact or circumstance to VPI. However, subject to the provisions
of Section 7.8, such notification shall not relieve either the COMPANIES or the
STOCKHOLDERS of their respective obligations under this Agreement, and, subject
to the provisions of Section 7.8, at the sole option of VPI, the truth and
accuracy of any and all warranties and representations of the COMPANIES, or on
behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on
the Pre-Closing Date and on the Closing Date, contained in this Agreement
(including the Schedules and Annexes hereto) shall be a precondition to the
consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANIES as of the end of all fiscal
quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANIES for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANIES or the results of its
operations from the financial statements as of the Balance Sheet Date. For the
fiscal quarter ending March 31, 1998, such financial statements shall be
delivered to VPI on or before April 21, 1998, unless the Closing Date shall have
occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the COMPANIES for the periods indicated thereon and shall be for
such dates and time periods as required by Regulation S-X under the 1933 Act and
the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
7.14 Additional Purchase of VPI Stock. VPI shall request that the
Underwriters make available for purchase by Joshua M. Freeman ("Freeman") up to
5% of the shares of VPI Stock to be issued in the IPO, excluding the shares of
VPI Stock to be made available to "friends and family" of VPI and the Founding
Companies (which amount available to friends and family is expected to be 5% of
the shares of VPI Stock to be issued in the IPO). Freeman acknowledges and
agrees that any allocation of shares of VPI Stock for purchase by Freeman shall
be subject to the Underwriters' discretion.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES
The obligations of STOCKHOLDERS and the COMPANIES with respect to actions
to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on
or prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and the NEWCOS contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and the NEWCOS contained in Section 6 shall be true and correct in all
material respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and the NEWCOS on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Mergers or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANIES as a result of which
the management of the COMPANIES deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have
delivered to the COMPANIES a certificate, dated as of a date no later than ten
days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of
State and in each state in which VPI or the NEWCOS are authorized to do
business, showing that each of VPI and the NEWCOS is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for VPI and the NEWCOS, respectively, for all periods prior to the
Pre-Closing Date have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or the NEWCOS which would constitute a Material
Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material
loss or damages to any of its properties or assets, whether or not covered by
insurance, which change, loss or damage materially affects or impairs the
ability of VPI and/or the NEWCOS to conduct their respective businesses.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a
certificate or certificates, dated the Pre-Closing Date and signed by the
secretary of VPI and of each NEWCO, certifying the truth and correctness of
attached copies of VPI's and the NEWCOS' respective Certificates of
Incorporation (including amendments thereto), Bylaws (including amendments
thereto), and resolutions of the boards of directors and, if required, the
stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into
this Agreement and the consummation of the transactions contemplated hereby.
Such certificate or certificates also shall be addressed to the Underwriters and
copies thereof shall be delivered to the Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS
The obligations of VPI and the NEWCOS with respect to actions to be taken
on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to
the Pre-Closing Date of all of the following conditions. The obligations of VPI
and the NEWCOS with respect to actions to be taken on the Closing Date are
subject to the satisfaction or waiver on or prior to the Closing Date of the
conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the
Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2,
9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied
shall be deemed to have been waived, except that no such waiver shall be deemed
to affect the survival of the representations and warranties of the COMPANIES
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
each COMPANY, certifying the truth and correctness of attached copies of each
COMPANY's Charter Documents and resolutions of the board of directors and the
STOCKHOLDERS approving each COMPANY's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate also
shall be addressed to the Underwriters and a copy thereof shall be delivered to
the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to any COMPANY which would constitute a Material Adverse
Effect, and neither COMPANY shall have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of any COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i)
any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii)
obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANIES and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between any of the COMPANIES and the
STOCKHOLDERS not reflecting fair market terms shall have been canceled effective
prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI
certificates, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in each
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which each COMPANY is authorized to do business, showing each COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for each COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of each COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the
incremental cost of having VPI so named as an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall
have signed an agreement with the Underwriters, in form and substance identical
to agreements signed by the Other Founding Companies and the Founding
Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS
covenant to hold all of the VPI Stock acquired hereunder for a period of at
least 180 days after the Closing Date except for transfers to immediate family
members, and trusts for the benefit of STOCKHOLDERS and/or immediate family
members, who agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
9.19 TRANSITION SERVICES AGREEMENT. Carl M. Freeman Associates, Inc. shall
have executed and delivered to the COMPANIES the Transition Services Agreement
in substantially the form attached hereto as Annex IX.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANIES, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANIES as being conducted at the Pre-Closing
Date.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANIES shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANIES, as defined in Section 1563 of the Code, to, provide to each of
the other parties hereto such cooperation
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and information as any of them reasonably may request in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Tax Returns pursuant to
this Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the transaction
as an exchange pursuant to which gain is not recognized under Section
351(a) of the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Joshua M.
Freeman to serve as a director of VPI effective as of the Closing Date. Such
designated person also shall be a member of the Executive Committee of the Board
of Directors effective as of the Closing Date, to serve subject to and in
accordance with the Certificate of Incorporation and Bylaws of VPI.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at any COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law;
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provided, however, that any new health insurance plan shall provide for coverage
for preexisting conditions for employees of each COMPANY who were covered by
such COMPANY's health insurance plan immediately prior to the Closing Date or as
otherwise required by law.
10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the
books and records of such COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
10.8 VPI NONCOMPETITION COVENANT. VPI shall not, during the three-year
period immediately following the Closing Date, for any reason whatsoever,
directly or indirectly, for itself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature, engage, as a shareholder, owner, partner or joint venturer, in any
residential or commercial property development or construction business or any
golf course development or golf course management business in Bethany Beach,
Delaware, or the 25-mile area around Bethany Beach, Delaware.
10.9 VPI RIGHT TO MANAGE. During the three-year period immediately
following the Closing Date, the COMPANIES shall have the exclusive listing to
market and sell (on substantially the same terms and conditions as set forth in
The Cove New Homes Sales and Marketing Agreement, dated as January 1, 1997, by
and between Coastal Resorts Realty, L.L.C. and Cove Resort Limited Partnership),
and Freeman (or his Affiliates) shall endeavor to cause the COMPANIES to manage
individual condominium units or other residential vacation properties,
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and any related homeowners' association or condominium association, developed by
Freeman (or his Affiliates) in Bethany Beach, Delaware, or the 25-mile area
around Bethany Beach, Delaware. It is understood and agreed that all such
agreements shall contain a provision permitting Freeman (or his Affiliates) to
terminate the agreements relating to listing and sale of units or other
residential vacation properties agreements upon the occurrence of: (1) breach of
such agreement as provided therein; or (2) a Change of Control (as defined
below). The provisions of this Section 10.9 shall terminate upon a Change of
Control. For purposes of this Section 10.9, a Change of Control shall be deemed
to have occurred if any of the following shall have occurred:
(i) any person or entity, other than VPI or an employee benefit plan
of the COMPANIES or VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended) of any voting security of the COMPANY or VPI and
immediately after such acquisition such person or entity is, directly or
indirectly, the Beneficial Owner of voting securities representing 50% or
more of the total voting power of all of the then-outstanding voting
securities of the COMPANY or VPI;
(ii) the following individuals no longer constitute a majority of the
members of the Board of Directors of VPI: (A) the individuals who, as of
the closing date of the IPO, constitute the Board of Directors of VPI (the
"Original Directors"); (B) the individuals who thereafter are elected to
the Board of Directors of VPI and whose election, or nomination for
election, to the Board of Directors of VPI was approved by a vote of at
least two-thirds (2/3) of the Original Directors then still in office (such
directors becoming
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"Additional Original Directors" immediately following their election); and
(C) the individuals who are elected to the Board of Directors of VPI and
whose election, or nomination for election, to the Board of Directors of
VPI was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election);
(iii) the stockholders of VPI shall approve a merger, consolidation,
recapitalization or reorganization of VPI, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such transaction which
would result in at least 75% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of VPI immediately prior to the transaction,
with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI of
all or a substantial portion of VPI's assets (i.e., 50% or more of the
total assets of VPI).
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless
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VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) at all times,
from and after the date of this Agreement until the Expiration Date, from and
against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by VPI, the NEWCOS and each COMPANY (as the Surviving Corporations) as
a result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or each COMPANY set forth herein or on the Schedules or
certificates delivered in connection herewith, (ii) any breach of any agreement
on the part of the STOCKHOLDERS or the COMPANIES under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to any
COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANIES
or the STOCKHOLDERS, contained in the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact relating solely to the COMPANIES or the STOCKHOLDERS required to
be stated therein or necessary to make the statements therein not misleading, or
(iv) the matters described on Schedule 11.1(iv) (relating to specifically
identified matters such as ongoing claims and/or litigation), which Schedule
shall be prepared by VPI, provided, however, (A) that in the case of any
indemnity arising pursuant to clause (iii) such indemnity shall not inure to the
benefit of VPI, the NEWCOS, the COMPANIES or the Surviving Corporations to the
extent that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to
VPI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
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11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS
of their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or the NEWCOS under this Agreement, (iii) any liabilities which the
STOCKHOLDERS may incur due to VPI's or the NEWCOS' failure to be responsible for
the liabilities and obligations of the COMPANIES as provided in Section 1 hereof
(except to the extent that VPI or the NEWCOS have claims against the
STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to VPI, the
NEWCOS or any of the Other Founding Companies contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, or arising out of or based upon
any omission or alleged omission to state therein a material fact relating to
VPI or the NEWCOS or any of the Other Founding Companies required to be stated
therein or necessary to make the statements therein not misleading, or (v) the
matters described on Schedule 11.2(v) (relating to specifically identified
matters including the release of the guarantees pursuant to Section 10.1
hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the
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"Indemnifying Party"), give the Indemnifying Party written notice of such claim
or the commencement of such action or proceeding. Such notice shall state the
nature and the basis of such claim and a reasonable estimate of the amount
thereof. The Indemnifying Party shall have the right to defend and settle
(subject to the consent of the Indemnified Party, as hereinafter provided), at
its own expense and by its own counsel, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by the Indemnifying Party, provided that if
counsel to the Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and the Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. Further,
absent a conflict, the Indemnified Party may select counsel and have such
counsel participate in such matter at the sole cost of the Indemnified Party.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested in writing by the Indemnifying Party, in
which event the Indemnified Party shall be reimbursed by the Indemnifying Party
for reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any
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such Third Person claim in which no admission of wrongdoing is required of the
Indemnified Party and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. If the Indemnifying Party does not undertake to
defend such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnifying Party shall reimburse the
Indemnified Party for the amount paid in such settlement and any other
liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed. All settlements hereunder shall effect a complete
release of the Indemnified Party, unless the Indemnified Party otherwise agrees
in writing. The parties hereto will make appropriate adjustments for insurance
proceeds in determining the amount of any indemnification obligation under this
Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving
Corporations and the other persons or entities indemnified pursuant to Section
11.1 shall not assert any claim for indemnification hereunder against the
STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of
all claims which such persons may have against the STOCKHOLDERS shall exceed
2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of
the VPI
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Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided,
however, that VPI, the NEWCOS, the Surviving Corporation and the other persons
or entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.l(iv) at any time, regardless of
whether the aggregate of all claims which such persons may have against the
STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the
amount of any such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for
indemnification hereunder against VPI or the NEWCOS until such time as, and
solely to the extent that, the aggregate of all claims which the STOCKHOLDERS
may have against VPI and the NEWCOS shall exceed $50,000, provided, however,
that the STOCKHOLDERS and the other persons or entities indemnified pursuant to
Section 11.2 may assert and shall be indemnified for any claim under Section
11.2(v) at any time, regardless of whether the aggregate of all claims which
such persons may have against any of VPI and the NEWCOS exceeds $50,000, it
being understood that the amount of any such claim under Section 11.2(v) shall
not be counted towards such $50,000 amount. No person shall be entitled to
indemnification under this Section 11 to the extent that: (a) such person's
claim for indemnification is directly or indirectly related to a breach by such
person of any representation, warranty, covenant or other agreement set forth in
this Agreement; or (b) such person receives a tax benefit as a result of the
claim or loss for which indemnification is sought (i.e., the amount of such
claim or loss for which indemnification is provided hereunder shall be reduced
by the amount of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the
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Indemnification Threshold, the limitation on indemnity set forth in the second
preceding sentence and the amount of any indemnity paid), VPI Stock shall be
valued at its initial public offering price as set forth in the Registration
Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this
Section 11 shall be deemed to be a reduction in the consideration received by
the STOCKHOLDERS pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the
COMPANIES;
(ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards
of directors), on the one hand, or by VPI (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by June
30, 1998, unless the failure of such transactions to be consummated is due to
the willful failure of the party seeking to terminate this Agreement to perform
any of its obligations under this Agreement to the extent required to be
performed by it prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANIES, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
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12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement (but
excluding the transactions contemplated by the Other Agreements) in the event
that this Agreement is terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or sales
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business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of the locations in which VPI or the
COMPANIES, or any of their subsidiaries, conduct a noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of any COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of any
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever
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except to the extent that such COMPANY has in the past disclosed such
information to the types of persons to whom disclosure is then presently
contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature (a) acquiring as an
investment not more than two percent (2%) of the capital stock of a competing
business whose stock is traded on a national securities exchange or
over-the-counter, (b) operating any and all of its existing business lines and
divisions other than those of the COMPANIES or (c) engaging in any of the
following activities: (1) mortgage brokerage; (2) title insurance; (3) golf
course development and management; (4) property (including hotel) development
and development management; (5) construction and construction management; (6)
marketing and sales of new homes and resales of existing homes outside Bethany
Beach, Delaware, and the 25-mile area surrounding Bethany Beach, Delaware; and
(7) rental and management of primary residence apartments.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition
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to the locations currently established therefor, then the STOCKHOLDERS will be
precluded (subject to the last paragraph of Section 13.1) from soliciting
customers or employees from such new location and from directly competing within
100 miles of such new location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that
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such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree
that the covenants in this Section 13 are a material and substantial part of
this transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or any COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
For purposes of this Section 13 only, "STOCKHOLDERS" shall not include T.
Michael Nally.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANIES, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANIES', the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other
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advisors, provided that such advisors (other than counsel) agree to the
confidentiality provisions of this Section 14.1, unless (i) such information is
or becomes known to the public generally or to businesses operating in the
noncommercial property management or rental industry through no fault of the
STOCKHOLDERS, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, however, that prior to
disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall,
if possible, give two days' prior written notice thereof to VPI and provide VPI
with the opportunity within such two-day period to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any of the STOCKHOLDERS of the
provisions of this Section, VPI shall be entitled to an injunction restraining
such STOCKHOLDERS from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting VPI from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages. In the event the transactions contemplated by this
Agreement are not consummated, STOCKHOLDERS shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANIES.
14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the COMPANIES, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the COMPANIES' respective businesses.
VPI and the NEWCOS agree that, prior to the Closing, or if the transactions
contemplated by this Agreement are not consummated, they will not use, except in
connection with the transactions contemplated hereby, or disclose such
confidential information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except disclosures (a) to
authorized representatives of the COMPANIES, (b) to counsel and other advisors;
provided, however, that such advisors (other than counsel) agree to the
confidentiality provisions of this Section 14.2 and (c) to the Other Founding
Companies and their representatives pursuant to Section 7.1(a), unless (i) such
information becomes known to the public generally through no fault of
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VPI or any NEWCO, (ii) disclosure is required by law or the order of any
governmental authority under color of law; provided, however, that prior to
disclosing any information pursuant to this clause (ii), VPI and the NEWCOS
shall, unless otherwise required by law or such order, give two days' prior
written notice thereof to the COMPANIES and the STOCKHOLDERS and provide the
COMPANIES and the STOCKHOLDERS with the opportunity within such two-day period
to contest such disclosure, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party. VPI will disclose confidential information
relating to the COMPANIES to the Other Founding Companies only if such companies
have agreed, in advance, to treat such information as confidential. In the event
of a breach or threatened breach by VPI or the NEWCOS of the provisions of this
Section, the COMPANIES and the STOCKHOLDERS shall be entitled to an injunction
restraining VPI and the NEWCOS from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANIES and the STOCKHOLDERS from pursuing any other available remedy for as
such breach or threatened breach, including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANIES of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
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15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate: THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the
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Future Sale except pursuant to such arrangements; provided, however, that the
terms of such sale (including commissions) are at least as favorable as the
terms the STOCKHOLDER would have received in the absence of this Section 15.2.
If VPI has not successfully arranged for a private sale of such shares through
one or more the Underwriters within such three (3) day period, the restrictions
of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future
Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The
terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford
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to sustain a total loss of such investment and has such knowledge and experience
in financial and business matters that he or she is capable of evaluating the
merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS
have had an adequate opportunity to ask questions and receive answers from the
officers of VPI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of VPI, the plans for the
operations of the business of VPI, the business, operations and financial
condition of the Founding Companies other than the COMPANIES, and any plans for
additional acquisitions and the like. The STOCKHOLDERS have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be
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sold by persons other than VPI is greater than the number of such shares which
can be offered without adversely affecting the offering, VPI may reduce pro rata
the number of shares offered for the accounts of such persons (based upon the
number of shares desired to be sold by such person) to a number deemed
satisfactory by such managing underwriter, provided, however, that for each such
offering made by VPI after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than VPI, the
STOCKHOLDERS and the stockholders of the Other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements (collectively, the
STOCKHOLDERS and the stockholders of the other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the Founding
Stockholders on a pro rata basis based on the number of shares proposed to be
registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
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Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
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17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock
received by the STOCKHOLDERS pursuant to this Agreement (the "Registrable
Securities") are included in a registration statement under this Section 17, to
the extent permitted by law, VPI will, and hereby does, indemnify and hold
harmless each seller of any Registrable Securities covered by such registration
statement, its directors, officers, agents, attorneys, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the 1933 Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller or any such director or
officer or underwriter or controlling Person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
securities were registered under the 1933 Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or
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necessary to make the statements therein not misleading, and VPI will reimburse
such seller and each such director, officer, underwriter and controlling Person
for any expenses (including but not limited to reasonable attorneys' fees)
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that VPI shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to VPI by
such seller expressly for use in the preparation thereof, and provided further
that VPI shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, underwriter or
controlling Person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by Sellers. If any Registrable Securities are
included in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933
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Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in strict conformity with written
information furnished to VPI by such seller expressly for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement; provided that such prospective
seller shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any underwriter, VPI or any such director, officer or
controlling Person and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling holder of Registrable
Securities under this Section 17.6(b) be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 17.6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this
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Section 17.6, except to the extent that the indemnifying party is actually
materially prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section 17.6 (with appropriate
modifications) shall be given by VPI and each seller of Registrable Securities
with respect to any required registration or other qualification of securities
under any federal or state law or regulation of any governmental authority other
than the 1933 Act.
(e) Indemnification Payments. The indemnification required by this
Section 17.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section
17.6 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
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indemnified party as a result of such loss, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 17.6(c) hereof, any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
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Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANIES and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and the NEWCOS shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of each COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
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18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement, including but
not limited to any letter of intent entered into by any of the parties hereto.
This Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI, acting through their respective officers or
trustees, duly authorized by their respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees
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and expenses of Arthur Andersen, LLP (including such fees and expenses in
connection with the audit of the COMPANIES' financial statements), Akin, Gump,
Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI,
and the costs of preparing the Registration Statement. The STOCKHOLDERS shall
pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANIES and
their respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this
Agreement, including the fees and expenses of accountants and legal counsel to
the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the
transactions contemplated by this Agreement are consummated, VPI shall reimburse
the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the
closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all
sales, use, transfer, real property transfer, recording, gains, stock transfer
and other similar taxes and fees ("Transfer Taxes") imposed in connection with
the Mergers, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each STOCKHOLDER shall file all necessary documentation and Tax
Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER
acknowledges that he or she, and not the COMPANIES or VPI, shall pay all taxes
due upon receipt of the consideration payable pursuant to Section 3 hereof, and
shall assume all tax risks and liabilities of such STOCKHOLDER in connection
with the transactions contemplated hereby; provided, however, that the foregoing
shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANIES
to rely upon the opinions contained in the tax opinion letter referenced in
Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
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(a) If to VPI, or the NEWCOS, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANIES, addressed as follows:
Coastal Resorts Realty L.L.C.
Coastal Resorts Management, Inc.
c/o Carl M. Freeman Associates, Inc.
11325 Seven Locks Road
Potomac, Maryland 20854
Facsimile no.: (301) 983-9289
Attention: Joshua M. Freeman
with copies to:
Shaw Pittman Potts & Trowbridge
2300 N Street, NW
Washington, DC 20037
Facsimile no.: (202) 663-8007
Attention: Stephen B. Huttler
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
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18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the respective Mergers. Any amendment or waiver effected in accordance with this
Section 18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Mergers and each future holder of
such VPI Stock.
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18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means any COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean the NEWCOS and each of the other
Delaware companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph
of this Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Mergers" shall mean the time as of which the Mergers
become effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Mergers" means the mergers of (i) COASTAL REALTY ACQUISITION LLC with and
into COASTAL RESORTS REALTY L.L.C. and (ii) COASTAL MANAGEMENT ACQUISITION CORP.
with and into COASTAL RESORTS MANAGEMENT, INC., pursuant to this Agreement and
the applicable provisions of the laws of the State of Delaware and other
applicable state laws.
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"NEWCO" or "NEWCOS" has the meaning set forth in the first paragraph of
this Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of each
respective NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANIES.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANIES and any affiliated, combined,
consolidated, unitary or similar group of which any COMPANY is or was a member.
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"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporations" shall mean each of the COMPANIES as the surviving
parties in the Mergers.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
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"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
COASTAL REALTY ACQUISITION LLC
COASTAL MANAGEMENT ACQUISITION CORP.
By:/s/ Leonard Potter
------------------------------------------
Leonard Potter
Vice President of each of such entities
COASTAL RESORTS REALTY L.L.C.
COASTAL RESORTS MANAGEMENT, INC.
By:/s/ Joshua M. Freeman
------------------------------------------
Joshua M. Freeman
President of each of such entities
STOCKHOLDERS:
/s/ Joshua M. Freeman
- ---------------------------------------------
Joshua M. Freeman
/s/ T. Michael Nally
- ---------------------------------------------
T. Michael Nally
CMF COASTAL RESORTS L.L.C.
By:/s/ Joshua M. Freeman
------------------------------------------
Joshua M. Freeman
President and Managing Member
EXHIBIT 2.4
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.,
COLLECTION OF FINE PROPERTIES, INC.,
TEN MILE HOLDINGS, LTD.
and
the STOCKHOLDERS named herein
- ----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. PURCHASE AND SALE........................................................2
1.1 General..............................................................2
1.2 Intentionally Deleted................................................2
1.3 Intentionally Deleted................................................2
1.4 Certain Information With Respect to the Capital Stock of the
COMPANIES and VPI...................................................3
2. INTENTIONALLY DELETED....................................................3
3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE.............................3
3.1 Delivery of VPI Stock and Cash.......................................3
3.2 Delivery of COMPANY Stock............................................3
3.3 Balance Sheet Test...................................................4
4. CLOSING..................................................................4
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.............5
(A) Representations and Warranties of COMPANIES and STOCKHOLDERS.........5
5.1 Due Organization..................................................6
5.2 Authority.........................................................7
5.3 Capital Stock of the COMPANIES....................................7
5.4 Transactions in Capital Stock.....................................7
5.5 No Bonus Shares...................................................8
5.6 Subsidiaries......................................................8
5.7 Predecessor Status; etc...........................................8
5.8 Spin-off by the COMPANIES.........................................8
5.9 Financial Statements..............................................8
5.10 Liabilities and Obligations......................................9
5.11 Accounts and Notes Receivable...................................10
5.12 Permits and Intangibles.........................................11
5.13 Environmental Matters...........................................12
5.14 Personal Property...............................................13
5.15 Significant Customers...........................................14
5.16 Material Contracts and Commitments..............................14
5.17 Real Property...................................................14
5.18 Insurance.......................................................16
5.19 Compensation; Employment Agreements; Organized Labor Matters....16
5.20 Employee Plans..................................................17
5.21 Compliance with ERISA...........................................18
5.22 Conformity with Law; Litigation.................................19
5.23 Taxes...........................................................20
5.24 No Violations...................................................22
5.25 Government Contracts............................................23
5.26 Absence of Changes..............................................23
5.27 Deposit Accounts; Powers of Attorney............................25
5.28 Validity of Obligations.........................................25
5.29 Relations with Governments......................................26
5.30 Disclosure......................................................26
5.31 Prohibited Activities...........................................27
(B) Representations and Warranties of STOCKHOLDERS......................27
5.32 Authority; Ownership............................................27
5.33 Preemptive Rights...............................................27
5.34 No Intention to Dispose of VPI Stock............................27
6. REPRESENTATIONS OF VPI..................................................27
6.1 Due Organization.................................................28
6.2 Authorization....................................................28
6.3 Capital Stock of VPI.............................................29
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6.4 Transactions in Capital Stock.......................................29
6.5 Subsidiaries........................................................29
6.6 Financial Statements................................................30
6.7 Liabilities and Obligations.........................................30
6.8 Conformity with Law; Litigation.....................................30
6.9 No Violations.......................................................31
6.10 Validity of Obligations............................................31
6.11 VPI Stock..........................................................31
6.12 No Side Agreements.................................................32
6.13 Business; Real Property; Material Agreements.......................32
6.14 Taxes..............................................................32
6.15 Completion of Due Diligence........................................34
6.16 Disclosure........................................................34
6.17 Tax Treatment......................................................35
7. COVENANTS PRIOR TO CLOSING..............................................35
7.1 Access and Cooperation; Due Diligence...............................35
7.2 Conduct of Business Pending Closing.................................36
7.3 Prohibited Activities...............................................37
7.4 No Shop.............................................................39
7.5 Notice to Bargaining Agents.........................................39
7.6 Agreements..........................................................39
7.7 Notification of Certain Matters.....................................39
7.8 Amendment of Schedules..............................................40
7.9 Cooperation in Preparation of Registration Statement................42
7.10 Final Financial Statements.........................................43
7.11 Further Assurances.................................................44
7.12 Authorized Capital.................................................44
7.13 Best Efforts to Consummate Transaction.............................44
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......44
8.1 Representations and Warranties......................................45
8.2 Performance of Obligations..........................................45
8.3 No Litigation.......................................................45
8.4 Opinion of Counsel..................................................45
8.5 Registration Statement..............................................45
8.6 Consents and Approvals..............................................46
8.7 Good Standing Certificates..........................................46
8.8 No Material Adverse Change..........................................46
8.9 Closing of IPO......................................................46
8.10 Secretary's Certificate............................................46
8.11 Employment Agreements..............................................47
8.12 Directors and Officers Insurance...................................47
8.13 Stock Options......................................................47
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI..............................47
9.1 Representations and Warranties......................................47
9.2 Performance of Obligations..........................................48
9.3 No Litigation.......................................................48
9.4 Secretary's Certificate.............................................48
9.5 No Material Adverse Effect..........................................48
9.6 STOCKHOLDERS' Release...............................................49
9.7 Termination of Related Party Agreements.............................49
9.8 Opinion of Counsel..................................................49
9.9 Consents and Approvals..............................................49
9.10 Good Standing Certificates.........................................49
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9.11 Registration Statement..............................................50
9.12 Employment Agreements..............................................50
9.13 Closing of IPO.....................................................50
9.14 FIRPTA Certificate.................................................50
9.15 Insurance..........................................................50
9.16 Lockup Agreement...................................................50
9.17 Letter of Representation...........................................50
9.18 Termination of Defined Benefit Plans...............................51
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................51
10.1 Release From Guarantees; Repayment of Certain Obligations..........51
10.2 Preservation of Tax and Accounting Treatment.......................51
10.3 Preparation and Filing of Tax Returns..............................52
10.4 Appointment of Directors...........................................53
10.5 Preservation of Employee Benefit Plans.............................53
10.6 Maintenance of Books...............................................53
10.7 Securities Covenants...............................................53
11. INDEMNIFICATION........................................................54
11.1 General Indemnification by the STOCKHOLDERS........................54
11.2 Indemnification by VPI.............................................55
11.3 Third Person Claims................................................56
11.4 Exclusive Remedy...................................................58
11.5 Limitations on Indemnification.....................................58
12. TERMINATION OF AGREEMENT...............................................59
12.1 Termination........................................................59
12.2 Liabilities in Event of Termination................................60
13. NONCOMPETITION.........................................................61
13.1 Prohibited Activities..............................................61
13.2 Damages............................................................63
13.3 Reasonable Restraint...............................................63
13.4 Severability; Reformation..........................................64
13.5 Independent Covenant...............................................64
13.6 Materiality........................................................64
13.7 Limitation.........................................................64
13.8 Right to Manage Properties.........................................65
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................65
14.1 STOCKHOLDERS.......................................................65
14.2 VPI................................................................66
14.3 Damages............................................................67
14.4 Survival...........................................................67
14.5 Return of Data Submitted...........................................67
15. TRANSFER RESTRICTIONS..................................................68
15.1 Transfer Restrictions..............................................68
15.2 Certain Transfers..................................................68
16. SECURITIES LAW REPRESENTATIONS.........................................69
16.1 Compliance with Law................................................69
16.2 Economic Risk; Sophistication......................................69
17. REGISTRATION RIGHTS....................................................70
17.1 Piggyback Registration Rights......................................70
17.2 Demand Registration Rights.........................................71
17.3 Registration Procedures............................................72
17.4 Underwriting Agreement.............................................73
17.5 Availability of Rule 144...........................................73
17.6 Registration Rights Indemnification................................73
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18. GENERAL................................................................78
18.1 Press Releases.....................................................78
18.2 Cooperation........................................................78
18.3 Successors and Assigns; Third Party Beneficiaries..................79
18.4 Entire Agreement...................................................79
18.5 Counterparts.......................................................79
18.6 Brokers and Agents.................................................79
18.7 Expenses...........................................................79
18.8 Notices............................................................80
18.9 Governing Law......................................................81
18.10 Exercise of Rights and Remedies...................................82
18.11 Time..............................................................82
18.12 Reformation and Severability......................................82
18.13 Remedies Cumulative...............................................82
18.14 Captions..........................................................82
18.15 Amendments and Waivers............................................82
18.16 Incorporation by Reference........................................83
18.17 Defined Terms.....................................................83
ANNEX I INTENTIONALLY DELETED
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), COLLECTION OF FINE PROPERTIES, INC., a Colorado
corporation, and TEN MILE HOLDINGS, LTD., a Colorado corporation (each, a
"COMPANY," and collectively, the "COMPANIES"), and Luis Alonso, Domingo R.
Moreira, Domingo A. Moreira Brenda M. Lopez Ibanez and Ana Maria Moreira (the
"STOCKHOLDERS").
WHEREAS, the respective Boards of Directors of VPI and the
COMPANIES deem it advisable and in the respective best interests of
VPI and the COMPANIES and their respective stockholders that the
STOCKHOLDERS contribute all of the COMPANY Stock owned by the
STOCKHOLDERS to VPI in exchange for VPI Stock and cash pursuant to
this Agreement and in accordance with the applicable provisions of the
laws of the State of Delaware and the State in which each of the
COMPANIES is incorporated;
WHEREAS, VPI is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each
of which is entitled "Agreement and Plan of Organization," with each
of B&B On The Beach, Inc., a North Carolina corporation, Brindley &
Brindley Realty & Development, Inc., a North Carolina corporation,
Coastal Resorts Realty L.L.C., a Delaware limited liability company,
Coastal Resorts Management, Inc., a Delaware corporation, First Resort
Software, Inc., a Colorado corporation, Hotel Corporation of the
Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a
Colorado corporation, Jupiter Property Management at Park City, Inc.,
a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii
corporation, The Maury People, Inc., a Massachusetts corporation,
Howey Acquisition, Inc., a Florida corporation, Realty Consultants,
Inc., a Florida corporation, Resort Property Management, Inc., a Utah
corporation, Telluride Resort Accommodations, Inc., a Colorado
corporation, Trupp-Hodnett Enterprises, Inc., a Georgia corporation,
THE
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Management Company, a Georgia corporation, and Whistler Chalets
Limited, a British Columbia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANIES,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI
Stock constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of
the subsidiaries of VPI that are parties to the Other Agreements
intend to consummate the VPI Plan of Organization as an integrated
plan pursuant to which the STOCKHOLDERS and the stockholders of the
Other Founding Companies shall transfer the capital stock of the
Founding Companies to VPI or a subsidiary of VPI, and will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Boards of Directors of
the COMPANIES have approved this Agreement as part of the VPI Plan of
Organization in order to transfer the capital stock of the COMPANIES
to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE
1.1 GENERAL. Upon the terms and subject to the conditions of this
Agreement, the STOCKHOLDERS hereby agree to sell, assign, transfer and deliver
to VPI, and VPI hereby agrees to purchase, all of the outstanding capital stock
of the COMPANIES (the "COMPANY Stock").
1.2 INTENTIONALLY DELETED.
1.3 INTENTIONALLY DELETED.
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1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES
AND VPI. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANIES and
VPI as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding.
2. INTENTIONALLY DELETED
3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE
3.1 DELIVERY OF VPI STOCK AND CASH. On the Closing Date, the STOCKHOLDERS,
who are the holders of all outstanding certificates representing shares of
COMPANY Stock, shall, upon surrender of such certificates, receive the
respective number of shares of VPI Stock and the amount of cash (subject to
adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to
be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled; provided, however, that such
delivery shall not constitute the actual transfer and delivery of the COMPANY
Stock, which shall take place on the Closing Date as provided in Section 4. The
STOCKHOLDERS agree promptly to cure any deficiencies with respect to the
endorsement of the
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stock certificates or other documents of conveyance with respect to such COMPANY
Stock or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i)
positive net worth (excluding all assets and liabilities related to customer
deposits and similar escrow-type accounts); (ii) positive net working capital
(defined as current assets minus current liabilities, excluding all assets and
liabilities related to customer deposits and similar escrow-type accounts); and
(iii) all customer deposit accounts and other similar escrow-type accounts fully
funded in cash or cash equivalents. To the extent that any condition set forth
in clauses (i) through (iii) is not met, the cash portion of the consideration
to be paid to the STOCKHOLDERS pursuant to this Section 3 shall be reduced by
the amount required to cure any such failure. Indebtedness of each COMPANY in
excess of the amount set forth on Annex III that was incurred in connection with
the acquisition of such COMPANY by the STOCKHOLDERS, or the acquisition of
nonoperating assets by such COMPANY or the STOCKHOLDERS, shall result in a
corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the transfer and delivery of the COMPANY Stock as
contemplated by Section 1 hereof and (ii) effect the delivery of shares referred
to in Section 3 hereof; provided, however, that such actions shall not
constitute the actual transfer and delivery of the COMPANY Stock and certified
check(s) or wire transfer(s) referred to in Section 3 hereof, each of which
actions shall only be taken upon the Closing Date as herein provided. In the
event that there is no Closing, VPI shall redeliver the certificates
representing COMPANY Stock to the STOCKHOLDERS. The taking of the actions
described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on
the pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue,
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N.W., Washington, D.C. 20036. On the Closing Date (x) all transactions
contemplated by this Agreement, including the transfer and delivery of COMPANY
Stock, the delivery of a certified check or checks or wire transfer(s) in an
amount equal to the cash portion of the consideration which the STOCKHOLDERS
shall be entitled to receive pursuant to Section 3 hereof shall occur and (y)
the closing with respect to the IPO shall be completed. The taking of the
actions described in the preceding clauses (x) and (y) shall constitute the
closing of the transactions hereunder (the "Closing"), and the date on which the
actions described in the preceding clauses (x) and (y) occur shall be referred
to as the "Closing Date." Except as provided in Sections 8 and 9 hereof with
respect to actions to be taken on the Closing Date, during the period from the
Pre-Closing Date to the Closing Date this Agreement may only be terminated by a
party if the underwriting agreement in respect of the IPO is terminated pursuant
to the terms of such agreement. This Agreement shall in any event terminate if
the Closing Date has not occurred within 15 business days of the Pre-Closing
Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.
Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANIES and the STOCKHOLDERS agrees that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 5.23 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
5.23 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof
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has been made on a timely basis, and solely to the extent that in connection
with the IPO, VPI actually incurs liability under the 1933 Act, the 1934 Act or
any other federal or state securities laws as a result of a breach of a
representation or warranty by the COMPANIES or the STOCKHOLDERS, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes. For purposes of this Section 5, the term
"COMPANY" shall mean and refer to each COMPANY and all of its Subsidiaries, if
any.
5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and such COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY
taken as a whole (as used herein with respect to such COMPANY, or with respect
to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which each COMPANY is incorporated and contains a list of all
such jurisdictions in which each COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of each COMPANY, as
heretofore made available to VPI, are correct and complete in all material
respects. There are no minutes in the possession of each COMPANY or the
STOCKHOLDERS which have not been made available to VPI, and all of such minutes
are correct and complete in all material respects. Except as set forth on
Schedule 5.1, the most recent minutes of each COMPANY, which are dated no
earlier than ten business days prior to the date hereof, affirm and ratify all
prior acts of such COMPANY, and of its officers and directors on behalf of such
COMPANY.
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5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority
to enter into and perform this Agreement.
5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of each COMPANY have been
duly authorized and validly issued, are fully paid and nonassessable, are owned
of record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by such COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates any of the COMPANIES to issue any
of its capital stock; (ii) neither COMPANY has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (iii) neither the voting stock structure of each COMPANY
nor the relative ownership of shares among any of their respective stockholders
has been altered or changed in contemplation of the transactions contemplated
hereby and/or the VPI Plan of Organization. Schedule 5.4 also includes complete
and accurate copies of all stock option or stock purchase plans, including a
list of all outstanding options, warrants or other rights to acquire shares of
each COMPANY's stock and the material terms of such outstanding options,
warrants or other rights.
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5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each
COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as
set forth on Schedule 5.6, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and claims of every
kind. Except as set forth on Schedule 5.6, each COMPANY does not presently own,
of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity nor is any COMPANY, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of each COMPANY, including the names of any
entities acquired by each COMPANY (by stock purchase, merger or otherwise) or
owned by each COMPANY or from whom any of the COMPANIES previously acquired
material assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of any of the
COMPANIES since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9, except as set
forth thereon, are copies of the following financial statements (the "COMPANY
Financial Statements") of each of the COMPANIES: the COMPANY's audited (i)
Balance Sheets, if any, as of December 31, 1997 and 1996; (ii) Statements of
Operations, if any, for each of the years in the two-year period ended December
31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet
Date");
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(iii) Statements of Changes in Stockholders' Equity, if any, for each of the
years in the two-year period ended on the Balance Sheet Date; and (iv)
Statements of Cash Flows, if any, for each of the years in the two-year period
ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 5.9). Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present
fairly the financial position of such COMPANY as of the dates indicated thereon,
and such Statements of Operations, Statements of Changes in Stockholders' Equity
and Statements of Cash Flows present fairly the results of operations for the
periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance
Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the
COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of such COMPANY (including all liabilities in excess of $10,000) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements, together with true, correct and
complete copies of such documents. Except as set forth on Schedule 5.10, since
the Balance Sheet Date neither COMPANY has incurred any material liabilities of
any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business. Each of the COMPANIES has also delivered to VPI on
Schedule 5.10, in the case of those contingent liabilities related to pending
or, to the knowledge of the COMPANIES, threatened litigation, or other
liabilities which are not fixed or are being contested, the following
information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
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(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of such COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate
list of all receivables obtained subsequent to the Balance Sheet Date up to the
Pre-Closing Date and (y) an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the
extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a
writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
each COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of such COMPANY after the Balance Sheet Date.
For purposes of determining collectibility of accounts receivable under
this Section 5.11, during the one-year period immediately following the Closing
Date, (a) the sum of (i) 50% of payments received by the COMPANY from each payor
entity on accounts receivable of the COMPANY and (ii) any amount not applied
under clause (b) shall be applied to reduce accounts receivable from such payor
entity existing as of the Closing Date and (b) an amount equal to the lesser of
(i) 50% of such payments or (ii) the unpaid balance generated after the Closing
Date shall be applied to reduce the unpaid balance, as of the date the payment
is received, of accounts receivable generated from such payor entity after the
Closing Date. For example, assuming that the
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Company X account reflects a balance due to the COMPANY of $1000 as of the
Closing Date and on a date two months after the Closing Date, and reflects an
additional balance due of $500 during the two-month period immediately following
the Closing Date, and further assuming that Company X pays $900 on its accounts
receivable to the COMPANY at the end of such two-month period, such $900 payment
shall be applied to reduce the Closing Date Company X account balance from $1000
to $550 and to reduce the post-Closing Company X account balance from $500 to
$50. If at the time a payment is received by the COMPANY there are no unpaid
accounts receivable from the payor entity generated after the Closing Date, the
payment shall be applied in its entirety to the unpaid balance of the accounts
receivable from the payor entity existing as of the Closing Date. Payments
received by the COMPANY after the first anniversary of the Closing Date on
accounts receivable of the COMPANY shall first be applied in their entirety (and
not on a 50/50 basis) to reduce the unpaid balance of the accounts receivable
existing as of the Closing Date until such unpaid balance shall have been paid
in full, and thereafter shall be applied to reduce accounts receivable generated
after the Closing Date.
5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses,
franchises, permits and other governmental authorizations that are necessary for
the operation of the business of such COMPANY as now conducted, and such COMPANY
has delivered to VPI an accurate list and summary description (which is set
forth on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by such COMPANY (including interests in software or
other technology systems, programs and intellectual property) (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 5.13). The licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 are valid, and such COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. Each of the
COMPANIES has
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conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
and is not in violation of any of the foregoing, except for inadvertent,
immaterial noncompliance with such requirements, standards, criteria and
conditions (provided that any such noncompliance shall be deemed a breach of
this Section 5.12 for purposes of Section 11 hereof). Except as specifically
provided on Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to each COMPANY by, any such licenses,
franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each
of the COMPANIES has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) each COMPANY has obtained and adhered to all permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.13, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by each COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by such
COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no
on-site or off-site location to which such COMPANY has transported or disposed
of Hazardous Wastes and
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Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against any of the COMPANIES or VPI for any clean-up cost, remedial work,
damage to natural resources, property damage or personal injury, including, but
not limited to, any claim under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; and (v) such COMPANY has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of such COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
such COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by such COMPANY with a value
in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that
are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by each COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the
knowledge of such COMPANY or the
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STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
each COMPANY's annual revenues as of the Balance Sheet Date. Except to the
extent set forth on Schedule 5.15, none of any COMPANY's significant customers
(or persons or entities that are sources of a significant number of customers)
have canceled or substantially reduced or, to the knowledge of any COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by such COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on
Schedule 5.16 all material contracts, commitments and similar agreements to
which such COMPANY currently is a party or by which it or any of its properties
are bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. Each COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. Each COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by such COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet
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Date, and all other real property, if any, used by each COMPANY in the conduct
of its business. Each COMPANY has good and insurable title to the real property
owned by it, including those reflected on Schedule 5.14, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of each COMPANY with respect to real property owned by such COMPANY.
Each COMPANY has also delivered to VPI an accurate list of real property
leased by such COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by such COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery thereof by the parties
thereto other than such COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of such COMPANY, the
STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the
other parties (and their successors) thereto in accordance with their respective
terms.
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5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by such COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that such COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Closing Date. No insurance carried by such
COMPANY has ever been canceled by the insurer and such COMPANY has never been
unable to obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of such COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or
subject to (and none of their respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of any
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign
to establish such representation is in progress and (iv) there is no pending or,
to the best of each COMPANY's knowledge, threatened labor dispute involving any
COMPANY and any group of its
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employees nor has any COMPANY experienced any labor interruptions over the past
three years. Each COMPANY believes its relationship with employees to be good.
Each COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of such COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20,
neither COMPANY sponsors, maintains or contributes to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or
accrue or pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation
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arrangement). Neither COMPANY has sponsored, maintained or contributed to any
employee pension benefit plan other than the plans, agreements, arrangements and
trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of such
COMPANY's employees.
All accrued contribution obligations of each COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of such COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of each COMPANY that are currently maintained or contributed to by such
COMPANY or cover employees or former employees of such COMPANY listed on
Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to any such
plan or any COMPANY, has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each
COMPANY has not incurred any liability
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for excise tax or penalty due to the Internal Revenue Service nor any liability
to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS
further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) each COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) each COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which any COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than a COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes such COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
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shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Each COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations,
and is not in violation of any of the foregoing.
5.23 TAXES.
(a) Each COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANIES or their respective officers or
employees responsible for maintaining the financial records of such COMPANY
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 5.23, there are no
examinations in progress (and the COMPANIES and their respective employees are
not aware of any proposed examinations) or claims against any COMPANY (including
liens against the COMPANY's assets) for federal, state, local and other Taxes
(including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for Taxes, whether
pending or threatened, has been received. Except as set forth on Schedule 5.23,
neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
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(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by any COMPANY, any member of an affiliated or
consolidated group which includes or included any of the COMPANIES, or with
respect to any payment made or deemed made by any COMPANY, required to be paid
by the date hereof, have been paid. All amounts required to be deposited,
withheld or collected under applicable federal, state, local or other Tax laws
and regulations by any COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any balance sheets and income
statements delivered pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, neither COMPANY has been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). Neither COMPANY is a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, neither COMPANY has (i)
assumed or is liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which any COMPANY
or such person or entity was the surviving corporation or a consolidation) or
(ii) indemnified any other person or entity or otherwise agreed to pay on behalf
of any other person or entity any Taxes arising from or which may be asserted on
the basis of any Tax treatment adopted with respect to all or any aspect of such
business acquisition transaction.
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(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of each COMPANY for its last three (3) fiscal years or
such shorter period of time as such COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) Each COMPANY has a taxable year ended on the date set forth as
such on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, each COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) Neither COMPANY is an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) Neither COMPANY has filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code or agreed to have section
341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as
defined in section 341(f) of the Code) owned by such COMPANY.
5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter
Document. Neither COMPANY or, to the knowledge of either COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of each
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COMPANY under the Material Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.24, none
of the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.24, none of the Material Documents
prohibits the use or publication by any COMPANY or VPI of the name of any other
party to such Material Document, and none of the Material Documents prohibits or
restricts either COMPANY from freely providing services to any other customer or
potential customer of such COMPANY, VPI or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither
COMPANY is now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of any COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of any
COMPANY;
(iii) any change in the authorized capital of any COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the
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COMPANIES to fail to meet the financial requirements, as of the Closing
Date, set forth in the first sentence of Section 3.3) or any direct or
indirect redemption, purchase or other acquisition of any of the capital
stock of any COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by any COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of any COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of any COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to any COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for immaterial cancellations of or agreements to cancel any such
indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of any COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of any COMPANY's business;
(xi) any waiver of any material rights or claims of any COMPANY;
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(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which any COMPANY is a party;
(xiii) any transaction by any COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by any COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has
delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as
of the date of the Agreement of:
(i) the name of each financial institution in which each COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from each COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of the COMPANIES and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of each
of the COMPANIES and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of each
COMPANY, enforceable against such COMPANY in accordance with its terms except as
may be limited by (i) bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally or (ii) the discretionary power of a court exercising equity
jurisdiction. The individual signing this Agreement on behalf of each COMPANY
has the legal power, authority and capacity to bind such COMPANY to the terms of
this Agreement.
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5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause any COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement (which includes the Schedules and Annexes attached
hereto) does not contain any untrue statement of a material fact by either
COMPANY or the STOCKHOLDERS and does not omit to state any material fact
necessary in order to make the statements made herein (or therein) by either
COMPANY or the STOCKHOLDERS, in light of the circumstances under which they are
made, not misleading. Each COMPANY's rights under the documents delivered
pursuant to this Agreement would not be materially adversely affected by, and no
statement made in this Agreement would be rendered untrue in any material
respect by, (i) any other document to which any COMPANY is a party, or to which
their respective properties are subject, or (ii) any other fact or circumstance
regarding any COMPANY (which fact or circumstance was, or should reasonably,
after due inquiry, have been known to any COMPANY) that is not disclosed
pursuant to this Agreement or to such delivered documents.
(b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree
(i) that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to any COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with any COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
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5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither
COMPANY has, between the Balance Sheet Date and the date hereof, taken any of
the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the transactions contemplated hereby to violate the
control requirement set forth in Code section 368(c).
6. REPRESENTATIONS OF VPI
VPI represents and warrants that all of the following representations and
warranties in this Section 6 are true at the date of this Agreement and, subject
to Section 7.8 hereof, shall be true at the
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time of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
authorized and qualified to do business under all applicable laws, regulations,
ordinances and orders of public authorities to carry on its business in the
places and in the manner as now conducted except where the failure to be so
authorized or qualified would not have a Material Adverse Effect. True, complete
and correct copies of the Certificate of Incorporation and Bylaws, as amended,
of VPI (the "VPI Charter Documents") are all attached hereto as Annex II. The
VPI Charter Documents provide for indemnification of officers and directors to
the full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The representatives of VPI executing this Agreement
have the authority to enter into and bind VPI to the terms of this Agreement and
(ii) VPI has the full legal right,
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power and authority to enter into and perform this Agreement, and all required
approvals of the shareholders and board of directors of VPI have been obtained.
6.3 CAPITAL STOCK OF VPI.. Immediately prior to the Closing Date, the
authorized capital stock of VPI is as set forth in Section 1.4(ii). All the
issued and outstanding shares of the capital stock of VPI are owned by the
persons set forth on Annex V hereof, and further are owned, in each case, free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. Upon consummation of the
IPO, the number of outstanding shares of VPI will be as set forth in the
Registration Statement. All of the issued and outstanding shares of the capital
stock of VPI have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by VPI and the persons set
forth on Annex V, and further, such shares were offered, issued, sold and
delivered by VPI in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares was issued
in violation of the preemptive rights of any past or present stockholder of VPI.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI to issue any of its
authorized but unissued capital stock; and (ii) VPI has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. VPI has no subsidiaries except for the companies to
become subsidiaries of VPI pursuant to each of the Other Agreements. Except as
set forth in the preceding sentence, VPI does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or
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business entity nor is VPI directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
has no material liabilities, contingent or otherwise, except as set forth in or
contemplated by this Agreement and the Other Agreements and except for fees and
expenses incurred in connection with the transactions contemplated hereby and
thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, VPI is not in violation of any law or regulation, or of any order
of any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
it; and except to the extent set forth on Schedule 6.8, there are no material
claims, actions, suits or proceedings, pending or, to the knowledge of VPI,
threatened, against or affecting VPI, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it and no notice of
any claim, action, suit or proceeding, whether pending or threatened, has been
received. VPI has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing.
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6.9 NO VIOLATIONS. VPI is not in violation of any VPI Charter Document.
Neither VPI nor, to the knowledge of VPI, any other party thereto, is in default
under any lease, instrument, agreement, license or permit to which VPI is a
party, or by which VPI, or any of its respective properties, are bound
(collectively, the "VPI Documents"); and (a) the rights and benefits of VPI
under the VPI Documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby will not result in any violation or breach or constitute a
default under, any of the terms or provisions of the VPI Documents or the VPI
Charter Documents. Except as set forth on Schedule 6.9, none of the VPI
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and the performance of the transactions contemplated herein have been
duly and validly authorized by the Board of Directors of VPI and this Agreement
has been duly and validly authorized by all necessary corporate action and is a
legal, valid and binding obligation of VPI, enforceable against VPI in
accordance with its terms except as limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights generally, and the individuals signing this Agreement on
behalf of VPI have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by
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reason of the provisions of the Delaware GCL. The shares of VPI Stock to be
issued to the STOCKHOLDERS pursuant to this Agreement will not be registered
under the 1933 Act, except as provided in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. VPI has not entered and will not enter into any
agreement with any of the Founding Companies or any of the stockholders of the
Founding Companies or VPI other than the Other Agreements and the agreements
specifically contemplated by each of the Other Agreements, including the
employment agreements referred to therein, and neither VPI nor its equity owners
or affiliates have received any cash compensation or payments in connection with
this transaction except for reimbursement of out-of-pocket expenses which are
necessary or appropriate to this transaction. None of the Other Agreements shall
provide for a valuation of any of the Other Founding Companies based on the use
of a multiplier greater than ten percent (10%).
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. VPI has not conducted
any operations or business since inception other than activities related to the
VPI Plan of Organization. VPI does not own and has not at any time owned any
real property or any material personal property and is not a party to any other
agreement, except as listed on Schedule 6.13 and except that VPI is a party to
the Other Agreements and the agreements contemplated thereby and to such
agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI has timely filed all requisite federal, state, local and other
Tax Returns for all fiscal periods ended on or before the date hereof. All such
Tax Returns have set forth all material items required to be set forth therein
and were prepared in compliance with applicable laws and were true, correct and
complete in all material respects. No material fact or information has become
known to VPI or its officers or employees responsible for maintaining the
financial records of VPI subsequent to the filing of such Tax Returns to the
contrary of any information contained therein. Except as set forth on Schedule
6.14, there are no examinations in progress (and VPI and its employees are not
aware of any proposed examinations) or claims against VPI
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(including liens against assets of VPI) for federal, state, local and other
Taxes (including penalties and interest) for any period or periods prior to and
including the date hereof and no notice of any claim for Taxes, whether pending
or threatened, has been received. Except as set forth on Schedule 6.14, VPI has
not entered into an agreement or waiver and has not been requested to enter into
an agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI, any member of an affiliated or consolidated
group which includes or included VPI, or with respect to any payment made or
deemed made by VPI, required to be paid by the date hereof, have been paid. All
amounts required to be deposited, withheld or collected under applicable
federal, state, local or other Tax laws and regulations by VPI for Taxes have
been so deposited, withheld or collected, and such deposit, withholding or
collection has either been paid to the respective governmental agencies or set
aside and secured in accounts for such purpose or secured and reserved against
and entered on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, VPI has not been included in
or joined in the filing of any consolidated or combined Tax Return (other than
as a common parent). VPI is not a party to or bound by or obligated under any
Tax sharing, Tax benefit or similar agreement with any person or entity.
(e) Except as set forth on Schedule 6.14, VPI (i) has not assumed and
is not liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which VPI or such
person or entity was the surviving corporation or a consolidation) and (ii) has
not indemnified any other person or entity or otherwise agreed to pay on behalf
of any other person or entity any Taxes arising from or which may be asserted on
the
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basis of any Tax treatment adopted with respect to all or any aspect of such
business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI for its last three (3) fiscal years or such shorter
period of time as VPI shall have existed, (ii) any Tax examinations commenced or
closed or outstanding during their three (3) most recent fiscal years, and (iii)
currently outstanding extensions of statutory limitations, are attached hereto
as Schedule 6.14.
(g) VPI has a taxable year ended on the date set forth as such on
Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, VPI's methods of accounting
have not changed in the past five years. No adjustment to taxable income by
reason of a change of accounting method is required in respect of any period for
which the statute of limitations has not expired.
(i) VPI is not an investment company as defined in Section 351(e)(1)
of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI as of the date hereof are disclosed on Schedule 6.14.
(k) VPI has not filed a consent with the Internal Revenue Service
pursuant to section 341(f) of the Code and has not agreed to have section
341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as
defined in section 341(f) of the Code) owned by VPI.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANIES as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by
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VPI, and do not omit to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDERS set forth in the letter of representations
(referenced in the tax opinion letter to be delivered pursuant to Section 8.4
hereof) are true and correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, each COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of such COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of such COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. Each COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI, the
STOCKHOLDERS and each COMPANY shall treat all information obtained in connection
with the negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Other Founding Companies as
confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
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(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of each COMPANY access to
all of VPI's sites, properties, books and records and all due diligence,
agreements, documents and information of or concerning the Founding Companies
and will furnish each COMPANY with such additional financial and operating data
and other information as to the business and properties of VPI as each COMPANY
may from time to time reasonably request. VPI will cooperate with each COMPANY,
its representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. VPI will provide complete access to its
operations and key officers and employees to each COMPANY, its representatives
and advisors on a continuing basis through the Closing Date. Each COMPANY will
cause all information obtained in connection with the negotiation and
performance of this Agreement to be treated as confidential in accordance with
the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with such COMPANY;
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(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, neither COMPANY shall, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANIES to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of such COMPANY, provided
that such COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of such COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANIES
(except as set forth herein), including, but not limited to, the issuance
of any option, warrant, call, conversion
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right or commitment of any kind with respect to the COMPANIES' capital
stock or the purchase or other reacquisition of any outstanding shares for
treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, any COMPANY or a merger, consolidation or business
combination of any COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide VPI on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between such COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between each COMPANY and any STOCKHOLDER not reflecting fair market terms,
except such existing agreements as are set forth on Schedule 9.7. Such
termination agreements are listed on Schedule 7.6 and copies thereof are
attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY
shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any
event the occurrence or
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non-occurrence of which would be likely to cause any representation or warranty
of any COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate
in any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI shall give prompt notice to the COMPANIES of (i) the occurrence
or non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any representation or warranty of VPI contained herein to be
untrue or inaccurate in any material respect at or prior to the Pre-Closing and
(ii) any material failure of VPI to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.7 that is not accompanied by a
proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not
be deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by any COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANIES consent to such amendment or supplement; and provided further, that no
amendment or supplement to a schedule prepared by VPI that constitutes or
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reflects an event or occurrence that would have a Material Adverse Effect may be
made unless a majority of the Founding Companies consent to such amendment or
supplement. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 8.1 and 9.1
have been fulfilled, the Schedules hereto shall be deemed to be the schedules as
amended or supplemented pursuant to this Section 7.8. In the event that one of
the Other Founding Companies seeks to amend or supplement a schedule pursuant to
Section 7.8 of one of the Other Agreements, and such amendment or supplement
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect on such Other Founding Company, VPI shall give the COMPANIES
notice promptly after it has knowledge thereof. If VPI and a majority of the
Founding Companies consent to such amendment or supplement, but the COMPANIES do
not give their consent, the COMPANIES collectively may terminate this Agreement
pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to
amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a
majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that VPI seeks to amend or
supplement a Schedule pursuant to this Section 7.8 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
7.8. No amendment of or supplement to a Schedule shall be made later than 24
hours prior to the anticipated effectiveness of the Registration Statement. For
purposes of this Section 7.8, consent to an amendment or supplement to a
schedule pursuant to Section 7.8 of this Agreement or one of the Other
Agreements shall have been deemed given by VPI or any Founding Company if no
response is received within 24 hours following receipt of notice of such
amendment or supplement (or sooner if required by the circumstances under which
such consent is requested and so requested in the notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and
the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the
Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with VPI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS
agree promptly to advise VPI if, at any time during the period in which a
prospectus relating to the offering is required to be delivered under the 1933
Act, any information contained in the prospectus concerning any COMPANY or the
STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. VPI will give the
COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to
review and comment on a substantially final draft of the Registration Statement
prior to filing, and with respect to all amendments thereto, VPI will give the
COMPANIES and STOCKHOLDERS an opportunity to review and comment on those
portions of such amendments that relate to the COMPANIES. Insofar as the
information contained in the Registration Statement relates solely to the
COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration
Statement each COMPANY represents and warrants as to such information with
respect to itself, and each STOCKHOLDER represents and warrants, as to such
information with respect to the COMPANIES and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the
opportunity to review and approve such information. If, prior to the 25th day
after the date of the final prospectus of VPI utilized in connection with the
IPO, the COMPANIES
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANIES or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANIES and
the STOCKHOLDERS shall immediately give notice of such fact or circumstance to
VPI. However, subject to the provisions of Section 7.8, such notification shall
not relieve either the COMPANIES or the STOCKHOLDERS of their respective
obligations under this Agreement, and, subject to the provisions of Section 7.8,
at the sole option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANIES, or on behalf of the COMPANIES and of
STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on
the Closing Date, contained in this Agreement (including the Schedules and
Annexes hereto) shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANIES as of the end of all fiscal
quarters following the Balance Sheet Date, and the unaudited consolidated income
statements of the COMPANIES for all fiscal quarters ended after the Balance
Sheet Date, disclosing no material adverse change (except as described on
Schedule 9.5) in the financial condition of the COMPANIES or the results of its
operations from the financial statements as of the Balance Sheet Date. For the
fiscal quarter ending March 31, 1998, such balance sheets and income statements
shall be delivered to VPI on or before April 21, 1998, unless the Closing Date
shall have occurred on or before April 21, 1998. The balance sheet and income
statement of the COMPANY for the fiscal quarter ended March 31, 1998, shall have
been prepared on a basis consistent with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated, (i)
except as noted therein, (ii) except for footnote disclosures normally required
by generally accepted accounting principles and (iii) subject to year-end
adjustments. Except as noted in such balance sheets and income statements, all
of such balance sheets and income statements will present fairly the results of
operations of the COMPANIES for the periods indicated thereon and shall
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be for such dates and time periods as required by Regulation S-X under the 1933
Act and the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES
The obligations of STOCKHOLDERS and the COMPANIES with respect to actions
to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on
or prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been
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waived, except that no such waiver shall be deemed to affect the survival of the
representations and warranties of VPI contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI contained in Section 6 shall be true and correct in all material respects as
of the Pre-Closing Date as though such representations and warranties had been
made as of that time; and a certificate to the foregoing effect dated the
Pre-Closing Date and signed by the President or any Vice President of VPI shall
have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI on or before the
Pre-Closing Date and the Closing Date shall have been duly complied with and
performed in all material respects; and certificates to the foregoing effect
dated the Pre-Closing Date and the Closing Date and signed by the President or
any Vice President of VPI shall have been delivered to the STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of the
COMPANIES as a result of which the management of the COMPANIES deems it
inadvisable to proceed with the transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
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8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI shall have delivered to the COMPANIES a
certificate, dated as of a date no later than ten days prior to the Pre-Closing
Date, duly issued by the Delaware Secretary of State and in each state in which
VPI is authorized to do business, showing that VPI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for VPI, for all periods prior to the Pre-Closing Date have been filed
and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI which would constitute a Material Adverse Effect,
and VPI shall not have suffered any material loss or damages to any of its
properties or assets, whether or not covered by insurance, which change, loss or
damage materially affects or impairs the ability of VPI to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a
certificate or certificates, dated the Pre-Closing Date and signed by the
secretary of VPI, certifying the truth and correctness of attached copies of
VPI's Certificates of Incorporation (including amendments thereto), Bylaws
(including amendments thereto), and resolutions of the boards of directors and,
if required, the stockholders of VPI approving VPI's entering into this
Agreement and the consummation of the transactions contemplated hereby. Such
certificate or certificates also shall be addressed to the Underwriters and
copies thereof shall be delivered to the Underwriters.
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8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI
The obligations of VPI with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI with
respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANIES contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and
correct in all
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material respects as of the Pre-Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; and the
STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date
and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of VPI as a
result of which the management of VPI deems it inadvisable to proceed with the
transactions hereunder.
9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
each COMPANY, certifying the truth and correctness of attached copies of each
COMPANY's Charter Documents and resolutions of the board of directors and the
STOCKHOLDERS approving each COMPANY's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate also
shall be addressed to the Underwriters and a copy thereof shall be delivered to
the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. Except as set forth on Schedule 9.5, no
event or circumstance shall have occurred with respect to any COMPANY which
would constitute a Material Adverse Effect, and neither COMPANY shall have
suffered any material loss or damages to any of its properties or assets,
whether or not covered by insurance, which change, loss or damage materially
affects or impairs the ability of any COMPANY to conduct its business.
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9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date, effective as of the Closing Date,
releasing the COMPANIES and VPI from (i) any and all claims of the STOCKHOLDERS
against the COMPANIES and VPI and (ii) obligations of the COMPANIES and VPI to
the STOCKHOLDERS, except for (x) items specifically identified on Schedules
5.10, 5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y)
continuing obligations to the STOCKHOLDERS relating to their employment by the
COMPANIES and (z) obligations or claims (including statutory and common law
claims) arising under this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between any of the COMPANIES and the
STOCKHOLDERS not reflecting fair market terms shall have been canceled effective
prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI
certificates, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in each
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which each COMPANY is authorized to do business, showing each COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for each COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
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9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of each COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the
incremental cost of having VPI so named as an additional insured.
9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall
have signed an agreement with the Underwriters, in form and substance identical
to agreements signed by the Other Founding Companies and the Founding
Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS
covenant to hold all of the VPI Stock acquired hereunder for a period of at
least 180 days after the Closing Date except for transfers to immediate family
members, and trusts for the benefit of STOCKHOLDERS and/or immediate family
members, who agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
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9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANIES, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANIES as being conducted at the Pre-Closing
Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
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10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANIES shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities, if any (in excess of all amounts already paid
with respect thereto or properly accrued or reserved with respect thereto
on the COMPANY Financial Statements and books and records), required to be
shown by such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANIES, as defined in Section 1563 of the Code, to, provide to each of
the other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide explanation
of any documents or information so provided. Subject to the preceding
sentence,
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each party required to file Tax Returns pursuant to this Agreement shall
bear all costs of filing such Tax Returns.
(iv) Each of the COMPANIES, VPI and each STOCKHOLDER shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Luis
Alonso to serve as a director of VPI effective as of the Closing Date. Such
designated person also shall be a member of the Executive Committee of the Board
of Directors effective as of the Closing Date, to serve subject to and in
accordance with the Certificate of Incorporation and Bylaws of VPI.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at any COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting conditions for employees of each
COMPANY who were covered by such COMPANY's health insurance plan immediately
prior to the Closing Date or as otherwise required by law.
10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the
books and records of such COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing
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Date. In addition, VPI agrees that it shall remove the restricted stock legend
from the VPI Stock received by any STOCKHOLDER pursuant to this Agreement as
soon as practicable after receipt from such STOCKHOLDER of a letter requesting
removal of the restricted stock legend provided that (i) the STOCKHOLDER has
held such stock for a period of at least two years after the Closing Date, (ii)
the STOCKHOLDER is not, and has not been for the three months preceding the
removal of the legend, a director of VPI, an officer of VPI (other than the
President of the COMPANY or its successor), or a beneficial owner of more than
one percent of the outstanding shares of VPI and (iii) there have been no
amendments to Rule 144(k) that would prohibit VPI from removing such legend.
11. INDEMNIFICATION
The STOCKHOLDERS and VPI each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI and each COMPANY at all times, from and after the date of this
Agreement until the Expiration Date, from and against all losses, claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by VPI and each COMPANY
as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or each COMPANY set forth herein or on the
Schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of the STOCKHOLDERS or the COMPANIES under this
Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal
or state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
relating solely to any COMPANY or the STOCKHOLDERS, and provided to VPI or its
counsel by the COMPANIES or the STOCKHOLDERS, contained in the Registration
Statement or any
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prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating solely to the COMPANIES or the
STOCKHOLDERS required to be stated therein or necessary to make the statements
therein not misleading, or (iv) the matters described on Schedule 11.1(iv)
(relating to specifically identified matters such as ongoing claims and/or
litigation), which Schedule shall be prepared by VPI, provided, however, (A)
that in the case of any indemnity arising pursuant to clause (iii) such
indemnity shall not inure to the benefit of VPI or the COMPANIES to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to
VPI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI of its
representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur
due to VPI's failure to be responsible for the liabilities and obligations of
the COMPANIES as provided in Section 1 hereof (except to the extent that VPI has
claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such
liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating
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to VPI or any of the Other Founding Companies contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, or arising out of or based upon
any omission or alleged omission to state therein a material fact relating to
VPI or any of the Other Founding Companies required to be stated therein or
necessary to make the statements therein not misleading, or (v) the matters
described on Schedule 11.2(v) (relating to specifically identified matters
including the release of the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party
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from representing the Indemnified Party, the Indemnified Party shall have the
right to participate in such matter through counsel of its own choosing and the
Indemnifying Party will reimburse the Indemnified Party for the reasonable
expenses of its counsel. Further, absent a conflict, the Indemnified Party may
select counsel and have such counsel participate in such matter at the sole cost
of the Indemnified Party. After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested in
writing by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a final
and complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
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11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI and the other persons or entities
indemnified pursuant to Section 11.1 shall not assert any claim for
indemnification hereunder against the STOCKHOLDERS until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid
to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the
STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI and
the other persons or entities indemnified pursuant to Section 11.1 may assert
and shall be indemnified for any claim under Section 11.l(iv) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any such claim under Section 11.1(iv) shall not be
counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert
any claim for indemnification hereunder against VPI until such time as, and
solely to the extent that, the aggregate of all claims which the STOCKHOLDERS
may have against VPI shall exceed $50,000, provided, however, that the
STOCKHOLDERS and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether the aggregate of all claims which such persons
may have against any of VPI exceeds $50,000, it being understood that the amount
of any such claim under Section 11.2(v) shall not be counted towards such
$50,000 amount. No person shall be entitled to indemnification under this
Section 11 if and to the extent that: (a) such person's claim for
indemnification is directly or indirectly related to a breach by
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such person of any representation, warranty, covenant or other agreement set
forth in this Agreement; or (b) such person receives a tax benefit as a result
of the claim or loss for which indemnification is sought (i.e., the amount of
such claim or loss for which indemnification is provided hereunder shall be
reduced by the amount of such tax benefit). VPI and the other persons or
entities indemnified pursuant to Section 11.1 shall not assert any claim for
indemnification for a breach, if any, of the representation made in the third
sentence of Section 5.11 hereof prior to the date that is eighteen months after
the Closing Date.
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the transactions contemplated hereby, provided that a
STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not
be limited. Indemnity obligations hereunder may be satisfied through the payment
of cash or the delivery of VPI Stock, or a combination thereof, at the
STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock
received or delivered by a STOCKHOLDER (for purposes of determining the
Indemnification Threshold, the limitation on indemnity set forth in the second
preceding sentence and the amount of any indemnity paid), VPI Stock shall be
valued at its initial public offering price as set forth in the Registration
Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this
Section 11 shall be deemed to be a reduction in the consideration received by
the STOCKHOLDERS pursuant to Section 3. The provisions of this Section 11 shall
be contained in the Other Agreements executed in connection with the VPI Plan of
Organization.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
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(i) by mutual consent of the boards of directors of VPI and the COMPANIES;
(ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANIES, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the
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COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii); and further provided,
however (and notwithstanding anything in Section 18.7 to the contrary), that the
COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management or rental business
or hotel management business in direct competition with VPI or any of its
subsidiaries, within 100 miles of the locations in which VPI or the
COMPANIES, or any of their subsidiaries, conduct a noncommercial property
management or rental business or hotel management business (the
"Territory").
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
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(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of any COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management or rental services or hotel management
services to property owners and/or renters in direct competition with VPI
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management or rental business or hotel management
business, which candidate, to the actual knowledge of such STOCKHOLDER
after due inquiry, was called upon by VPI (including the subsidiaries
thereof) or for which, to the actual knowledge of such STOCKHOLDER after
due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis,
for the purpose of acquiring such entity, unless VPI (or any subsidiary
thereof) has expressly declined to pursue such acquisition candidate or at
least one (1) year has elapsed since VPI (or any subsidiary thereof) has
taken any action with respect to pursuing such acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of any
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that such COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit (a) any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter; (b) the STOCKHOLDERS who
as of the date hereof own and operate certain businesses (other than the
businesses of the COMPANIES) engaged in, without limitation, development of
condominium and other property, ownership of real property, ownership of
hospitality facilities, real estate brokerage, ownership of rental properties
and general contractor construction, from continuing to own and operate such
businesses; or (c) the STOCKHOLDERS (or their affiliates) who manage
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properties outside of Summit County, Colorado, owned and controlled by such
STOCKHOLDERS (or their affiliates) from continuing to manage such properties.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
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13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or arbitrator or mediator has determined that
such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree
that the covenants in this Section 13 are a material and substantial part of
this transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or any COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by
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the COMPANY of the employment agreement, the provisions of this Section 13
likewise shall not be valid or enforceable.
13.8 RIGHT TO MANAGE PROPERTIES. VPI shall have the first option to manage
properties developed by the STOCKHOLDERS (or their affiliates) on commercially
reasonable terms which shall be mutually agreed upon between the STOCKHOLDERS
and VPI. If the STOCKHOLDERS and VPI are unable to mutually agree on such terms,
the STOCKHOLDERS shall have the right to have such newly developed properties
managed by an independent property management company. Notwithstanding the
foregoing, the STOCKHOLDERS shall cause L&D Development Co. to cause the
COMPANIES to be the property manager for the homeowners' association, and, to
the extent possible, purchasers of individual units, of the Los Pinos
development with no commission payable to the L&D Development Co. therefor.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANIES, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANIES', the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI and (c) to counsel and other advisors, provided that such advisors (other
than counsel) agree to the confidentiality provisions of this Section 14.1,
unless (i) such information is or becomes known to the public generally or to
businesses operating in the noncommercial property management or rental industry
through no fault of the STOCKHOLDERS,
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(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on
their ability to disseminate confidential information with respect to the
COMPANIES. Nothing herein shall restrict the STOCKHOLDERS from using
confidential information of the COMPANIES described in this Section 14.1 in the
businesses in which they are entitled to engage in competition with the COMPANY
pursuant to Sections 13.1(b) and (c).
14.2 VPI . VPI recognizes and acknowledges that it had in the past and
currently has access to certain confidential information of the COMPANIES, such
as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the COMPANIES' respective businesses. VPI agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANIES, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI, (ii) disclosure is required
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by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI shall, unless otherwise required by law or such order, give two days' prior
written notice thereof to the COMPANIES and the STOCKHOLDERS and provide the
COMPANIES and the STOCKHOLDERS with the opportunity within such two-day period
to contest such disclosure, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party. VPI will disclose confidential information
relating to the COMPANIES to the Other Founding Companies only if such companies
have agreed, in advance, to treat such information as confidential. In the event
of a breach or threatened breach by VPI of the provisions of this Section, the
COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining
VPI from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the COMPANIES and the STOCKHOLDERS from
pursuing any other available remedy for as such breach or threatened breach,
including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANIES of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
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15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the
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Future Sale except pursuant to such arrangements; provided, however, that the
terms of such sale (including commissions) are at least as favorable as the
terms the STOCKHOLDER would have received in the absence of this Section 15.2.
If VPI has not successfully arranged for a private sale of such shares through
one or more the Underwriters within such three (3) day period, the restrictions
of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future
Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The
terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford
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to sustain a total loss of such investment and has such knowledge and experience
in financial and business matters that he or she is capable of evaluating the
merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS
have had an adequate opportunity to ask questions and receive answers from the
officers of VPI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of VPI, the plans for the
operations of the business of VPI, the business, operations and financial
condition of the Founding Companies other than the COMPANIES, and any plans for
additional acquisitions and the like. The STOCKHOLDERS have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be
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sold by persons other than VPI is greater than the number of such shares which
can be offered without adversely affecting the offering, VPI may reduce pro rata
the number of shares offered for the accounts of such persons (based upon the
number of shares desired to be sold by such person) to a number deemed
satisfactory by such managing underwriter, provided, however, that for each such
offering made by VPI after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than VPI, the
STOCKHOLDERS and the stockholders of the Other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements (collectively, the
STOCKHOLDERS and the stockholders of the other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the Founding
Stockholders on a pro rata basis based on the number of shares proposed to be
registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
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Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
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17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or
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necessary to make the statements therein not misleading, and VPI will reimburse
such seller and each such director, officer, underwriter and controlling Person
for any expenses (including but not limited to reasonable attorneys' fees)
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that VPI shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to VPI by
such seller expressly for use in the preparation thereof, and provided further
that VPI shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, underwriter or
controlling Person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933
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Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in strict conformity with written
information furnished to VPI by such seller expressly for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement; provided that such prospective
seller shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any underwriter, VPI or any such director, officer or
controlling Person and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling holder of Registrable
Securities under this Section 17.6(b) be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this
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Section 17.6, except to the extent that the indemnifying party is actually
materially prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
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indemnified party as a result of such loss, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 17.6(c) hereof, any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation
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(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANIES and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS and VPI shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of each COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
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18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANIES and VPI and supersede any prior agreement and understanding relating
to the subject matter of this Agreement, including but not limited to any letter
of intent entered into by any of the parties hereto. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANIES and VPI, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees
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and expenses of Arthur Andersen, LLP (including such fees and expenses in
connection with the audit of the COMPANIES' financial statements), Akin, Gump,
Strauss, Hauer & Feld, L.L.P., and any other person or entity retained by VPI,
and the costs of preparing the Registration Statement. The STOCKHOLDERS shall
pay the fees, expenses and disbursements of the STOCKHOLDERS, the COMPANIES and
their respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this
Agreement, including the fees and expenses of accountants and legal counsel to
the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the
transactions contemplated by this Agreement are consummated, VPI shall reimburse
the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the
closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all
sales, use, transfer, real property transfer, recording, gains, stock transfer
and other similar taxes and fees ("Transfer Taxes") imposed in connection with
the transactions contemplated hereby, other than Transfer Taxes, if any, imposed
by the State of Delaware. Each STOCKHOLDER shall file all necessary
documentation and Tax Returns with respect to such Transfer Taxes. In addition,
each STOCKHOLDER acknowledges that he or she, and not the COMPANIES or VPI,
shall pay all taxes due upon receipt of the consideration payable pursuant to
Section 3 hereof, and shall assume all tax risks and liabilities of such
STOCKHOLDER in connection with the transactions contemplated hereby; provided,
however, that the foregoing shall not in any way prejudice the ability of the
STOCKHOLDERS and the COMPANIES to rely upon the opinions contained in the tax
opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
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(a) If to VPI, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANIES, addressed as follows:
Collection of Fine Properties, Inc.
319 North Main Street
Breckenridge, Colorado 80424
Facsimile no.: (970) 547-3300
Attention: Mr. Luis Alonso
and marked "Personal and Confidential"
with copy to:
Kelley Drye & Warren LLP
201 South Biscayne Boulevard, Suite 2400
Miami, Florida 33131
Facsimile no.: (305) 372-2490
Attention: Ignacio E. Sanchez
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
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18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, the COMPANIES and STOCKHOLDERS (as defined in the introductory
paragraph of this Agreement) who will hold or who hold at least 50% of the VPI
Stock issued or to be issued to the STOCKHOLDERS upon consummation of the
respective transactions contemplated hereby. Any amendment or waiver effected in
accordance with this Section 18.15 shall be binding upon each of the parties
hereto, any other person receiving VPI Stock in connection with the transactions
contemplated hereby and each future holder of such VPI Stock.
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18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means any COMPANY, any Subsidiary and any member of a
Relevant Group.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph
of this Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 1.1.
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"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANIES.
84
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"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANIES and any affiliated, combined,
consolidated, unitary or similar group of which any COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
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"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the third recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
86
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
By:/s/ Leonard Potter
------------------------------
Leonard Potter
Vice President of each of such entities
COLLECTION OF FINE PROPERTIES, INC.
By: /s/ Luis Alonso
------------------------------
Name: Luis Alonso
-------------------------------
Title: President
------------------------------
TEN MILE HOLDINGS, LTD.
By: /s/ Luis Alonso
------------------------------
Name: Luis Alonso
-------------------------------
Title: President
------------------------------
STOCKHOLDERS:
/s/ Luis Alonso
- ----------------------------------
Luis Alonso
/s/ Domingo R. Moreira
- ----------------------------------
Domingo R. Moreira
/s/ Domingo A. Moreira
- ----------------------------------
Domingo A. Moreira
/s/ Brenda M. Lopez Ibanez
- ----------------------------------
Brenda M. Lopez Ibanez
/s/ Ana Maria Moreira
- ----------------------------------
Ana Maria Moreira
EXHIBIT 2.5
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
HOUSTON AND O'LEARY COMPANY
and
the STOCKHOLDERS named herein
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. PURCHASE AND SALE........................................................2
1.1 General..............................................................2
1.2 Intentionally Deleted................................................2
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY and VPI.....................................................3
2. INTENTIONALLY DELETED....................................................3
3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE.............................3
3.1 Delivery of VPI Stock and Cash.......................................3
3.2 Delivery of COMPANY Stock............................................3
3.3 Balance Sheet Test...................................................4
4. CLOSING..................................................................4
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............5
(A) Representations and Warranties of COMPANY and STOCKHOLDERS...........5
5.1 Due Organization..................................................6
5.2 Authority.........................................................7
5.3 Capital Stock of the COMPANY......................................7
5.4 Transactions in Capital Stock.....................................7
5.5 No Bonus Shares...................................................8
5.6 Subsidiaries......................................................8
5.7 Predecessor Status; etc...........................................8
5.8 Spin-off by the COMPANY...........................................8
5.9 Financial Statements..............................................8
5.10 Liabilities and Obligations......................................9
5.11 Accounts and Notes Receivable...................................10
5.12 Permits and Intangibles.........................................10
5.13 Environmental Matters...........................................11
5.14 Personal Property...............................................12
5.15 Significant Customers...........................................13
5.16 Material Contracts and Commitments..............................13
5.17 Real Property...................................................14
5.18 Insurance.......................................................15
5.19 Compensation; Employment Agreements; Organized Labor Matters....15
5.20 Employee Plans..................................................16
5.21 Compliance with ERISA...........................................17
5.22 Conformity with Law; Litigation.................................19
5.23 Taxes...........................................................19
5.24 No Violations...................................................22
5.25 Government Contracts............................................23
5.26 Absence of Changes..............................................23
5.27 Deposit Accounts; Powers of Attorney............................24
5.28 Validity of Obligations.........................................25
5.29 Relations with Governments......................................25
5.30 Disclosure......................................................25
5.31 Prohibited Activities...........................................26
(B) Representations and Warranties of STOCKHOLDERS......................26
5.32 Authority; Ownership............................................26
5.33 Preemptive Rights...............................................27
5.34 No Intention to Dispose of VPI Stock............................27
6. REPRESENTATIONS OF VPI..................................................28
6.1 Due Organization....................................................28
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6.2 Authorization.......................................................29
6.3 Capital Stock of VPI................................................29
6.4 Transactions in Capital Stock.......................................29
6.5 Subsidiaries........................................................30
6.6 Financial Statements................................................30
6.7 Liabilities and Obligations.........................................30
6.8 Conformity with Law; Litigation.....................................30
6.9 No Violations.......................................................31
6.10 Validity of Obligations............................................31
6.11 VPI Stock..........................................................32
6.12 No Side Agreements.................................................32
6.13 Business; Real Property; Material Agreements.......................32
6.14 Taxes..............................................................32
6.15 Completion of Due Diligence........................................35
6.16 Disclosure........................................................35
6.17 Tax Treatment......................................................35
7. COVENANTS PRIOR TO CLOSING..............................................35
7.1 Access and Cooperation; Due Diligence...............................35
7.2 Conduct of Business Pending Closing.................................36
7.3 Prohibited Activities...............................................37
7.4 No Shop.............................................................39
7.5 Notice to Bargaining Agents.........................................40
7.6 Agreements..........................................................40
7.7 Notification of Certain Matters.....................................40
7.8 Amendment of Schedules..............................................41
7.9 Cooperation in Preparation of Registration Statement................42
7.10 Final Financial Statements.........................................44
7.11 Further Assurances.................................................44
7.12 Authorized Capital.................................................44
7.13 Best Efforts to Consummate Transaction.............................45
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........45
8.1 Representations and Warranties......................................45
8.2 Performance of Obligations..........................................46
8.3 No Litigation.......................................................46
8.4 Opinion of Counsel..................................................46
8.5 Registration Statement..............................................46
8.6 Consents and Approvals..............................................46
8.7 Good Standing Certificates..........................................46
8.8 No Material Adverse Change..........................................47
8.9 Closing of IPO......................................................47
8.10 Secretary's Certificate............................................47
8.11 Employment Agreements..............................................47
8.12 Directors and Officers Insurance...................................47
8.13 Stock Options......................................................47
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI..............................48
9.1 Representations and Warranties......................................48
9.2 Performance of Obligations..........................................48
9.3 No Litigation.......................................................49
9.4 Secretary's Certificate.............................................49
9.5 No Material Adverse Effect..........................................49
9.6 STOCKHOLDERS' Release...............................................49
9.7 Termination of Related Party Agreements.............................50
9.8 Opinion of Counsel..................................................50
9.9 Consents and Approvals..............................................50
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9.10 Good Standing Certificates.........................................50
9.11 Registration Statement.............................................50
9.12 Employment Agreements..............................................50
9.13 Closing of IPO.....................................................50
9.14 FIRPTA Certificate.................................................50
9.15 Insurance..........................................................50
9.16 Lockup Agreement...................................................50
9.17 Letter of Representation...........................................51
9.18 Termination of Defined Benefit Plans...............................51
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................51
10.1 Release From Guarantees; Repayment of Certain Obligations..........51
10.2 Preservation of Tax and Accounting Treatment.......................51
10.3 Preparation and Filing of Tax Returns..............................52
10.4 Appointment of Directors...........................................53
10.5 Preservation of Employee Benefit Plans.............................53
10.6 Maintenance of Books...............................................53
10.7 Securities Covenants...............................................54
11. INDEMNIFICATION........................................................54
11.1 General Indemnification by the STOCKHOLDERS........................54
11.2 Indemnification by VPI.............................................55
11.3 Third Person Claims................................................56
11.4 Exclusive Remedy...................................................58
11.5 Limitations on Indemnification.....................................58
12. TERMINATION OF AGREEMENT...............................................59
12.1 Termination........................................................59
12.2 Liabilities in Event of Termination................................60
13. NONCOMPETITION.........................................................61
13.1 Prohibited Activities..............................................61
13.2 Damages............................................................62
13.3 Reasonable Restraint...............................................63
13.4 Severability; Reformation..........................................63
13.5 Independent Covenant...............................................64
13.6 Materiality........................................................64
13.7 Limitation.........................................................64
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................65
14.1 STOCKHOLDERS.......................................................65
14.2 VPI................................................................66
14.3 Damages............................................................67
14.4 Survival...........................................................67
14.5 Return of Data Submitted...........................................67
15. TRANSFER RESTRICTIONS..................................................67
15.1 Transfer Restrictions..............................................67
15.2 Certain Transfers..................................................68
16. SECURITIES LAW REPRESENTATIONS.........................................68
16.1 Compliance with Law................................................69
16.2 Economic Risk; Sophistication......................................69
17. REGISTRATION RIGHTS....................................................69
17.1 Piggyback Registration Rights......................................70
17.2 Demand Registration Rights.........................................71
17.3 Registration Procedures............................................72
17.4 Underwriting Agreement.............................................72
17.5 Availability of Rule 144...........................................72
17.6 Registration Rights Indemnification................................72
18. GENERAL................................................................77
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18.1 Press Releases.....................................................77
18.2 Cooperation........................................................78
18.3 Successors and Assigns; Third Party Beneficiaries..................78
18.4 Entire Agreement...................................................78
18.5 Counterparts.......................................................79
18.6 Brokers and Agents.................................................79
18.7 Expenses...........................................................79
18.8 Notices............................................................80
18.9 Governing Law......................................................81
18.10 Exercise of Rights and Remedies...................................81
18.11 Time..............................................................81
18.12 Reformation and Severability......................................81
18.13 Remedies Cumulative...............................................82
18.14 Captions..........................................................82
18.15 Amendments and Waivers............................................82
18.16 Incorporation by Reference........................................82
18.17 Defined Terms.....................................................82
ANNEX I INTENTIONALLY DELETED
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI FORM OF OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
iv
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), HOUSTON AND O'LEARY COMPANY, a Colorado corporation (the
"COMPANY"), and Heidi O'Leary Houston (the "STOCKHOLDERS").
WHEREAS, the respective Boards of Directors of VPI and the COMPANY
deem it advisable and in the respective best interests of VPI and the
COMPANY and their respective stockholders that the STOCKHOLDERS contribute
all of the COMPANY Stock owned by the STOCKHOLDERS to VPI in exchange for
VPI Stock and cash pursuant to this Agreement and in accordance with the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Hotel Corporation of
the Pacific, Inc., a Hawaii corporation, Jupiter Property Management at
Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc.,
a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation,
Howey Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a
Florida corporation, Resort Property Management, Inc., a Utah corporation,
Telluride Resort Accommodations, Inc., a Colorado corporation,
Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management
Company, a Georgia
1
<PAGE>
corporation, and Whistler Chalets Limited, a British Columbia corporation,
and their respective stockholders in order to acquire additional businesses
(the COMPANY, together with each of the entities with which VPI has entered
into the Other Agreements, are collectively referred to herein as the
"Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and will acquire the stock of VPI as an exchange
pursuant to which gain is not recognized under Section 351(a) of the Code;
and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE
1.1 GENERAL. Upon the terms and subject to the conditions of this
Agreement, the STOCKHOLDERS hereby agree to sell, assign, transfer and deliver
to VPI, and VPI hereby agrees to purchase, all of the outstanding capital stock
of the COMPANY (the "COMPANY Stock").
1.2 INTENTIONALLY DELETED.
1.3 INTENTIONALLY DELETED
2
<PAGE>
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY
AND VPI . The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY and VPI
as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding;
2. INTENTIONALLY DELETED
3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE
3.1 DELIVERY OF VPI STOCK AND CASH. On the Closing Date the STOCKHOLDERS,
who are the holders of all outstanding certificates representing shares of
COMPANY Stock, shall, upon surrender of such certificates, receive the
respective number of shares of VPI Stock and the amount of cash (subject to
adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to
be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled; provided, however, that such
delivery shall not constitute the actual transfer and delivery of the COMPANY
Stock, which shall take place only on the Closing Date provided in Section 4.
The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such COMPANY Stock or with respect to the stock powers accompanying
any COMPANY Stock.
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3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall
result in a corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
Indebtedness, if any, that was incurred for working capital or in
connection with the operating assets of the COMPANY, in each case in amounts
that are reasonable and consistent with the past practice of the COMPANY, will
be assumed or repaid by VPI without a corresponding reduction to consideration
paid hereunder. In addition, so long as the conditions set forth in clauses (i)
through (iii) are satisfied as of the Closing Date, the COMPANY shall be
permitted to distribute any additional cash or cash equivalents to the
STOCKHOLDERS or to pay bonuses to the STOCKHOLDERS or employees of the COMPANY
at any time prior to the Closing Date, notwithstanding anything in this
Agreement to the contrary.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the transfer and delivery of the COMPANY Stock as
contemplated by Section 1 hereof and (ii) effect the delivery of shares referred
to in Section 3 hereof; provided, however, that such actions shall not
constitute the actual transfer and delivery of the shares of COMPANY Stock and
certified check(s) or
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wire transfer(s) referred to in Section 3 hereof, each of which actions shall
only be taken upon the Closing Date as herein provided. In the event there is no
Closing, VPI shall redeliver the certificates for the COMPANY Stock to the
STOCKHOLDERS. The taking of the actions described in clauses (i) and (ii) above
(the "Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing
Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New
Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) all
transactions contemplated by this Agreement, including the transfer and delivery
of COMPANY Stock, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to Section 3 hereof shall
occur and (y) the closing with respect to the IPO shall be completed. The taking
of the actions described in the preceding clauses (x) and (y) shall constitute
the closing of the transactions hereunder (the "Closing"), and the date on which
the actions described in the preceding clauses (x) and (y) occur shall be
referred to as the "Closing Date." Except as provided in Sections 8 and 9 hereof
with respect to actions to be taken on the Closing Date, during the period from
the Pre-Closing Date to the Closing Date this Agreement may only be terminated
by a party if the underwriting agreement in respect of the IPO is terminated
pursuant to the terms of such agreement. This Agreement shall in any event
terminate if the Closing Date has not occurred within 15 business days of the
Pre-Closing Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations
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and warranties shall survive the Closing Date for a period of two years (the
last day of such period being the "Expiration Date"), except that (i) the
warranties and representations set forth in Section 5.23 hereof shall survive
until such time as the limitations period has run for all Tax periods ended on
or prior to the Closing Date, which shall be deemed to be the Expiration Date
for Section 5.23 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, VPI actually incurs
liability under the 1933 Act, the 1934 Act or any other federal or state
securities laws as a result of a breach of a representation or warranty by the
COMPANY or the STOCKHOLDERS, the representations and warranties set forth herein
shall survive until the expiration of any applicable limitations period, which
shall be deemed to be the Expiration Date for such purposes. For purposes of
this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all
of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Articles of Incorporation and
Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the
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COMPANY or the STOCKHOLDERS which have not been made available to VPI, and all
of such minutes are correct and complete in all material respects. Except as set
forth on Schedule 5.1, the most recent minutes of the COMPANY, which are dated
no earlier than ten business days prior to the date hereof, affirm and ratify
all prior acts of the COMPANY, and of its officers and directors on behalf of
the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the transactions contemplated hereby
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and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list of
all outstanding options, warrants or other rights to acquire shares of the
COMPANY's stock and the material terms of such outstanding options, warrants or
other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
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5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9, except as set
forth thereon, are copies of the following financial statements (the "COMPANY
Financial Statements") of the COMPANY: the COMPANY's (i) audited Balance Sheet,
if any, as of December 31, 1997 and unaudited Balance Sheet, if any, as of
December 31, 1996; (ii) audited Statement of Operations, if any, for the period
ended December 31, 1997 (December 31, 1997 being hereinafter referred to as the
"Balance Sheet Date") and unaudited Statement of Operations, if any, for the
period ended December 31, 1996; (iii) audited Statement of Changes in
Stockholders' Equity, if any, for the period ended on the Balance Sheet Date;
and (iv) audited Statement of Cash Flows, if any, for the period ended on the
Balance Sheet Date. Except as set forth on Schedule 5.9, such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted thereon or on Schedule 5.9 and, with respect to unaudited
COMPANY Financial Statements, except for the requirement of footnote
disclosures). Except as set forth on Schedule 5.9, such Balance Sheets as of
December 31, 1997 and 1996 present fairly the financial position of such COMPANY
as of the dates indicated thereon, and such Statements of Operations, Statements
of Changes in Stockholders' Equity and Statements of Cash Flows present fairly
the results of operations for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The
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COMPANY has also delivered to VPI on Schedule 5.10, in the case of those
contingent liabilities related to pending or, to the knowledge of the COMPANY,
threatened litigation, or other liabilities which are not fixed or are being
contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all
receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing
Date and (y) an aging of all accounts and notes receivable showing amounts due
in 30 day aging categories (the "A/R Aging Reports"). Except to the extent
reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing
accompanying the A/R Aging Reports, the accounts, notes and other receivables
shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible
in the amounts shown, net of reserves reflected in the balance sheet as of the
Balance Sheet Date with respect to accounts receivable as of the Balance Sheet
Date, and net of reserves reflected in the books and records of the COMPANY
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(consistent with the methods used for the balance sheet) with respect to
accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises,
permits and other governmental authorizations that are necessary for the
operation of the business of the COMPANY as now conducted, and the COMPANY has
delivered to VPI an accurate list and summary description (which is set forth on
Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the COMPANY (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). The licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any
of the foregoing, except for inadvertent, immaterial noncompliance with such
requirements, standards, criteria and conditions (provided that any such
noncompliance shall be deemed a breach of this Section 5.12 for purposes of
Section 11 hereof). Except as specifically provided on Schedule 5.12, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the COMPANY by, any such licenses, franchises, permits or government
authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses
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relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) the COMPANY has obtained and adhered to all permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.13, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no
on-site or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY or VPI for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) the
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and
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(z) all leases and agreements in respect of personal property used in the
operation of the COMPANY's business as now conducted, including, true, complete
and correct copies of all such leases and agreements. The COMPANY shall indicate
on Schedule 5.14 those assets listed thereon that are currently owned, or that
were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates
of the COMPANY. Except as set forth on Schedule 5.14, (i) all personal property
used by the COMPANY in its business is either owned by the COMPANY or leased by
the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the
personal property listed on Schedule 5.14 is in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on Schedule 5.14 are in full force and effect and, assuming due
execution and delivery thereof by the parties thereto other than the COMPANY,
the STOCKHOLDERS and their respective Affiliates, constitute valid and binding
agreements of the COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY
or the STOCKHOLDERS, the other parties (and their successors) thereto in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
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strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
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The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery thereof by the parties
thereto other than the COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of the COMPANY, the
STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other
parties (and their successors) thereto in accordance with their respective
terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY has
ever been canceled by the insurer and the COMPANY has never been unable to
obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
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Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the best of the COMPANY's knowledge, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment
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agreements and other agreements or arrangements containing "golden parachute" or
other similar provisions, and all deferred compensation agreements, together
with true, complete and correct copies of such plans, agreements and any trusts
related thereto, and classifications of employees covered thereby as of the
Balance Sheet Date. Except for the employee benefit plans, if any, described on
Schedule 5.20, the COMPANY does not sponsor, maintain or contribute to any plan
program, fund or arrangement that constitutes an "employee pension benefit plan"
(within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) nor has the COMPANY any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of
ERISA) or any non-qualified deferred compensation arrangement). The COMPANY has
not sponsored, maintained or contributed to any employee pension benefit plan
other than the plans, agreements, arrangements and trusts set forth on Schedule
5.20, nor is the COMPANY required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions or employment of any of the COMPANY's employees.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with
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their terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations. Except as disclosed on Schedule 5.21, all
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audit reports, Forms 5500, summary plan descriptions or
Tax Returns) have been timely filed or distributed, and copies thereof for the
three most recent plan years are included as part of Schedule 5.21 hereof. No
plan listed on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect
to any such plan or the COMPANY, has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
COMPANY has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service nor any liability to the Pension Benefit Guaranty
Corporation. The COMPANY and STOCKHOLDERS further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
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(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the COMPANY and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations, and is not in
violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were
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true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the
STOCKHOLDERS have entered into an agreement or waiver or have been requested to
enter into an agreement or waiver extending any statute of limitations regarding
Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any balance sheet and income statement
delivered pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
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(d) Except as set forth in Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth in Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date
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hereof, no statutory or regulatory election with respect to Taxes will be made
without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of the COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.24, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect, and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.24, none of the
Material Documents prohibits the use or publication by the COMPANY or VPI of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the COMPANY from freely providing services to
any other customer or potential customer of the COMPANY or VPI or any Other
Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
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5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for immaterial
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cancellations of or agreements to cancel any such indebtedness or
obligation (provided that any such cancellation or agreement to cancel
shall be deemed a breach of this Section 5.26 for purposes of Section 11
hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held; (iii) the type
of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
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Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights generally or (ii) the
discretionary power of a court exercising equity jurisdiction. The individual
signing this Agreement on behalf of the COMPANY has the legal power, authority
and capacity to bind the COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement (which includes the Schedules and Annexes attached
hereto) does not contain any untrue statement of a material fact by the COMPANY
or the STOCKHOLDERS and does not omit to state any material fact necessary in
order to make the statements made herein (or therein) by the COMPANY or the
STOCKHOLDERS, in light of the circumstances under which they are made, not
misleading. The COMPANY's rights under the documents delivered pursuant to this
Agreement would not be materially adversely affected by, and no statement made
in this Agreement would be rendered untrue in any material respect by, (i) any
other document to which the COMPANY is a party, or to which its properties are
subject, or (ii) any other fact or circumstance regarding the
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COMPANY (which fact or circumstance was, or should reasonably, after due
inquiry, have been known to the COMPANY) that is not disclosed pursuant to this
Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
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5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the transactions contemplated hereby to violate the
control requirement set forth in Code section 368(c).
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6. REPRESENTATIONS OF VPI
VPI represents and warrants that all of the following representations and
warranties in this Section 6 are true at the date of this Agreement and, subject
to Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing
Date, and that such representations and warranties shall survive the Closing
Date for a period of two years (the last day of such period being the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 6.14 hereof shall survive until such time as the limitations period
has run for all Tax periods ended on or prior to the Closing Date, which shall
be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and
representations set forth in Section 6.17 hereof shall survive until April 15,
2002, or until such later date as the limitations period on the assessment of
additional tax relating to the taxable year in which the transactions
contemplated herein occur may be extended from time to time, so long as VPI has
been notified of such extension and has consented to such extension (which
consent shall not be unreasonably withheld) and (iii) solely for purposes of
determining whether a claim for indemnification under Section 11.2(iv) hereof
has been made on a timely basis, and solely to the extent that in connection
with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the
1933 Act, the 1934 Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
authorized and qualified to do business under all applicable laws, regulations,
ordinances and orders of public authorities to carry on its business in the
places and in the manner as now conducted except where the failure to be so
authorized or qualified would not have a Material Adverse Effect. True, complete
and correct copies of the Certificate of Incorporation and Bylaws, as amended,
of VPI (the "VPI Charter Documents") are all attached hereto as Annex II. The
VPI Charter Documents provide for indemnification of officers and directors to
the full extent permitted by the General Corporation Law of Delaware.
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6.2 AUTHORIZATION. (i) The representatives of VPI executing this Agreement
have the authority to enter into and bind VPI to the terms of this Agreement and
(ii) VPI has the full legal right, power and authority to enter into and perform
this Agreement, and all required approvals of the shareholders and board of
directors of VPI have been obtained.
6.3 CAPITAL STOCK OF VPI . Immediately prior to the Closing Date, the
authorized capital stock of VPI is as set forth in Section 1.4(ii). All of the
issued and outstanding shares of the capital stock of VPI are owned by the
persons set forth on Annex V hereof, and further are owned, in each case, free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. Upon consummation of the
IPO, the number of outstanding shares of VPI will be as set forth in the
Registration Statement. All of the issued and outstanding shares of the capital
stock of VPI have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by VPI and the persons set
forth on Annex V and further, such shares were offered, issued, sold and
delivered by VPI in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares was issued
in violation of the preemptive rights of any past or present stockholder of VPI.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI to issue any of its
authorized but unissued capital stock; and (ii) VPI has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. VPI has no subsidiaries except for companies to become
subsidiaries of VPI pursuant to each of the Other Agreements. Except as set
forth in the preceding sentence, VPI presently does not own, of record or
beneficially, or control, directly or indirectly, any capital stock,
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securities convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is VPI, directly or indirectly,
a participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
has no material liabilities, contingent or otherwise, except as set forth in or
contemplated by this Agreement and the Other Agreements and except for fees and
expenses incurred in connection with the transactions contemplated hereby and
thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, VPI is not in violation of any law or regulation, or of any order
of any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
it; and except to the extent set forth on Schedule 6.8, there are no material
claims, actions, suits or proceedings, pending or, to the knowledge of VPI,
threatened, against or affecting VPI, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it and no notice of
any claim, action, suit or proceeding, whether pending or threatened, has been
received. VPI has conducted and is conducting its business in compliance with
the requirements, standards, criteria
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and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing.
6.9 NO VIOLATIONS. VPI is not in violation of any VPI Charter Document.
Neither VPI nor, to the knowledge of VPI, any other party thereto, is in default
under any lease, instrument, agreement, license or permit to which VPI is a
party, or by which VPI, or any of its respective properties, are bound
(collectively, the "VPI Documents"); and (a) the rights and benefits of VPI
under the VPI Documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby will not result in any violation or breach or constitute a
default under, any of the terms or provisions of the VPI Documents or the VPI
Charter Documents. Except as set forth on Schedule 6.9, none of the VPI
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI performance of the transactions contemplated herein have been duly and
validly authorized by the Board of Directors of VPI and this Agreement has been
duly and validly authorized by all necessary corporate action and is a legal,
valid and binding obligation of VPI, enforceable against VPI in accordance with
its terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15
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and 16 hereof, will be identical in all material and substantive respects to the
VPI Stock issued and outstanding as of the date hereof and the VPI Stock to be
issued pursuant to the Other Agreements by reason of the provisions of the
Delaware GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant
to this Agreement will not be registered under the 1933 Act, except as provided
in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. VPI has not entered and will not enter into any
agreement with any of the Founding Companies or any of the stockholders of the
Founding Companies or VPI other than the Other Agreements and the agreements
specifically contemplated by each of the Other Agreements, including the
employment agreements referred to therein, and neither VPI nor its equity owners
or affiliates have received any cash compensation or payments in connection with
this transaction except for reimbursement of out-of-pocket expenses which are
necessary or appropriate to this transaction. None of the Other Agreements shall
provide for a valuation of any of the Other Founding Companies based on the use
of a multiplier greater than ten percent (10%).
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. VPI has not conducted
any operations or business since inception other than activities related to the
VPI Plan of Organization. VPI does not own and has not at any time owned any
real property or any material personal property and is not a party to any other
agreement, except as listed on Schedule 6.13 and except that VPI is a party to
the Other Agreements and the agreements contemplated thereby and to such
agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI has timely filed all requisite federal, state, local and other
Tax Returns for all fiscal periods ended on or before the date hereof. All such
Tax Returns have set forth all material items required to be set forth therein
and were prepared in compliance with applicable laws and were true, correct and
complete in all material respects. No material fact or information has become
known to VPI or its officers or employees responsible for maintaining the
financial records of VPI subsequent to the filing of such Tax Returns to the
contrary of any information
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contained therein. Except as set forth on Schedule 6.14, there are no
examinations in progress (and VPI and its employees are not aware of any
proposed examinations) or claims against VPI (including liens against assets of
VPI) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, VPI has not entered into an
agreement or waiver and has not been requested to enter into an agreement or
waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI, any member of an affiliated or consolidated
group which includes or included VPI, or with respect to any payment made or
deemed made by VPI, required to be paid by the date hereof, have been paid. All
amounts required to be deposited, withheld or collected under applicable
federal, state, local or other Tax laws and regulations by VPI for Taxes have
been so deposited, withheld or collected, and such deposit, withholding or
collection has either been paid to the respective governmental agencies or set
aside and secured in accounts for such purpose or secured and reserved against
and entered on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, VPI has not been included in
or joined in the filing of any consolidated or combined Tax Return (other than
as a common parent). VPI is not a party to or bound by or obligated under any
Tax sharing, Tax benefit or similar agreement with any person or entity.
(e) Except as set forth on Schedule 6.14, VPI (i) has not assumed and
is not liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which VPI or such
person or entity was the surviving corporation or a
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consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI for its last three (3) fiscal years or such shorter
period of time as VPI shall have existed, (ii) any Tax examinations commenced or
closed or outstanding during their three (3) most recent fiscal years, and (iii)
currently outstanding extensions of statutory limitations, are attached hereto
as Schedule 6.14.
(g) VPI has a taxable year ended on the date set forth as such on
Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, VPI's methods of accounting
have not changed in the past five years. No adjustment to taxable income by
reason of a change of accounting method is required in respect of any period for
which the statute of limitations has not expired.
(i) VPI is not an investment company as defined in Section 351(e)(1)
of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI as of the date hereof are disclosed on Schedule 6.14.
(k) VPI has not filed a consent with the Internal Revenue Service
pursuant to section 341(f) of the Code and has not agreed to have section
341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as
defined in section 341(f) of the Code) owned by VPI.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
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6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI, and do not omit to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDERS set forth in the letter of representations
(referenced in the tax opinion letter to be delivered pursuant to Section 8.4
hereof) are true and correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI, the
STOCKHOLDERS and the COMPANY shall treat all information obtained in connection
with the negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Other Founding Companies as
confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives,
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employees and agents to keep confidential any information regarding the COMPANY
obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's sites, properties, books and records and all due diligence,
agreements, documents and information of or concerning the Founding Companies
and will furnish the COMPANY with such additional financial and operating data
and other information as to the business and properties of VPI as the COMPANY
may from time to time reasonably request. VPI will cooperate with the COMPANY,
its representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. VPI will provide complete access to its
operations and key officers and employees to the COMPANY, its representatives
and advisors on a continuing basis through the Closing Date. The COMPANY will
cause all information obtained in connection with the negotiation and
performance of this Agreement to be treated as confidential in accordance with
the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
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(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
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(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
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(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the COMPANY's
capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock, except that the STOCKHOLDERS may give shares of
COMPANY Stock to their children and may transfer shares of COMPANY Stock to
employees of the COMPANY provided the total number of issued and
outstanding shares of COMPANY Stock does not increase; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
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7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the
Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. VPI shall give prompt notice to the
COMPANY of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of VPI contained herein to be untrue or inaccurate in any material respect at or
prior to the Pre-Closing and (ii) any material failure of VPI to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. The delivery of any notice pursuant to this Section 7.7 that is
not accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement,
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would have been required to be set forth or described in the Schedules,
provided, however, that supplements and amendments to Schedules 5.10, 5.11,
5.14, 5.15, 5,16 and 5.19 shall only have to be delivered at the Pre-Closing
Date, unless such Schedule is to be amended to reflect an event occurring other
than in the ordinary course of business. Notwithstanding the foregoing sentence,
no amendment or supplement to a Schedule prepared by the COMPANY that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless VPI and a majority of the Founding Companies
other than the COMPANY consent to such amendment or supplement; and provided
further, that no amendment or supplement to a schedule prepared by VPI that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless a majority of the Founding Companies consent
to such amendment or supplement. For all purposes of this Agreement, including
without limitation for purposes of determining whether the conditions set forth
in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be
deemed to be the schedules as amended or supplemented pursuant to this Section
7.8. In the event that one of the Other Founding Companies seeks to amend or
supplement a schedule pursuant to Section 7.8 of one of the Other Agreements,
and such amendment or supplement constitutes or reflects an event or occurrence
that would have a Material Adverse Effect on such Other Founding Company, VPI
shall give the COMPANY notice promptly after it has knowledge thereof. If VPI
and a majority of the Founding Companies consent to such amendment or
supplement, but the COMPANY does not give its consent, the COMPANY may terminate
this Agreement pursuant to Section 12.l(iv) hereof. In the event that the
COMPANY seeks to amend or supplement a Schedule pursuant to this Section 7.8,
and VPI and a majority of the Other Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. In the event that VPI seeks to
amend or supplement a Schedule pursuant to this Section 7.8 and a majority of
the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the
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provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours following receipt of
notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested and so requested in the
notice). The provisions of this Section 7.8 shall be contained in the Other
Agreements executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
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represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY or the STOCKHOLDERS become aware of any
fact or circumstance which would change (or, if after the Closing Date, would
have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in
this Agreement or would affect any document delivered pursuant hereto in any
material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice
of such fact or circumstance to VPI. However, subject to the provisions of
Section 7.8, such notification shall not relieve either the COMPANY or the
STOCKHOLDERS of their respective obligations under this Agreement, and, subject
to the provisions of Section 7.8, at the sole option of VPI, the truth and
accuracy of any and all warranties and representations of the COMPANY, or on
behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on
the Pre-Closing Date and on the Closing Date, contained in this Agreement
(including the Schedules and Annexes hereto) shall be a precondition to the
consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated income
statement of the COMPANY for all fiscal quarters ended after the Balance Sheet
Date, disclosing no material adverse change in the financial condition of the
COMPANY or the results of its operations from the financial statements as of the
Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such balance
sheet and income statement shall be delivered to VPI on or before April 21,
1998, unless the Closing Date shall have occurred on or before April 21, 1998.
Such balance sheet and income statement of the COMPANY for the fiscal quarter
ended March
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31, 1998, shall have been prepared on a basis consistent with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, (i) except as noted therein, (ii) except for footnote disclosures
normally required by generally accepted accounting principles and (iii) subject
to year-end adjustments. Except as noted in such balance sheets and income
statements, such balance sheets and income statements will present fairly the
results of operations of the COMPANY for the periods indicated thereon and shall
be for such dates and time periods as required by Regulation S-X under the 1933
Act and the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI contained in Section 6 shall be true and correct in all material respects as
of the Pre-Closing Date as though such representations and warranties had been
made as of that time; and a certificate to the foregoing effect dated the
Pre-Closing Date and signed by the President or any Vice President of VPI shall
have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI on or before the
Pre-Closing Date and the Closing Date shall have been duly complied with and
performed in all material respects; and certificates to the foregoing effect
dated the Pre-Closing Date and the Closing Date and signed by the President or
any Vice President of VPI shall have been delivered to the STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of the
COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI shall have delivered to the COMPANY a
certificate, dated as of a date no later than ten days prior to the Pre-Closing
Date, duly issued by the Delaware Secretary of State and in each state in which
VPI is authorized to do business, showing that VPI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for VPI respectively for all periods prior to the Pre-Closing Date
have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI which would constitute a Material Adverse Effect,
and VPI shall not have suffered any material loss or damages to any of its
properties or assets, whether or not covered by insurance, which change, loss or
damage materially affects or impairs the ability of VPI to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
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8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI,
certifying the truth and correctness of attached copies of VPI's respective
Certificates of Incorporation (including amendments thereto), Bylaws (including
amendments thereto), and resolutions of the boards of directors and, if
required, the stockholders of VPI approving VPI's entering into this Agreement
and the consummation of the transactions contemplated hereby. Such certificate
or certificates also shall be addressed to the Underwriters and copies thereof
shall be delivered to the Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI
The obligations of VPI with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI with
respect to actions to be taken on the Closing Date are subject to the
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satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of VPI as a
result of which the management of VPI deems it inadvisable to proceed with the
transactions hereunder.
9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the
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consummation of the transactions contemplated hereby. Such certificate also
shall be addressed to the Underwriters and a copy thereof shall be delivered to
the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date effective as of the Closing Date,
releasing the COMPANY and VPI from (i) any and all claims of the STOCKHOLDERS
against the COMPANY and VPI and (ii) obligations of the COMPANY and VPI to the
STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10,
5.11 and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y)
continuing obligations to the STOCKHOLDERS relating to their employment by the
COMPANY and (z) obligations arising under this Agreement or the transactions
contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
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9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANY for the
incremental cost of having VPI so named as an additional insured.
9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate
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family members, and trusts for the benefit of STOCKHOLDERS and/or immediate
family members, who agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
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(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
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relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide explanation
of any documents or information so provided. Subject to the preceding
sentence, each party required to file Tax Returns pursuant to this
Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANY, VPI and each STOCKHOLDER shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Heidi
O'Leary Houston to serve as a director of VPI effective as of the Closing Date.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting conditions for employees of the
COMPANY who were covered by the COMPANY's health insurance plan immediately
prior to the Closing Date or as otherwise required by law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
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10.7 SECURITIES COVENANTS. VPI shall meet the current public
information requirements of Rule 144, promulgated by the SEC, for the two-year
period following the Closing Date. In addition, VPI agrees that it shall remove
the restricted stock legend from the VPI Stock received by any STOCKHOLDER
pursuant to this Agreement as soon as practicable after receipt from such
STOCKHOLDER of a letter requesting removal of the restricted stock legend
provided that (i) the STOCKHOLDER has held such stock for a period of at least
two years after the Closing Date, (ii) the STOCKHOLDER is not, and has not been
for the three months preceding the removal of the legend, a director of VPI, an
officer of VPI (other than the President of the COMPANY or its successor), or a
beneficial owner of more than one percent of the outstanding shares of VPI and
(iii) there have been no amendments to Rule 144(k) that would prohibit VPI from
removing such legend.
11. INDEMNIFICATION
The STOCKHOLDERS and VPI each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI and the COMPANY at all times, from and after the date of this
Agreement until the Expiration Date, from and against all losses, claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by VPI and the COMPANY
as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
Schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of the STOCKHOLDERS or the COMPANY under this
Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal
or state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material
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fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or
its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to the COMPANY or the
STOCKHOLDERS required to be stated therein or necessary to make the statements
therein not misleading, or (iv) the matters described on Schedule 11.1(iv)
(relating to specifically identified matters such as ongoing claims and/or
litigation), which Schedule shall be prepared by VPI, provided, however, (A)
that in the case of any indemnity arising pursuant to clause (iii) such
indemnity shall not inure to the benefit of VPI or the COMPANY to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to
VPI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI of its
representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI under this Agreement, (iii) any liabilities which the STOCKHOLDERS may incur
due to VPI's failure to be responsible for the liabilities and obligations of
the COMPANY as provided in Section 1 hereof (except to the extent that VPI has
claims against the STOCKHOLDERS under Section 11.1 hereof by reason of such
liabilities); (iv) any liability under the 1933 Act, the 1934
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Act or other federal or state law or regulation, at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating to VPI or any of the Other Founding Companies contained
in any preliminary prospectus, the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact relating to VPI or any of the Other Founding Companies required to
be stated therein or necessary to make the statements therein not misleading, or
(v) the matters described on Schedule 11.2(v) (relating to specifically
identified matters including the release of the guarantees pursuant to Section
10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying
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Party shall have a conflict of interest that prevents counsel for the
Indemnifying Party from representing the Indemnified Party, the Indemnified
Party shall have the right to participate in such matter through counsel of its
own choosing and the Indemnifying Party will reimburse the Indemnified Party for
the reasonable expenses of its counsel. Further, absent a conflict, the
Indemnified Party may select counsel and have such counsel participate in such
matter at the sole cost of the Indemnified Party. After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except (i) as set
forth in the preceding sentence and (ii) to the extent such participation is
requested in writing by the Indemnifying Party, in which event the Indemnified
Party shall be reimbursed by the Indemnifying Party for reasonable additional
legal expenses and out-of-pocket expenses. If the Indemnifying Party desires to
accept a final and complete settlement of any such Third Person claim in which
no admission of wrongdoing is required of the Indemnified Party and the
Indemnified Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person claim
shall be limited to the amount so offered in settlement by said Third Person. If
the Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, conditioned or delayed. All settlements hereunder shall
effect a complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties
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hereto will make appropriate adjustments for insurance proceeds in determining
the amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI and the other persons or entities
indemnified pursuant to Section 11.1 shall not assert any claim for
indemnification hereunder against the STOCKHOLDERS until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid
to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the
STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI and
the other persons or entities indemnified pursuant to Section 11.1 may assert
and shall be indemnified for any claim under Section 11.l(iv) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any such claim under Section 11.1(iv) shall not be
counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert
any claim for indemnification hereunder against VPI until such time as, and
solely to the extent that, the aggregate of all claims which the STOCKHOLDERS
may have against VPI shall exceed $50,000, provided, however, that the
STOCKHOLDERS and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether the aggregate of all claims which such persons
may have against VPI exceed $50,000, it being understood that the amount of any
such claim under Section 11.2(v) shall not be counted towards such $50,000
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amount. No person shall be entitled to indemnification under this Section 11 if
and to the extent that: (a) such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement; or (b) such
person receives a tax benefit as a result of the claim or loss for which
indemnification is sought (i.e., the amount of such claim or loss for which
indemnification is provided hereunder shall be reduced by the amount of such tax
benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the transactions contemplated hereby, provided that a
STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not
be limited. Indemnity obligations hereunder may be satisfied through the payment
of cash or the delivery of VPI Stock, or a combination thereof, at the
STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock
received or delivered by a STOCKHOLDER (for purposes of determining the
Indemnification Threshold, the limitation on indemnity set forth in the second
preceding sentence and the amount of any indemnity paid), VPI Stock shall be
valued at its initial public offering price as set forth in the Registration
Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this
Section 11 shall be deemed to be a reduction in the consideration received by
the STOCKHOLDERS pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June
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30, 1998, unless the failure of such transactions to be consummated is due to
the willful failure of the party seeking to terminate this Agreement to perform
any of its obligations under this Agreement to the extent required to be
performed by it prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the
reasonable documented fees and expenses of
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its attorneys and accountants incurred in connection with the transactions
contemplated by this Agreement in the event that this Agreement is terminated by
VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or sales
business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of the locations in which VPI or the
COMPANY, or any of their subsidiaries, conduct a noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
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management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit (a) any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter or (b) Heidi O'Leary
Houston from engaging in any noncommercial property management, rental or sales
business or hotel management business only with respect to her primary personal
residence or any real property in which she has a noncontrolling interest such
that she is unable to direct management, rental or sales business or hotel
management business relating to such real property to the COMPANY or VPI.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that
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the foregoing covenant may be enforced by VPI in the event of breach by such
STOCKHOLDER, by injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting the customers or employees from
such new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such
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restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or arbitrator or mediator has determined that
such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without good
cause (as defined in such employment agreement), notwithstanding the definition
of "Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
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14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the COMPANY and (c) to counsel and other advisors, provided that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.1, unless (i) such information is or becomes known to the public
generally or to businesses operating in the noncommercial property management,
rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure
is required by law or the order of any governmental authority under color of
law, provided, however, that prior to disclosing any information pursuant to
this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior
written notice thereof to VPI and provide VPI with the opportunity within such
two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this Section,
VPI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting VPI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated by this Agreement are not consummated,
STOCKHOLDERS shall have none of the above-mentioned restrictions on their
ability to disseminate confidential information with respect to the COMPANY.
Nothing herein shall restrict the STOCKHOLDERS from using confidential
information of the COMPANY described in this Section
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14.1 in the businesses in which they are entitled to engage in competition with
the COMPANY pursuant to Section 13.1(b).
14.2 VPI . VPI recognizes and acknowledges that it has in the past and
currently have access to certain confidential information of the COMPANY, such
as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the COMPANY's business. VPI agrees that, prior to
the Closing, or if the transactions contemplated by this Agreement are not
consummated, it will not use, except in connection with the transactions
contemplated hereby, or disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except disclosures (a) to authorized representatives of the COMPANY,
(b) to counsel and other advisors; provided, however, that such advisors (other
than counsel) agree to the confidentiality provisions of this Section 14.2 and
(c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(a), unless (i) such information becomes known to the public
generally through no fault of VPI, (ii) disclosure is required by law or the
order of any governmental authority under color of law; provided, however, that
prior to disclosing any information pursuant to this clause (ii), VPI shall,
unless otherwise required by law or such order, give two days' prior written
notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and
the STOCKHOLDERS with the opportunity within such two-day period to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. VPI will disclose confidential information relating to the
COMPANY to the Other Founding Companies only if such companies have agreed, in
advance, to treat such information as confidential and to the use restrictions
contained herein. In the event of a breach or threatened breach by VPI of the
provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled
to an injunction restraining VPI from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as
such breach or threatened breach, including the recovery of damages.
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14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER
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AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective
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accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANY, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
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17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders on a pro rata basis based on the number
of shares proposed to be registered by each of the Founding Stockholders.
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17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
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17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby
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does, indemnify and hold harmless each seller of any Registrable Securities
covered by such registration statement, its directors, officers, agents,
attorneys, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to which such seller
or any such director or officer or underwriter or controlling Person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and VPI will reimburse such seller and each
such director, officer, underwriter and controlling Person for any expenses
(including but not limited to reasonable attorneys' fees) reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that VPI shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to VPI by such seller expressly
for use in the preparation thereof, and provided further that VPI shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the 1933 Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final
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prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in
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such final prospectus. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any underwriter, VPI or
any such director, officer or controlling Person and shall survive the transfer
of such securities by such seller. In no event shall the liability of any
selling holder of Registrable Securities under this Section 17.6(b) be greater
in amount than the dollar amount of the proceeds received by such holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
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(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
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media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANY, the STOCKHOLDERS and VPI shall each deliver
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such additional instruments
as the other may reasonably request for the purpose of carrying out this
Agreement. The COMPANY shall cooperate and use its reasonable efforts to have
the present officers, directors and the employees of the COMPANY cooperate with
VPI on and after the Closing Date in furnishing information, evidence, testimony
and other assistance in connection with any tax return filing obligations,
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY and VPI and supersede any prior agreement and understanding relating to
the subject matter of this Agreement, including but not limited to any letter of
intent entered into by any of the parties hereto. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS,
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the COMPANY and VPI, acting through their respective officers or trustees, duly
authorized by their respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld,
L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property
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transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed in connection with the transactions contemplated
hereby, other than Transfer Taxes, if any, imposed by the State of Delaware.
Each STOCKHOLDER shall file all necessary documentation and Tax Returns with
respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that
he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of
the consideration payable pursuant to Section 3 hereof, and shall assume all tax
risks and liabilities of such STOCKHOLDER in connection with the transactions
contemplated hereby; provided, however, that the foregoing shall not in any way
prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the
opinions contained in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
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(c) If to the COMPANY, addressed to it at:
Houston and O'Leary Company
620 East Hyman Avenue
Aspen, Colorado 81611
Facsimile no: (970) 925-8670
Attention: Heidi O'Leary Houston
and marked "Personal and Confidential"
with copies to:
Krendl Horowitz & Krendl
370 17th Street, Suite 5350
Denver, Colorado 80202
Facsimile no: (303) 629-2406
Attention: Cathy S. Krendl
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining
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provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, the COMPANY and STOCKHOLDERS (as defined in the introductory
paragraph of this Agreement) who will hold or who hold at least 50% of the VPI
Stock issued or to be issued to the STOCKHOLDERS upon consummation of the
transactions contemplated hereby. Any amendment or waiver effected in accordance
with this Section 18.15 shall be binding upon each of the parties hereto, any
other person receiving VPI Stock in connection with the transactions
contemplated hereby and each future holder of such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
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"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
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"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without good cause under such employment
agreement of the STOCKHOLDER subject to the Noncompetition Period, one (1) year
following the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
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"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
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"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the third recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
By:/s/ Leonard Potter
-------------------------------
Leonard Potter
Vice President
HOUSTON AND O'LEARY COMPANY
By:/s/ Heidi O'Leary Houston
-------------------------------
Heidi O'Leary Houston
President
STOCKHOLDER:
/s/ Heidi O'Leary Houston
- ----------------------------------
Heidi O'Leary Houston
EXHIBIT 2.6
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
JUPITER ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
JUPITER PROPERTY MANAGEMENT AT PARK CITY, INC.
and
the STOCKHOLDERS named herein
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors
of Surviving Corporation............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO..............................................4
1.5 Effect of Merger.....................................................4
2. CONVERSION OF STOCK......................................................6
2.1 Manner of Conversion.................................................6
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock................................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................7
4. CLOSING..................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9
(A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9
5.1 Due Organization.................................................10
5.2 Authority........................................................10
5.3 Capital Stock of the COMPANY.....................................11
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................11
5.6 Subsidiaries.....................................................11
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANY..........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................14
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers...........................................17
5.16 Material Contracts and Commitments..............................17
5.17 Real Property...................................................18
5.18 Insurance.......................................................19
5.19 Compensation; Employment Agreements; Organized Labor Matters....19
5.20 Employee Plans..................................................20
5.21 Compliance with ERISA...........................................21
5.22 Conformity with Law; Litigation.................................22
5.23 Taxes...........................................................23
5.24 No Violations...................................................25
5.25 Government Contracts............................................26
5.26 Absence of Changes..............................................26
5.27 Deposit Accounts; Powers of Attorney............................28
5.28 Validity of Obligations.........................................28
5.29 Relations with Governments......................................29
5.30 Disclosure......................................................29
5.31 Prohibited Activities...........................................30
(B) Representations and Warranties of STOCKHOLDERS......................30
5.32 Authority; Ownership............................................30
5.33 Preemptive Rights...............................................30
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5.34 No Intention to Dispose of VPI Stock............................30
6. REPRESENTATIONS OF VPI AND NEWCO........................................31
6.1 Due Organization....................................................31
6.2 Authorization.......................................................32
6.3 Capital Stock of VPI and NEWCO......................................32
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................33
6.6 Financial Statements................................................33
6.7 Liabilities and Obligations.........................................33
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................34
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................35
6.12 No Side Agreements.................................................35
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................36
6.15 Completion of Due Diligence........................................38
6.16 Disclosure........................................................38
6.17 Tax Treatment......................................................38
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................40
7.3 Prohibited Activities...............................................41
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................43
7.6 Agreements..........................................................43
7.7 Notification of Certain Matters.....................................43
7.8 Amendment of Schedules..............................................44
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................47
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................49
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................50
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
9.5 No Material Adverse Effect..........................................53
9.6 STOCKHOLDERS' Release...............................................53
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9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
9.18 Termination of Defined Benefit Plans...............................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
11. INDEMNIFICATION........................................................58
11.1 General Indemnification by the STOCKHOLDERS........................58
11.2 Indemnification by VPI.............................................59
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................62
12. TERMINATION OF AGREEMENT...............................................63
12.1 Termination........................................................63
12.2 Liabilities in Event of Termination................................64
13. NONCOMPETITION.........................................................65
13.1 Prohibited Activities..............................................65
13.2 Damages............................................................66
13.3 Reasonable Restraint...............................................66
13.4 Severability; Reformation..........................................67
13.5 Independent Covenant...............................................67
13.6 Materiality........................................................68
13.7 Limitation.........................................................68
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................68
14.1 STOCKHOLDERS.......................................................68
14.2 VPI AND NEWCO......................................................69
14.3 Damages............................................................70
14.4 Survival...........................................................70
14.5 Return of Data Submitted...........................................71
15. TRANSFER RESTRICTIONS..................................................71
15.1 Transfer Restrictions..............................................71
15.2 Certain Transfers..................................................71
16. SECURITIES LAW REPRESENTATIONS.........................................72
16.1 Compliance with Law................................................72
16.2 Economic Risk; Sophistication......................................73
17. REGISTRATION RIGHTS....................................................73
17.1 Piggyback Registration Rights......................................73
17.2 Demand Registration Rights.........................................74
17.3 Registration Procedures............................................75
17.4 Underwriting Agreement.............................................76
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17.5 Availability of Rule 144...........................................76
17.6 Registration Rights Indemnification................................76
18. GENERAL................................................................81
18.1 Press Releases.....................................................81
18.2 Cooperation........................................................81
18.3 Successors and Assigns; Third Party Beneficiaries..................82
18.4 Entire Agreement...................................................82
18.5 Counterparts.......................................................82
18.6 Brokers and Agents.................................................82
18.7 Expenses...........................................................82
18.8 Notices............................................................83
18.9 Governing Law......................................................84
18.10 Exercise of Rights and Remedies...................................85
18.11 Time..............................................................85
18.12 Reformation and Severability......................................85
18.13 Remedies Cumulative...............................................85
18.14 Captions..........................................................85
18.15 Amendments and Waivers............................................85
18.16 Incorporation by Reference........................................86
18.17 Defined Terms.....................................................86
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPRATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), JUPITER ACQUISITION CORP., a Delaware corporation
("NEWCO"), JUPITER PROPERTY MANAGEMENT AT PARK CITY, INC., a Utah corporation
(the "COMPANY"), and Jon R. Brinton (the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Hotel Corporation of
the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a
Colorado corporation, Maui Condominium & Home Realty, Inc., a Hawaii
corporation, The Maury People, Inc., a
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Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation,
Realty Consultants, Inc., a Florida corporation, Resort Property
Management, Inc., a Utah corporation, Telluride Resort Accommodations,
Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia
corporation, THE Management Company, a Georgia corporation, and Whistler
Chalets Limited, a British Columbia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in effect
shall be the Certificate of Incorporation of the Surviving Corporation
until changed as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of the laws of the state in which the Surviving
Corporation is located and of the Certificate of Incorporation and Bylaws
of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or
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capacities, and effective upon the Effective Time of the Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of the Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of the Surviving Corporation, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the COMPANY shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
NEWCO shall be merged with and into the COMPANY, and the COMPANY, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of NEWCO shall cease and, in accordance
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with the terms of this Agreement, the Surviving Corporation shall possess all of
the rights, privileges, immunities and franchises, of a public, as well as of a
private, nature, and all property, real, personal and mixed, and all debts due
on whatever account, including subscriptions to shares, and all Taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to NEWCO and the COMPANY
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectively the property of the Surviving Corporation as they were
of NEWCO and the COMPANY; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the states of incorporation
vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all of the
liabilities and obligations of NEWCO and the COMPANY and any claim existing, or
action or proceeding pending, by or against NEWCO or the COMPANY may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in their place. Neither the rights of creditors nor any liens
upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and
all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the
Surviving Corporation, and may be enforced against such Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by such Surviving Corporation.
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2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and (2) the right to receive
the amount of cash, subject to adjustment pursuant to Section 3.3 hereof,
set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
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Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Merger, VPI shall have no
class of capital stock (including preferred stock) issued and outstanding other
than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in
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connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall
result in a corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of
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the consideration which the STOCKHOLDERS shall be entitled to receive pursuant
to the Merger referred to in Section 3 hereof shall occur and (z) the closing
with respect to the IPO shall be completed. The taking of the actions described
in the preceding clauses (x), (y) and (z) shall constitute the closing of the
transactions hereunder (the "Closing"), and the date on which the actions
described in the preceding clauses (x), (y) and (z) occur shall be referred to
as the "Closing Date." Except as provided in Sections 8 and 9 hereof with
respect to actions to be taken on the Closing Date, during the period from the
Pre-Closing Date to the Closing Date this Agreement may only be terminated by a
party if the underwriting agreement in respect of the IPO is terminated pursuant
to the terms of such agreement. This Agreement shall in any event terminate if
the Closing Date has not occurred within 15 business days of the Pre-Closing
Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually incurs liability under
the 1933 Act, the 1934 Act or any other federal or state securities laws as a
result of a breach of a representation or warranty by the COMPANY or the
STOCKHOLDERS, the
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representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes. For purposes of this Section 5, the term
"COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries, if
any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have
not been made available to VPI, and all of such minutes are correct and complete
in all material respects. Except as set forth on Schedule 5.1, the most recent
minutes of the COMPANY, which are dated no earlier than ten business days prior
to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its
officers and directors on behalf of the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
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5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business
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entity (each, a "Subsidiary"), and sets forth the number and class of the
authorized capital stock of each Subsidiary and the number of shares or
interests of each Subsidiary which are issued and outstanding, all of which
shares (except as set forth on Schedule 5.6) are owned by the COMPANY, free and
clear of all liens, security interests, pledges, voting trusts, equities,
restrictions, encumbrances and claims of every kind. Except as set forth on
Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity nor is the COMPANY, directly or indirectly, a participant in any
joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31,
1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited
Statement of Operations, if any, for the period ended December 31, 1997
(December 31, 1997 being hereinafter referred to as the "Balance Sheet Date")
and unaudited Statement of Operations, if any, for the period ended December 31,
1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for
the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash
Flows, if any, for the period ended on the Balance Sheet Date.
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Except as set forth on Schedule 5.9, such Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated (except as noted thereon or
on Schedule 5.9 and, with respect to unaudited COMPANY Financial Statements,
except for the requirement of footnote disclosures). Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present
fairly the financial position of such COMPANY as of the dates indicated thereon,
and such Statements of Operations, Statements of Changes in Stockholders' Equity
and Statements of Cash Flows present fairly the results of operations for the
periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
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(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all
receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing
Date and (y) an aging of all accounts and notes receivable showing amounts due
in 30 day aging categories (the "A/R Aging Reports"). Except to the extent
reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing
accompanying the A/R Aging Reports, the accounts, notes and other receivables
shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible
in the amounts shown, net of reserves reflected in the balance sheet as of the
Balance Sheet Date with respect to accounts receivable as of the Balance Sheet
Date, and net of reserves reflected in the books and records of the COMPANY
(consistent with the methods used for the balance sheet) with respect to
accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises,
permits and other governmental authorizations that are necessary for the
operation of the business of the COMPANY as now conducted, and the COMPANY has
delivered to VPI an accurate list and summary description (which is set forth on
Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the COMPANY (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). The licenses, franchises, permits and other
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governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any
of the foregoing, except for inadvertent, immaterial noncompliance with such
requirements, standards, criteria and conditions (provided that any such
noncompliance shall be deemed a breach of this Section 5.12 for purposes of
Section 11 hereof). Except as specifically provided on Schedule 5.12, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the COMPANY by, any such licenses, franchises, permits or government
authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY
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except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site
or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) the COMPANY has no contingent liability in connection with any release of
any Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are
currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of the
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COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the
STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
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5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery thereof by the parties
thereto other than the COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of the COMPANY, the
STOCKHOLDERS and, to
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the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY has
ever been canceled by the insurer and the COMPANY has never been unable to
obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the best of the COMPANY's knowledge, no campaign to
establish
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such representation is in progress and (iv) there is no pending or, to the best
of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and
any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20, the
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section (3)(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
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example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation arrangement). The COMPANY has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is
the COMPANY required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the COMPANY's employees.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such
plan or the COMPANY, has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
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listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
COMPANY has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service nor any liability to the Pension Benefit Guaranty
Corporation. The COMPANY and STOCKHOLDERS further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or
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instrumentality having jurisdiction over the COMPANY, except for inadvertent,
immaterial noncompliance with any such law, regulation or order (provided that
any such noncompliance shall be deemed a breach of this Section 5.22 for
purposes of Section 11 hereof); and except to the extent set forth on Schedules
5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or,
to the knowledge of the COMPANY, threatened, against or affecting the COMPANY,
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over the COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations,
and is not in violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the
STOCKHOLDERS have entered into an agreement or waiver or have been requested to
enter into an agreement or waiver extending any
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statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth in Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth in Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
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(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of the
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COMPANY under the Material Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.24, none
of the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.24, none of the Material Documents
prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any
other party to such Material Document, and none of the Material Documents
prohibits or restricts the COMPANY from freely providing services to any other
customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding
Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the
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COMPANY to fail to meet the financial requirements, as of the Closing Date,
set forth in the first sentence of Section 3.3) or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock of
the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
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(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights generally or (ii) the
discretionary power of a court exercising equity jurisdiction. The individual
signing this Agreement on behalf of the COMPANY has the legal power, authority
and capacity to bind the COMPANY to the terms of this Agreement.
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5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
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5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI Charter Documents
provide for indemnification of officers and directors to the full extent
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permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the Merger, and
all required approvals of the shareholders and board of directors of VPI and
NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned by, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
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6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this
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Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated
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hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
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6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to
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be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by VPI and NEWCO for Taxes have been so
deposited, withheld or collected, and such deposit, withholding or collection
has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
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(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the
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STOCKHOLDERS set forth in the letter of representations (referenced in the tax
opinion letter to be delivered pursuant to Section 8.4 hereof) are true and
correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI,
NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
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(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
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(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-
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occurrence of which would be likely to cause any representation or warranty of
the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in
any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of VPI or NEWCO
contained herein to be untrue or inaccurate in any material respect at or prior
to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is
not accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or NEWCO that constitutes or reflects an event or occurrence that would have a
Material Adverse Effect may be made unless a majority of the Founding Companies
consent to such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto
shall be deemed to be the schedules as amended or supplemented pursuant to this
Section 7.8. In the event that one of the Other Founding Companies seeks to
amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANY notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANY does not give its consent, the COMPANY
may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event
that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours following receipt of
notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested and so requested in the
notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Pre-Closing Date and on the Closing
Date, contained in this Agreement (including the Schedules and Annexes hereto)
shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 21, 1998, unless the Closing Date shall have occurred on or before April
21, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANY for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANY for the
incremental cost of having VPI so named as an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation
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and information as any of them reasonably may request in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Tax Returns pursuant to
this Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. Representatives of the Founding Companies
shall constitute a majority of the directors of VPI immediately following the
Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting conditions for employees of the
COMPANY who were covered by the COMPANY's health insurance plan immediately
prior to the Closing Date or as otherwise required by law.
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10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all
times, from and after the date of this Agreement until the Expiration Date, from
and against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a
result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or
certificates delivered in connection herewith, (ii) any breach of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY
or
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the STOCKHOLDERS, contained in the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact relating solely to the COMPANY or the STOCKHOLDERS required to be
stated therein or necessary to make the statements therein not misleading, or
(iv) the matters described on Schedule 11.1(iv) (relating to specifically
identified matters such as ongoing claims and/or litigation), which Schedule
shall be prepared by VPI, provided, however, (A) that in the case of any
indemnity arising pursuant to clause (iii) such indemnity shall not inure to the
benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to
VPI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1
hereof by reason of such liabilities); (iv) any liability under the 1933 Act,
the 1934 Act or other federal or state law or
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regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to VPI, NEWCO
or any of the Other Founding Companies contained in any preliminary prospectus,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to VPI or
NEWCO or any of the Other Founding Companies required to be stated therein or
necessary to make the statements therein not misleading, or (v) the matters
described on Schedule 11.2(v) (relating to specifically identified matters
including the release of the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to
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the Indemnifying Party shall have a conflict of interest that prevents
counsel for the Indemnifying Party from representing the Indemnified Party, the
Indemnified Party shall have the right to participate in such matter through
counsel of its own choosing and the Indemnifying Party will reimburse the
Indemnified Party for the reasonable expenses of its counsel. Further, absent a
conflict, the Indemnified Party may select counsel and have such counsel
participate in such matter at the sole cost of the Indemnified Party. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested in writing by the Indemnifying Party, in
which event the Indemnified Party shall be reimbursed by the Indemnifying Party
for reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim in which no admission of wrongdoing is required of the
Indemnified Party and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. If the Indemnifying Party does not undertake to
defend such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnifying Party shall reimburse the
Indemnified Party for the amount paid in such settlement and any other
liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed. All settlements hereunder shall effect a complete
release of the Indemnified Party, unless the Indemnified Party otherwise agrees
in writing. The parties hereto will make appropriate adjustments for insurance
proceeds in determining
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the amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDERS until
such time as, and solely to the extent that, the aggregate of all claims which
such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of
(i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock
delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided,
however, that VPI, NEWCO, the Surviving Corporation and the other persons or
entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.l(iv) at any time, regardless of
whether the aggregate of all claims which such persons may have against the
STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the
amount of any such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for
indemnification hereunder against VPI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which the STOCKHOLDERS may have
against VPI and NEWCO shall exceed $50,000, provided, however, that the
STOCKHOLDERS and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether the aggregate of all claims which such persons
may have against any of VPI and NEWCO exceeds $50,000, it being understood that
the amount of any such claim under Section 11.2(v) shall not be
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counted towards such $50,000 amount. No person shall be entitled to
indemnification under this Section 11 if and to the extent that: (a) such
person's claim for indemnification is directly or indirectly related to a breach
by such person of any representation, warranty, covenant or other agreement set
forth in this Agreement; or (b) such person receives a tax benefit as a result
of the claim or loss for which indemnification is sought (i.e., the amount of
such claim or loss for which indemnification is provided hereunder shall be
reduced by the amount of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to
be a reduction in the consideration received by the STOCKHOLDERS pursuant to
Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June
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30, 1998, unless the failure of such transactions to be consummated is due to
the willful failure of the party seeking to terminate this Agreement to perform
any of its obligations under this Agreement to the extent required to be
performed by it prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided,however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the
reasonable documented fees and expenses of
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its attorneys and accountants incurred in connection with the transactions
contemplated by this Agreement in the event that this Agreement is terminated by
VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or sales
business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of the locations in which VPI or the
COMPANY, or any of their subsidiaries, conduct a noncommercial property
management, rental or sales business or hotel management business(the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
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management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and
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business of VPI (including the subsidiaries thereof) on the date of the
execution of this Agreement and the current plans of VPI (including VPI's
subsidiaries); but it is also the intent of VPI and the STOCKHOLDERS that such
covenants be construed and enforced in accordance with the changing locations of
VPI (including VPI's other subsidiaries) from the date hereof through the
Noncompetition Period. For example, if, during the Noncompetition Period, VPI
(including VPI's other subsidiaries) establishes new locations for its current
activities or business in addition to the locations currently established
therefor, then the STOCKHOLDERS will be precluded from soliciting the customers
or employees from such new location and from directly competing within 100 miles
of such new location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against
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VPI (including the subsidiaries thereof), whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by VPI of such
covenants. It is specifically agreed that the Noncompetition Period, during
which the agreements and covenants of each STOCKHOLDER made in this Section 13
shall be effective, shall be computed by excluding from such computation any
time during which a court of competent jurisdiction or other arbitrator or
mediator has determined that such STOCKHOLDER is in violation of any provision
of this Section 13. The covenants contained in Section 13 shall have no effect
if the transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose
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such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except disclosures (a) to
authorized representatives of VPI, (b) following the Closing, by the
STOCKHOLDERS as is required in the course of performing their duties for VPI or
the Surviving Corporation and (c) to counsel and other advisors, provided that
such advisors (other than counsel) agree to the confidentiality provisions of
this Section 14.1, unless (i) such information is or becomes known to the public
generally or to businesses operating in the noncommercial property management,
rental or sales industry through no fault of the STOCKHOLDERS, (ii) disclosure
is required by law or the order of any governmental authority under color of
law, provided, however, that prior to disclosing any information pursuant to
this clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior
written notice thereof to VPI and provide VPI with the opportunity within such
two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this Section,
VPI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting VPI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated by this Agreement are not consummated,
STOCKHOLDERS shall have none of the above-mentioned restrictions on their
ability to disseminate confidential information with respect to the COMPANY.
14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to
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authorized representatives of the COMPANY, (b) to counsel and other advisors;
provided, however, that such advisors (other than counsel) agree to the
confidentiality provisions of this Section 14.2 and (c) to the Other Founding
Companies and their representatives pursuant to Section 7.1(a), unless (i) such
information becomes known to the public generally through no fault of VPI or
NEWCO, (ii) disclosure is required by law or the order of any governmental
authority under color of law; provided, however, that prior to disclosing any
information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise
required by law or such order, give two days' prior written notice thereof to
the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS
with the opportunity within such two-day period to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. VPI
will disclose confidential information relating to the COMPANY to the Other
Founding Companies only if such companies have agreed, in advance, to treat such
information as confidential. In the event of a breach or threatened breach by
VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS
shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any
other available remedy for as such breach or threatened breach, including the
recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
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14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires
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to make a Future Sale, the STOCKHOLDER shall first provide written notice
thereof to VPI. VPI shall have three (3) days after receipt of such notice by
VPI in which to arrange for a private sale of such shares through one or more of
the Underwriters, and such STOCKHOLDER may not make the Future Sale except
pursuant to such arrangements; provided, however, that the terms of such sale
(including commissions) are at least as favorable as the terms the STOCKHOLDER
would have received in the absence of this Section 15.2. If VPI has not
successfully arranged for a private sale of such shares through one or more the
Underwriters within such three (3) day period, the restrictions of this Section
15.2 shall not apply to such Future Sale. Any subsequent Future Sales by such
STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this
Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
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THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANY, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares
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could, in the reasonable opinion of tax counsel to VPI or its independent
auditors, jeopardize the status of the transactions contemplated hereby and by
the Registration Statement as an exchange pursuant to which gain is not
recognized under Section 351(a) of the Code. In addition, if VPI is advised in
writing in good faith by any managing underwriter of an underwritten offering of
the securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders on a pro rata basis based on the number
of shares proposed to be registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other
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Founding Stockholders and shall, as soon as practicable but in no event later
than 45 days after the Demand Registration Request, file and use its best
efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are
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reasonable and necessary to comply with the requirements of the 1933 Act and the
regulations thereunder to enable the Founding Stockholders to sell their shares
pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final
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prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and VPI will reimburse such seller and each such
director, officer, underwriter and controlling Person for any expenses
(including but not limited to reasonable attorneys' fees) reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that VPI shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to VPI by such seller expressly
for use in the preparation thereof, and provided further that VPI shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the 1933 Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, to the
Person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, underwriter or controlling Person and shall
survive the transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter
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within the meaning of the 1933 Act, VPI, each director of VPI, each officer of
VPI, VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of any underwriter, VPI or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller. In no event shall the liability of any selling holder of
Registrable Securities under this Section 17.6(b) be greater in amount than the
dollar amount of the proceeds received by such holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such
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action; provided that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 17.6, except to the extent that
the indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses,
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claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay
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by reason of such untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and
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other assistance in connection with any tax return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents,
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representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all conditions to be
performed by VPI under this Agreement, including the fees and expenses of Arthur
Andersen, LLP (including such fees and expenses in connection with the audit of
the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
and any other person or entity retained by VPI, and the costs of preparing the
Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and
disbursements of the STOCKHOLDERS, the COMPANY and their respective agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all conditions to be
performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger, other than
Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the
COMPANY or VPI, shall pay all taxes due upon receipt of the consideration
payable pursuant to Section 3 hereof, and shall assume all tax risks and
liabilities of such STOCKHOLDER in connection with the transactions contemplated
hereby; provided, however, that the foregoing shall not in any way prejudice the
ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained
in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be
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notified, postage prepaid and registered or certified with return receipt
requested, (ii) by delivering the same in person to an officer or agent of such
party or (iii) by facsimile transmission when confirmation of receipt is
received from the party being notified by the party sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
Jupiter Property Management at Park City, Inc.
1700 Park Avenue
P.O. Box 680128
Park City, Utah 84068
Facsimile no.: (435) 649-8063
Attention: Jon R. Brinton
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
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18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Merger and each future holder of such
VPI Stock.
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18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
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"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
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"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
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"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
JUPITER ACQUISITION CORP.
By:/s/ Leonard Potter
----------------------------------
Leonard Potter
Vice President
JUPITER PROPERTY MANAGEMENT AT PARK CITY, INC.
By:/s/ Jon R. Brinton
----------------------------------
Name: Jon R. Brinton
---------------------------
Title: President
---------------------------
STOCKHOLDERS:
/s/ Jon R. Brinton
- ----------------------------------
Jon R. Brinton
EXHIBIT 2.7
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
MAUI ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
MAUI CONDOMINIUM & HOME REALTY, INC.
and
the STOCKHOLDERS named herein
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Articles of Incorporation, Bylaws and Board of Directors of
Surviving Corporation...............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO..............................................4
1.5 Effect of Merger.....................................................4
2. CONVERSION OF STOCK......................................................5
2.1 Manner of Conversion.................................................5
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................7
4. CLOSING..................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9
(A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9
5.1 Due Organization.................................................10
5.2 Authority........................................................10
5.3 Capital Stock of the COMPANY.....................................10
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................11
5.6 Subsidiaries.....................................................11
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANY..........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................13
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers...........................................16
5.16 Material Contracts and Commitments..............................17
5.17 Real Property...................................................17
5.18 Insurance.......................................................18
5.19 Compensation; Employment Agreements; Organized Labor Matters....19
5.20 Employee Plans..................................................20
5.21 Compliance with ERISA...........................................21
5.22 Conformity with Law; Litigation.................................22
5.23 Taxes...........................................................23
5.24 No Violations...................................................25
5.25 Government Contracts............................................26
5.26 Absence of Changes..............................................26
5.27 Deposit Accounts; Powers of Attorney............................28
5.28 Validity of Obligations.........................................28
5.29 Relations with Governments......................................28
5.30 Disclosure......................................................28
5.31 Prohibited Activities...........................................29
(B) Representations and Warranties of STOCKHOLDERS......................30
5.32 Authority; Ownership............................................30
5.33 Preemptive Rights...............................................30
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5.34 No Intention to Dispose of VPI Stock............................30
6. REPRESENTATIONS OF VPI AND NEWCO........................................31
6.1 Due Organization....................................................31
6.2 Authorization.......................................................32
6.3 Capital Stock of VPI and NEWCO......................................32
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................33
6.6 Financial Statements................................................33
6.7 Liabilities and Obligations.........................................33
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................34
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................35
6.12 No Side Agreements.................................................35
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................36
6.15 Completion of Due Diligence........................................38
6.16 Disclosure........................................................38
6.17 Tax Treatment......................................................38
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................40
7.3 Prohibited Activities...............................................41
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................43
7.6 Agreements..........................................................43
7.7 Notification of Certain Matters.....................................43
7.8 Amendment of Schedules..............................................44
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................47
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................49
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................50
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
9.5 No Material Adverse Effect..........................................53
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9.6 STOCKHOLDERS' Release...............................................53
9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
9.18 Termination of Defined Benefit Plans...............................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
11. INDEMNIFICATION........................................................58
11.1 General Indemnification by the STOCKHOLDERS........................58
11.2 Indemnification by VPI.............................................59
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................62
12. TERMINATION OF AGREEMENT...............................................63
12.1 Termination........................................................63
12.2 Liabilities in Event of Termination................................64
13. NONCOMPETITION.........................................................65
13.1 Prohibited Activities..............................................65
13.2 Damages............................................................66
13.3 Reasonable Restraint...............................................67
13.4 Severability; Reformation..........................................67
13.5 Independent Covenant...............................................68
13.6 Materiality........................................................68
13.7 Limitation.........................................................68
13.8 COMPANY Noncompetition.............................................68
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69
14.1 STOCKHOLDERS.......................................................69
14.2 VPI AND NEWCO......................................................70
14.3 Damages............................................................71
14.4 Survival...........................................................71
14.5 Return of Data Submitted...........................................71
15. TRANSFER RESTRICTIONS..................................................71
15.1 Transfer Restrictions..............................................71
15.2 Certain Transfers..................................................72
16. SECURITIES LAW REPRESENTATIONS.........................................72
16.1 Compliance with Law................................................73
16.2 Economic Risk; Sophistication......................................73
17. REGISTRATION RIGHTS....................................................73
17.1 Piggyback Registration Rights......................................74
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17.2 Demand Registration Rights.........................................75
17.3 Registration Procedures............................................76
17.4 Underwriting Agreement.............................................76
17.5 Availability of Rule 144...........................................76
17.6 Registration Rights Indemnification................................76
18. GENERAL................................................................81
18.1 Press Releases.....................................................81
18.2 Cooperation........................................................82
18.3 Successors and Assigns; Third Party Beneficiaries..................82
18.4 Entire Agreement...................................................82
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................83
18.7 Expenses...........................................................83
18.8 Notices............................................................84
18.9 Governing Law......................................................85
18.10 Exercise of Rights and Remedies...................................85
18.11 Time..............................................................85
18.12 Reformation and Severability......................................85
18.13 Remedies Cumulative...............................................85
18.14 Captions..........................................................86
18.15 Amendments and Waivers............................................86
18.16 Incorporation by Reference........................................86
18.17 Defined Terms.....................................................86
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), MAUI ACQUISITION CORP., a Delaware corporation ("NEWCO"),
MAUI CONDOMINIUM & HOME REALTY, INC., a Hawaii corporation (the "COMPANY"), and
Daniel C. Blair and Paul T. Dobson (the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Hotel Corporation of
the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a
Colorado corporation, Jupiter Property Management at Park City, Inc., a
Utah corporation, The Maury People, Inc., a
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Massachusetts corporation, Howey Acquisition, Inc., a Florida corporation,
Realty Consultants, Inc., a Florida corporation, Resort Property
Management, Inc., a Utah corporation, Telluride Resort Accommodations,
Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia
corporation, THE Management Company, a Georgia corporation, and Whistler
Chalets Limited, a British Columbia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State or the
Director of the Department of Commerce and Consumer Affairs, as applicable, of
the State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 ARTICLES OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING
CORPORATION. At the Effective Time of the Merger:
(i) the Articles of Incorporation of the COMPANY then in effect shall
be the Articles of Incorporation of the Surviving Corporation until changed
as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of the laws of the state in which the Surviving
Corporation is located and of the Articles of Incorporation and Bylaws of
the Surviving Corporation; and
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(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger the person designated by VPI to be appointed
as such officer shall be appointed as a vice president of the Surviving
Corporation and the person designated by VPI to be appointed as such
officer shall be appointed as an Assistant Secretary of the Surviving
Corporation, each of such officers to serve, subject to the provisions of
the Articles of Incorporation and Bylaws of the Surviving Corporation,
until his or her successor is duly elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the COMPANY shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
NEWCO shall be merged with and into the
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COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested
therewith. At the Effective Time of the Merger, the separate existence of NEWCO
shall cease and, in accordance with the terms of this Agreement, the Surviving
Corporation shall possess all of the rights, privileges, immunities and
franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all Taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectively the property of the
Surviving Corporation as they were of NEWCO and the COMPANY; and the title to
any real estate, or interest therein, whether by deed or otherwise, under the
laws of the states of incorporation vested in NEWCO and the COMPANY, shall not
revert or be in any way impaired by reason of the Merger. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all of the liabilities and obligations of NEWCO and the COMPANY and
any claim existing, or action or proceeding pending, by or against NEWCO or the
COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the
Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and
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outstanding immediately prior to the Effective Time of the Merger, respectively,
into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation,
respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and (2) the right to receive
the amount of cash, subject to adjustment pursuant to Section 3.3 hereof,
set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective
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Time of the Merger, VPI shall have no class of capital stock (including
preferred stock) issued and outstanding other than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall
result in a corresponding
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dollar-for-dollar reduction in the cash portion of the consideration paid to the
STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment
shall be made to effect the intent of this Section 3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to
in Section 3 hereof shall occur and (z) the closing with respect to the IPO
shall be
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completed. The taking of the actions described in the preceding clauses (x), (y)
and (z) shall constitute the closing of the transactions hereunder (the
"Closing"), and the date on which the actions described in the preceding clauses
(x), (y) and (z) occur shall be referred to as the "Closing Date." Except as
provided in Sections 8 and 9 hereof with respect to actions to be taken on the
Closing Date, during the period from the Pre-Closing Date to the Closing Date
this Agreement may only be terminated by a party if the underwriting agreement
in respect of the IPO is terminated pursuant to the terms of such agreement.
This Agreement shall in any event terminate if the Closing Date has not occurred
within 15 business days of the Pre-Closing Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually incurs liability under
the 1933 Act, the 1934 Act or any other federal or state securities laws as a
result of a breach of a representation or warranty by the COMPANY or the
STOCKHOLDERS, the representations and warranties set forth herein shall survive
until the expiration of any applicable limitations period, which shall be deemed
to be the Expiration Date for such purposes. For purposes of
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this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all
of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Articles of Incorporation and
Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have
not been made available to VPI, and all of such minutes are correct and complete
in all material respects. Except as set forth on Schedule 5.1, the most recent
minutes of the COMPANY, which are dated no earlier than ten business days prior
to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its
officers and directors on behalf of the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV
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and further, except as set forth on Schedule 5.3, are owned free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of the COMPANY have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the STOCKHOLDERS and further, such shares were offered, issued, sold and
delivered by the COMPANY in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder
of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
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free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's unaudited (i) Balance Sheets, if any, as of December 31,
1997 and 1996; (ii) Statements of Operations, if any, for each of the years in
the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter
referred to as the "Balance Sheet Date"); (iii) Statements of Changes in
Stockholders' Equity, if any, for each of the years in the two-year period ended
on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each
of the years in the two-year period ended on the Balance Sheet Date. Except as
set forth on Schedule 5.9, such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December
31, 1997 and 1996 present fairly the financial position of such COMPANY as of
the dates indicated thereon, and such Statements of Operations, Statements of
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Changes in Stockholders' Equity and Statements of Cash Flows present fairly the
results of operations for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of
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the Balance Sheet Date, including any such amounts which are not reflected in
the balance sheet as of the Balance Sheet Date, and including receivables from
and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide
to VPI (x) an accurate list of all receivables obtained subsequent to the
Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts
and notes receivable showing amounts due in 30 day aging categories (the "A/R
Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed
by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the
accounts, notes and other receivables shown on Schedule 5.11 and on the A/R
Aging Reports are and shall be collectible in the amounts shown, net of reserves
reflected in the balance sheet as of the Balance Sheet Date with respect to
accounts receivable as of the Balance Sheet Date, and net of reserves reflected
in the books and records of the COMPANY (consistent with the methods used for
the balance sheet) with respect to accounts receivable of the COMPANY after the
Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises,
permits and other governmental authorizations that are necessary for the
operation of the business of the COMPANY as now conducted, and the COMPANY has
delivered to VPI an accurate list and summary description (which is set forth on
Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the COMPANY (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). The licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and
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5.13 and is not in violation of any of the foregoing, except for inadvertent,
immaterial noncompliance with such requirements, standards, criteria and
conditions (provided that any such noncompliance shall be deemed a breach of
this Section 5.12 for purposes of Section 11 hereof). Except as specifically
provided on Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to the COMPANY by, any such licenses,
franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY except as permitted by
Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to
which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the COMPANY, VPI or NEWCO for any clean-up cost,
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remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) the
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are
currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the
knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a
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"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the COMPANY's significant customers (or persons or entities that are sources of
a significant number of customers) have canceled or substantially reduced or, to
the knowledge of the COMPANY, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
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(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located (or with the Bureau of
Conveyances of the State of Hawaii or the Assistant Registrar of the Land
Court of the State of Hawaii, as applicable) which do not adversely affect
the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery thereof by the parties
thereto other than the COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of the COMPANY, the
STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other
parties (and their successors) thereto in accordance with their respective
terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received
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for the past three (3) policy years and (iii) true, complete and correct copies
of all insurance policies currently in effect. Such insurance policies evidence
all of the insurance that the COMPANY is required to carry pursuant to all of
its contracts and other agreements and pursuant to all applicable laws. All of
such insurance policies are currently in full force and effect and shall remain
in full force and effect through the Closing Date. No insurance carried by the
COMPANY has ever been canceled by the insurer and the COMPANY has never been
unable to obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the best of the COMPANY's knowledge, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
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The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20, the
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section (3)(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation arrangement). The COMPANY has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans, agreements, arrangements and trusts set forth on Schedule
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5.20, nor is the COMPANY required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions or employment of any of the COMPANY's employees.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such
plan or the COMPANY, has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
COMPANY has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service nor any liability to the Pension Benefit Guaranty
Corporation. The COMPANY and STOCKHOLDERS further represent that:
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(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings,
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commenced or, to the knowledge of the COMPANY, threatened, against or affecting
the COMPANY, at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over the COMPANY and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been received.
The COMPANY has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, orders, approvals, variances,
rules and regulations, and is not in violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the
STOCKHOLDERS have entered into an agreement or waiver or have been requested to
enter into an agreement or waiver extending any statute of limitations regarding
Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY,
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required to be paid by the date hereof, have been paid. All amounts required to
be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by the COMPANY for Taxes have been so deposited,
withheld or collected, and such deposit, withholding or collection has either
been paid to the respective governmental agencies or set aside and secured in
accounts for such purpose or secured and reserved against and entered on the
COMPANY Financial Statements (and, if applicable, any Financial Statements
delivered pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
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(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of the COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.24, none of the Material
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Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on Schedule 5.24, none of the Material Documents prohibits the use or
publication by the COMPANY, VPI or NEWCO of the name of any other party to such
Material Document, and none of the Material Documents prohibits or restricts the
COMPANY from freely providing services to any other customer or potential
customer of the COMPANY, VPI, NEWCO or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors,
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STOCKHOLDERS, employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees in accordance with
past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
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(xv) any other distribution of property or assets by the COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights generally or (ii) the
discretionary power of a court exercising equity jurisdiction. The individual
signing this Agreement on behalf of the COMPANY has the legal power, authority
and capacity to bind the COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
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(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
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(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI
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Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the Merger, and
all required approvals of the shareholders and board of directors of VPI and
NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
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6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this
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Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated
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hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
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6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to
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be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by VPI and NEWCO for Taxes have been so
deposited, withheld or collected, and such deposit, withholding or collection
has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
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(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the
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STOCKHOLDERS set forth in the letter of representations (referenced in the tax
opinion letter to be delivered pursuant to Section 8.4 hereof) are true and
correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI,
NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
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(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
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(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(ix) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(x) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-
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occurrence of which would be likely to cause any representation or warranty of
the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in
any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of VPI or NEWCO
contained herein to be untrue or inaccurate in any material respect at or prior
to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is
not accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or NEWCO that constitutes or reflects an event or occurrence that would have a
Material Adverse Effect may be made unless a majority of the Founding Companies
consent to such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto
shall be deemed to be the schedules as amended or supplemented pursuant to this
Section 7.8. In the event that one of the Other Founding Companies seeks to
amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANY notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANY does not give its consent, the COMPANY
may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event
that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours following receipt of
notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested and so requested in the
notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Pre-Closing Date and on the Closing
Date, contained in this Agreement (including the Schedules and Annexes hereto)
shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 21, 1998, unless the Closing Date shall have occurred on or before April
21, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANY for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANY for the
incremental cost of having VPI so named as an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation
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and information as any of them reasonably may request in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Tax Returns pursuant to
this Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to
serve as a director of VPI effective as of the Closing Date. Representatives of
the Founding Companies shall constitute a majority of the directors of VPI
immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting
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conditions for employees of the COMPANY who were covered by the COMPANY's health
insurance plan immediately prior to the Closing Date or as otherwise required by
law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all
times, from and after the date of this Agreement until the Expiration Date, from
and against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a
result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or
certificates delivered in connection herewith, (ii) any breach of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out
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of or based upon any untrue statement or alleged untrue statement of a material
fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or
its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to the COMPANY or the
STOCKHOLDERS required to be stated therein or necessary to make the statements
therein not misleading, or (iv) the matters described on Schedule 11.1(iv)
(relating to specifically identified matters such as ongoing claims and/or
litigation), which Schedule shall be prepared by VPI, provided, however, (A)
that in the case of any indemnity arising pursuant to clause (iii) such
indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to VPI counsel and to VPI for inclusion in the final prospectus, and
such information was not so included or properly delivered, and (B) that no
STOCKHOLDER shall be liable for any indemnification obligation pursuant to this
Section 11.1 to the extent attributable to a breach of any representation,
warranty or agreement made herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that
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VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by
reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act
or other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to VPI, NEWCO or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying
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Party that are in the Indemnified Party's possession or control. All Indemnified
Parties shall use the same counsel, which shall be the counsel selected by the
Indemnifying Party, provided that if counsel to the Indemnifying Party shall
have a conflict of interest that prevents counsel for the Indemnifying Party
from representing the Indemnified Party, the Indemnified Party shall have the
right to participate in such matter through counsel of its own choosing and the
Indemnifying Party will reimburse the Indemnified Party for the reasonable
expenses of its counsel. Further, absent a conflict, the Indemnified Party may
select counsel and have such counsel participate in such matter at the sole cost
of the Indemnified Party. After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested in
writing by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a final
and complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder
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shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDERS until
such time as, and solely to the extent that, the aggregate of all claims which
such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of
(i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock
delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided,
however, that VPI, NEWCO, the Surviving Corporation and the other persons or
entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.l(iv) at any time, regardless of
whether the aggregate of all claims which such persons may have against the
STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the
amount of any such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for
indemnification hereunder against VPI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which the STOCKHOLDERS may have
against VPI and NEWCO shall exceed $50,000, provided, however, that the
STOCKHOLDERS and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether
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the aggregate of all claims which such persons may have against any of VPI and
NEWCO exceeds $50,000, it being understood that the amount of any such claim
under Section 11.2(v) shall not be counted towards such $50,000 amount. No
person shall be entitled to indemnification under this Section 11 if and to the
extent that: (a) such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement; or (b) such person
receives a tax benefit as a result of the claim or loss for which
indemnification is sought (i.e., the amount of such claim or loss for which
indemnification is provided hereunder shall be reduced by the amount of such tax
benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to
be a reduction in the consideration received by the STOCKHOLDERS pursuant to
Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANY;
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(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided,
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however (and notwithstanding anything in Section 18.7 to the contrary), that the
COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management or rental business
or hotel management business in direct competition with VPI or any of its
subsidiaries, within 100 miles of the locations in which VPI or the
COMPANY, or any of their subsidiaries, conduct a noncommercial property
management or rental business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the
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COMPANY or of any of the Other Founding Companies within the Territory for
the purpose of providing noncommercial property management or rental
services or hotel management services to property owners and/or renters in
direct competition with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management or rental business or hotel management
business, which candidate, to the actual knowledge of such STOCKHOLDER
after due inquiry, was called upon by VPI (including the subsidiaries
thereof) or for which, to the actual knowledge of such STOCKHOLDER after
due inquiry, VPI (or any subsidiary thereof) made an acquisition analysis,
for the purpose of acquiring such entity, unless VPI (or any subsidiary
thereof) has expressly declined to pursue such acquisition candidate or at
least one (1) year has elapsed since VPI (or any subsidiary thereof) has
taken any action with respect to pursuing such acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
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13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
13.8 COMPANY NONCOMPETITION. The parties hereto agree that the Surviving
Corporation and the surviving corporations under the Other Agreements that
operate in the State of Hawaii shall cooperate with each other and shall not
compete with each other. This provision shall be included in the Other
Agreements of the Other Founding Companies that operate in the State of Hawaii.
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by
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this Agreement are not consummated, STOCKHOLDERS shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI or NEWCO, (ii) disclosure is required
by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI and NEWCO shall, unless otherwise required by law or such order, give two
days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and
provide the COMPANY and the STOCKHOLDERS with the opportunity within such
two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. VPI will disclose
confidential information relating to the COMPANY to the Other Founding Companies
only if such companies have agreed, in advance, to treat such information as
confidential. In the event of a breach or threatened breach by VPI or NEWCO of
the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be
entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available
remedy for as such breach or threatened breach, including the recovery of
damages.
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14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER
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AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective
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accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANY, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
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17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders on a pro rata basis based on the number
of shares proposed to be registered by each of the Founding Stockholders.
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17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
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17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby
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does, indemnify and hold harmless each seller of any Registrable Securities
covered by such registration statement, its directors, officers, agents,
attorneys, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to which such seller
or any such director or officer or underwriter or controlling Person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and VPI will reimburse such seller and each
such director, officer, underwriter and controlling Person for any expenses
(including but not limited to reasonable attorneys' fees) reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that VPI shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to VPI by such seller expressly
for use in the preparation thereof, and provided further that VPI shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the 1933 Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final
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prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in
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such final prospectus. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any underwriter, VPI or
any such director, officer or controlling Person and shall survive the transfer
of such securities by such seller. In no event shall the liability of any
selling holder of Registrable Securities under this Section 17.6(b) be greater
in amount than the dollar amount of the proceeds received by such holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
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(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
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media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the
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STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective
officers or trustees, duly authorized by their respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld,
L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property
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transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed in connection with the Merger, other than Transfer
Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all
necessary documentation and Tax Returns with respect to such Transfer Taxes. In
addition, each STOCKHOLDER acknowledges that he or she, and not the COMPANY or
VPI, shall pay all taxes due upon receipt of the consideration payable pursuant
to Section 3 hereof, and shall assume all tax risks and liabilities of such
STOCKHOLDER in connection with the transactions contemplated hereby; provided,
however, that the foregoing shall not in any way prejudice the ability of the
STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax
opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
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(c) If to the COMPANY, addressed to it at:
Maui Condominium & Home Realty, Inc.
2511 South Kihei Road
P.O. Box 1840
Kihei, Hawaii 96753
Facsimile no.: (808) 875-1769
Attention: Paul T. Dobson
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
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18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Merger and each future holder of such
VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
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"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
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"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
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"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll,
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employment, excise, property, deed, stamp, alternative or add on minimum,
environmental or other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, whether disputed or not, together
with any interest, penalties, additions to tax or additional amounts with
respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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Maui Agreement and Plan of Organization
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
MAUI ACQUISITION CORP.
By:/s/ Leonard Potter
----------------------------------
Leonard Potter
Vice President
MAUI CONDOMINIUM & HOME REALTY, INC.
By:/s/ Paul T. Dobson
----------------------------------
Name: Paul T. Dobson
---------------------------
Title: Vice President/Secretary
--------------------------
STOCKHOLDERS:
/s/ Daniel C. Blair
- -------------------------------------
Daniel C. Blair
/s/ Paul T. Dobson
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Paul T. Dobson
EXHIBIT 2.8
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AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
MAURY ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
THE MAURY PEOPLE, INC.
and
the STOCKHOLDERS named herein
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TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation...............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO..............................................4
1.5 Effect of Merger.....................................................4
2. CONVERSION OF STOCK......................................................5
2.1 Manner of Conversion.................................................5
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................7
4. CLOSING..................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9
(A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9
5.1 Due Organization.................................................10
5.2 Authority........................................................10
5.3 Capital Stock of the COMPANY.....................................10
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................11
5.6 Subsidiaries.....................................................11
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANY..........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................14
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers...........................................17
5.16 Material Contracts and Commitments..............................17
5.17 Real Property...................................................17
5.18 Insurance.......................................................18
5.19 Compensation; Employment Agreements; Organized Labor Matters....19
5.20 Employee Plans..................................................20
5.21 Compliance with ERISA...........................................21
5.22 Conformity with Law; Litigation.................................22
5.23 Taxes...........................................................23
5.24 No Violations...................................................25
5.25 Government Contracts............................................26
5.26 Absence of Changes..............................................26
5.27 Deposit Accounts; Powers of Attorney............................28
5.28 Validity of Obligations.........................................28
5.29 Relations with Governments......................................29
5.30 Disclosure......................................................29
5.31 Prohibited Activities...........................................30
(B) Representations and Warranties of STOCKHOLDERS......................30
5.32 Authority; Ownership............................................30
5.33 Preemptive Rights...............................................30
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5.34 No Intention to Dispose of VPI Stock............................30
6. REPRESENTATIONS OF VPI AND NEWCO........................................30
6.1 Due Organization....................................................31
6.2 Authorization.......................................................31
6.3 Capital Stock of VPI and NEWCO......................................32
6.4 Transactions in Capital Stock.......................................32
6.5 Subsidiaries........................................................32
6.6 Financial Statements................................................33
6.7 Liabilities and Obligations.........................................33
6.8 Conformity with Law; Litigation.....................................33
6.9 No Violations.......................................................34
6.10 Validity of Obligations............................................34
6.11 VPI Stock..........................................................35
6.12 No Side Agreements.................................................35
6.13 Business; Real Property; Material Agreements.......................35
6.14 Taxes..............................................................35
6.15 Completion of Due Diligence........................................38
6.16 Disclosure........................................................38
6.17 Tax Treatment......................................................38
7. COVENANTS PRIOR TO CLOSING..............................................38
7.1 Access and Cooperation; Due Diligence...............................38
7.2 Conduct of Business Pending Closing.................................39
7.3 Prohibited Activities...............................................41
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................43
7.6 Agreements..........................................................43
7.7 Notification of Certain Matters.....................................43
7.8 Amendment of Schedules..............................................44
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................47
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................49
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................50
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
9.5 No Material Adverse Effect..........................................53
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9.6 STOCKHOLDERS' Release...............................................53
9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................55
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
11. INDEMNIFICATION........................................................58
11.1 General Indemnification by the STOCKHOLDERS........................59
11.2 Indemnification by VPI.............................................60
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................62
12. TERMINATION OF AGREEMENT...............................................64
12.1 Termination........................................................64
12.2 Liabilities in Event of Termination................................65
13. NONCOMPETITION.........................................................65
13.1 Prohibited Activities..............................................65
13.2 Damages............................................................67
13.3 Reasonable Restraint...............................................67
13.4 Severability; Reformation..........................................68
13.5 Independent Covenant...............................................68
13.6 Materiality........................................................69
13.7 Limitation.........................................................69
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69
14.1 STOCKHOLDERS.......................................................69
14.2 VPI AND NEWCO......................................................70
14.3 Damages............................................................71
14.4 Survival...........................................................71
14.5 Return of Data Submitted...........................................71
15. TRANSFER RESTRICTIONS..................................................71
15.1 Transfer Restrictions..............................................71
15.2 Certain Transfers..................................................72
16. SECURITIES LAW REPRESENTATIONS.........................................73
16.1 Compliance with Law................................................73
16.2 Economic Risk; Sophistication......................................73
17. REGISTRATION RIGHTS....................................................74
17.1 Piggyback Registration Rights......................................74
17.2 Demand Registration Rights.........................................75
17.3 Registration Procedures............................................76
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17.4 Underwriting Agreement.............................................76
17.5 Availability of Rule 144...........................................76
17.6 Registration Rights Indemnification................................77
18. GENERAL................................................................81
18.1 Press Releases.....................................................82
18.2 Cooperation........................................................82
18.3 Successors and Assigns; Third Party Beneficiaries..................82
18.4 Entire Agreement...................................................82
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................83
18.7 Expenses...........................................................83
18.8 Notices............................................................84
18.9 Governing Law......................................................85
18.10 Exercise of Rights and Remedies...................................85
18.11 Time..............................................................86
18.12 Reformation and Severability......................................86
18.13 Remedies Cumulative...............................................86
18.14 Captions..........................................................86
18.15 Amendments and Waivers............................................86
18.16 Incorporation by Reference........................................86
18.17 Defined Terms.....................................................87
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), MAURY ACQUISITION CORP., a Delaware corporation ("NEWCO"),
THE MAURY PEOPLE, INC., a Massachusetts corporation (the "COMPANY"), and Sharon
Benson Doucette (the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Hotel Corporation of
the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a
Colorado corporation, Jupiter Property Management at Park City, Inc., a
Utah corporation, Maui Condominium & Home Realty,
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Inc., a Hawaii corporation, Howey Acquisition, Inc., a Florida corporation,
Realty Consultants, Inc., a Florida corporation, Resort Property
Management, Inc., a Utah corporation, Telluride Resort Accommodations,
Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia
corporation, THE Management Company, a Georgia corporation, and Whistler
Chalets Limited, a British Columbia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the STOCKHOLDERS and the Board
of Directors of the COMPANY have approved this Agreement as part of the VPI
Plan of Organization in order to transfer the capital stock of the COMPANY
to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in effect
shall be the Certificate of Incorporation of the Surviving Corporation
until changed as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of the laws of the state in which the Surviving
Corporation is located and of the Certificate of Incorporation and Bylaws
of the Surviving Corporation;
(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or
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capacities, and effective upon the Effective Time of the Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of the Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of the Surviving Corporation, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until his or her successor is duly elected and
qualified; and
(v) the corporate purposes of the Surviving Corporation shall be the
purposes set forth in the Articles of Organization of the COMPANY until
changed as provided by law.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the COMPANY shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
NEWCO shall be merged with and into the
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COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested
therewith. At the Effective Time of the Merger, the separate existence of NEWCO
shall cease and, in accordance with the terms of this Agreement, the Surviving
Corporation shall possess all of the rights, privileges, immunities and
franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all Taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectively the property of the
Surviving Corporation as they were of NEWCO and the COMPANY; and the title to
any real estate, or interest therein, whether by deed or otherwise, under the
laws of the states of incorporation vested in NEWCO and the COMPANY, shall not
revert or be in any way impaired by reason of the Merger. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all of the liabilities and obligations of NEWCO and the COMPANY and
any claim existing, or action or proceeding pending, by or against NEWCO or the
COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the
Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and
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outstanding immediately prior to the Effective Time of the Merger, respectively,
into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation,
respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and (2) the right to receive
the amount of cash, subject to adjustment pursuant to Section 3.3 hereof,
set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective
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Time of the Merger, VPI shall have no class of capital stock (including
preferred stock) issued and outstanding other than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall
result in a corresponding
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dollar-for-dollar reduction in the cash portion of the consideration paid to the
STOCKHOLDERS pursuant to this Section 3. If necessary, a post-Closing adjustment
shall be made to effect the intent of this Section 3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to
in Section 3 hereof shall occur and (z) the closing with respect to the IPO
shall be
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completed. The taking of the actions described in the preceding clauses (x), (y)
and (z) shall constitute the closing of the transactions hereunder (the
"Closing"), and the date on which the actions described in the preceding clauses
(x), (y) and (z) occur shall be referred to as the "Closing Date." Except as
provided in Sections 8 and 9 hereof with respect to actions to be taken on the
Closing Date, during the period from the Pre-Closing Date to the Closing Date
this Agreement may only be terminated by a party if the underwriting agreement
in respect of the IPO is terminated pursuant to the terms of such agreement.
This Agreement shall in any event terminate if the Closing Date has not occurred
within 15 business days of the Pre-Closing Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually incurs liability under
the 1933 Act, the 1934 Act or any other federal or state securities laws as a
result of a breach of a representation or warranty by the COMPANY or the
STOCKHOLDERS, the representations and warranties set forth herein shall survive
until the expiration of any applicable limitations period, which shall be deemed
to be the Expiration Date for such purposes. For purposes of
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this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all
of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have
not been made available to VPI, and all of such minutes are correct and complete
in all material respects. Except as set forth on Schedule 5.1, the most recent
minutes of the COMPANY, which are dated no earlier than ten business days prior
to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its
officers and directors on behalf of the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV
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and further, except as set forth on Schedule 5.3, are owned free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of the COMPANY have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the STOCKHOLDERS and further, such shares were offered, issued, sold and
delivered by the COMPANY in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder
of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
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free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31,
1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited
Statement of Operations, if any, for the period ended December 31, 1997
(December 31, 1997 being hereinafter referred to as the "Balance Sheet Date")
and unaudited Statement of Operations, if any, for the period ended December 31,
1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for
the period ended on the Balance Sheet Date and unaudited Statement of Changes in
Stockholders' Equity, if any, for the period ended December 31, 1996; and (iv)
audited Statement of Cash Flows, if any, for the period ended on the Balance
Sheet Date and unaudited Statement of Cash Flows, if any, for the period ended
December 31, 1996. Except as set forth on Schedule 5.9, such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except
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as noted thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such
Balance Sheets as of December 31, 1997 and 1996 present fairly the financial
position of such COMPANY as of the dates indicated thereon, and such Statements
of Operations, Statements of Changes in Stockholders' Equity and Statements of
Cash Flows present fairly the results of operations for the periods indicated
thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
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5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all
receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing
Date and (y) an aging of all accounts and notes receivable showing amounts due
in 30 day aging categories (the "A/R Aging Reports"). Except to the extent
reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing
accompanying the A/R Aging Reports, the accounts, notes and other receivables
shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible
in the amounts shown, net of reserves reflected in the balance sheet as of the
Balance Sheet Date with respect to accounts receivable as of the Balance Sheet
Date, and net of reserves reflected in the books and records of the COMPANY
(consistent with the methods used for the balance sheet) with respect to
accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises,
permits and other governmental authorizations that are necessary for the
operation of the business of the COMPANY as now conducted, and the COMPANY has
delivered to VPI an accurate list and summary description (which is set forth on
Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the COMPANY (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). The licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is
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conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 and is not in
violation of any of the foregoing, except for inadvertent, immaterial
noncompliance with such requirements, standards, criteria and conditions
(provided that any such noncompliance shall be deemed a breach of this Section
5.12 for purposes of Section 11 hereof). Except as specifically provided on
Schedule 5.12, the transactions contemplated by this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to the COMPANY by, any such licenses, franchises, permits
or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY except as permitted by
Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to
which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which
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site is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the COMPANY,
VPI or NEWCO for any clean-up cost, remedial work, damage to natural resources,
property damage or personal injury, including, but not limited to, any claim
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended; and (v) the COMPANY has no contingent liability in
connection with any release of any Hazardous Waste or Hazardous Substance into
the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are
currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the
knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
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5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on
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Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery therof by the parties
thereto other than the COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of the COMPANY, the
STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other
parties (and their successors) thereto in accordance with their respective
terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received
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for the past three (3) policy years and (iii) true, complete and correct copies
of all insurance policies currently in effect. Such insurance policies evidence
all of the insurance that the COMPANY is required to carry pursuant to all of
its contracts and other agreements and pursuant to all applicable laws. All of
such insurance policies are currently in full force and effect and shall remain
in full force and effect through the Closing Date. No insurance carried by the
COMPANY has ever been canceled by the insurer and the COMPANY has never been
unable to obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the best of the COMPANY's knowledge, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
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The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20, the
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section (3)(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation arrangement). The COMPANY has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans, agreements, arrangements and trusts set forth on Schedule
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5.20, nor is the COMPANY required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions or employment of any of the COMPANY's employees. The COMPANY has
frozen (or will freeze pursuant to Section 7 hereof), all benefit accrual with
respect to any defined benefit employee pension plan listed on Schedule 5.20.
The freezing of such benefits will be in accordance with the applicable plans
(including all amendments which are adopted to effect the freezing of benefit
accrual), and the applicable provisions of ERISA, the Code, the regulations
under each of ERISA and the Code, and all other applicable laws.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such
plan or the COMPANY, has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
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listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
COMPANY has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service nor any liability to the Pension Benefit Guaranty
Corporation. The COMPANY and STOCKHOLDERS further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the COMPANY, except for inadvertent, immaterial
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noncompliance with any such law, regulation or order (provided that any such
noncompliance shall be deemed a breach of this Section 5.22 for purposes of
Section 11 hereof); and except to the extent set forth on Schedules 5.10 or
5.13, there are no claims, actions, suits or proceedings, commenced or, to the
knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over the COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations,
and is not in violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the
STOCKHOLDERS have entered into an agreement or waiver or have been requested to
enter into an agreement or waiver extending any statute of limitations regarding
Taxes.
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(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth in Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth in Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the
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COMPANY shall have existed, (ii) any Tax examinations commenced or closed or
outstanding during their three (3) most recent fiscal years, and (iii) currently
outstanding extensions of statutory limitations, are attached hereto as Schedule
5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of the COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations
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hereunder and the consummation of the transactions contemplated hereby will not
result in any violation or breach or constitute a default under, any of the
terms or provisions of the Material Documents or the Charter Documents. Except
as set forth on Schedule 5.24, none of the Material Documents requires notice
to, or the consent or approval of, any governmental agency or other third party
with respect to any of the transactions contemplated hereby in order to remain
in full force and effect, and consummation of the transactions contemplated
hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit. Except as set forth on Schedule
5.24, none of the Material Documents prohibits the use or publication by the
COMPANY, VPI or NEWCO of the name of any other party to such Material Document,
and none of the Material Documents prohibits or restricts the COMPANY from
freely providing services to any other customer or potential customer of the
COMPANY, VPI, NEWCO or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in
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the first sentence of Section 3.3) or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
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(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business; (xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights generally or (ii) the
discretionary power of a court exercising equity jurisdiction. The individual
signing this Agreement on behalf of the COMPANY has the legal power, authority
and capacity to bind the COMPANY to the terms of this Agreement.
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5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Founding Company
Questionnaire attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
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5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to
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Section 7.8 hereof, shall be true at the time of Pre-Closing and the Closing
Date, and that such representations and warranties shall survive the Closing
Date for a period of two years (the last day of such period being the
"Expiration Date"), except that (i) the warranties and representations set forth
in Section 6.14 hereof shall survive until such time as the limitations period
has run for all Tax periods ended on or prior to the Closing Date, which shall
be deemed to be the Expiration Date for Section 6.14, (ii) the warranties and
representations set forth in Section 6.17 hereof shall survive until April 15,
2002, or until such later date as the limitations period on the assessment of
additional tax relating to the taxable year in which the transactions
contemplated herein occur may be extended from time to time, so long as VPI has
been notified of such extension and has consented to such extension (which
consent shall not be unreasonably withheld) and (iii) solely for purposes of
determining whether a claim for indemnification under Section 11.2(iv) hereof
has been made on a timely basis, and solely to the extent that in connection
with the IPO, the STOCKHOLDERS or the COMPANY actually incur liability under the
1933 Act, the 1934 Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI Charter Documents
provide for indemnification of officers and directors to the full extent
permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement
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and (ii) VPI and NEWCO have the full legal right, power and authority to enter
into and perform this Agreement and the Merger, and all required approvals of
the shareholders and board of directors of VPI and NEWCO, respectively, have
been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except
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as set forth in the preceding sentence, neither VPI nor NEWCO presently owns, of
record or beneficially, or controls, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is VPI or NEWCO, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this Agreement and the Other Agreements and except
for fees and expenses incurred in connection with the transactions contemplated
hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and
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are conducting their respective businesses in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and are not in violation of any of the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
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6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact
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or information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by VPI and NEWCO for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the financial
statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax
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sharing, Tax benefit or similar agreement with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the
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Code apply to any disposition of any subsection (f) asset (as defined in section
341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDERS set forth in the letter of representations
(referenced in the tax opinion letter to be delivered pursuant to Section 8.4
hereof) are true and correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any
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documents or materials required by this Agreement. VPI, NEWCO, the STOCKHOLDERS
and the COMPANY shall treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Other Founding Companies as
confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
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(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business;
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices; and
(ix) freeze all benefit accrual under any defined benefit employee
pension benefit plan listed on Schedule 5.20 (and amend any such plan as
necessary in order to freeze benefit accrual), and take all steps necessary
to begin the plan termination process, including, but not limited to,
filing the appropriate forms with the Pension Benefit Guaranty Corporation
and the Internal Revenue Service (including, but not limited to, an
application to the Internal Revenue Service for a determination upon
termination) and procuring from the STOCKHOLDERS a valid waiver of benefits
in order to facilitate funding of any such plan for termination purposes
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and to prevent VPI from assuming any financial liability for funding any
such plan. Such steps shall be taken in accordance with the provisions of
the plan and the applicable provisions of ERISA and the Code and the
regulations under each of ERISA and the Code.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-
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occurrence of which would be likely to cause any representation or warranty of
the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in
any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of VPI or NEWCO
contained herein to be untrue or inaccurate in any material respect at or prior
to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is
not accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or NEWCO that constitutes or reflects an event or occurrence that would have a
Material Adverse Effect may be made unless a majority of the Founding Companies
consent to such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto
shall be deemed to be the schedules as amended or supplemented pursuant to this
Section 7.8. In the event that one of the Other Founding Companies seeks to
amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANY notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANY does not give its consent, the COMPANY
may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event
that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours following receipt of
notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested and so requested in the
notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Pre-Closing Date and on the Closing
Date, contained in this Agreement (including the Schedules and Annexes hereto)
shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 21, 1998, unless the Closing Date shall have occurred on or before April
21, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANY for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees or independent contractor service
providers on a pro rata basis based upon the respective consideration amounts
paid by VPI under this Agreement and the Other Agreements. The exercise price of
all options granted under such stock option plan as of the Closing Date will be
the price per share of VPI Stock in the IPO, and all such options shall vest in
four equal installments commencing on the first anniversary of the Closing Date
and on each of the three anniversaries thereafter. The terms set forth in the
preceding sentence and all other terms of the options shall be no less favorable
than the options made available to the Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANY for the
incremental cost of having VPI so named as an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction
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contemplated hereby as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and
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information shall include providing copies of all relevant portions of
relevant Tax Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by taxing authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each
party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Tax Returns pursuant to this Agreement shall bear all
costs of filing such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to
serve as a director of VPI effective as of the Closing Date. Representatives of
the Founding Companies shall constitute a majority of the directors of VPI
immediately following the Closing Date.
10.5 EMPLOYEE BENEFIT PLANS. Following the Closing Date, VPI shall not
terminate any health insurance, life insurance or 401(k) plan in effect at the
COMPANY until such time as VPI is able to replace such plan with a plan that is
applicable to VPI and all of its then existing subsidiaries. VPI shall have no
obligation to provide replacement plans that have the same terms and provisions
as the existing plans, except as may be required by ERISA or other applicable
law; provided, however, that any new health insurance plan shall provide for
coverage for preexisting conditions for employees of the COMPANY who were
covered by the COMPANY's health insurance plan immediately prior to the Closing
Date or as otherwise required by law. Following the Closing Date, VPI shall
cause the COMPANY to consummate the termination of any defined benefit employee
pension benefit plan which was to be terminated under the provisions of Section
7.2 hereof (including, but not limited to,
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making any distributions that are required by ERISA, the Code or any other
applicable law, and filing any forms required by the Internal Revenue Service or
any other applicable governmental agency after such distributions). In addition,
the STOCKHOLDERS shall execute any documents required: (i) to effectuate such
termination and (ii) to fully fund any such plan to the extent required,
following the execution of a waiver of benefits by the STOCKHOLDERS, in order to
avoid the existence any liability of VPI, NEWCO and the COMPANY for funding such
plan.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
10.8 POST-CLOSING PAYMENTS TO STOCKHOLDERS. VPI shall cause the COMPANY to
pay over to the STOCKHOLDERS all brokerage commissions received by the COMPANY
on or after the Closing Date pursuant to real estate sales agreements in which
the COMPANY serves as a broker that were signed by all parties thereto prior to
the Closing Date; provided, however, that a schedule setting forth all such
agreements that have been signed prior to the Closing Date (but that have not
yet had a closing occur pursuant thereto) shall have been delivered to VPI on or
before the Closing Date.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
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11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all
times, from and after the date of this Agreement until the Expiration Date, from
and against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a
result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or
certificates delivered in connection herewith, (ii) any breach of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY
or the STOCKHOLDERS, contained in the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact relating solely to the COMPANY or the STOCKHOLDERS required to be
stated therein or necessary to make the statements therein not misleading, or
(iv) the matters described on Schedule 11.1(iv) (relating to specifically
identified matters such as ongoing claims and/or litigation), which Schedule
shall be prepared by VPI, provided, however, (A) that in the case of any
indemnity arising pursuant to clause (iii) such indemnity shall not inure to the
benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to
VPI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any
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indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1
hereof by reason of such liabilities); (iv) any liability under the 1933 Act,
the 1934 Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to VPI, NEWCO or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any
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party obligated to provide indemnification pursuant to Section 11.1 or 11.2
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel.
Further, absent a conflict, the Indemnified Party may select counsel and have
such counsel participate in such matter at the sole cost of the Indemnified
Party. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested in writing by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-
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pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDERS until
such time as, and solely to the extent that, the aggregate of all claims which
such persons may have against the STOCKHOLDERS shall
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exceed 2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the
value of the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification
Threshold"), provided, however, that VPI, NEWCO, the Surviving Corporation and
the other persons or entities indemnified pursuant to Section 11.1 may assert
and shall be indemnified for any claim under Section 11.l(iv) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any such claim under Section 11.1(iv) shall not be
counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert
any claim for indemnification hereunder against VPI or NEWCO until such time as,
and solely to the extent that, the aggregate of all claims which the
STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided,
however, that the STOCKHOLDERS and the other persons or entities indemnified
pursuant to Section 11.2 may assert and shall be indemnified for any claim under
Section 11.2(v) at any time, regardless of whether the aggregate of all claims
which such persons may have against any of VPI and NEWCO exceeds $50,000, it
being understood that the amount of any such claim under Section 11.2(v) shall
not be counted towards such $50,000 amount. No person shall be entitled to
indemnification under this Section 11 if and to the extent that: (a) such
person's claim for indemnification is directly or indirectly related to a breach
by such person of any representation, warranty, covenant or other agreement set
forth in this Agreement; or (b) such person receives a tax benefit as a result
of the claim or loss for which indemnification is sought (i.e., the amount of
such claim or loss for which indemnification is provided hereunder shall be
reduced by the amount of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the
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value of the VPI Stock received or delivered by a STOCKHOLDER (for purposes of
determining the Indemnification Threshold, the limitation on indemnity set forth
in the second preceding sentence and the amount of any indemnity paid), VPI
Stock shall be valued at its initial public offering price as set forth in the
Registration Statement. Any indemnification payment made by the STOCKHOLDERS
pursuant to this Section 11 shall be deemed to be a reduction in the
consideration received by the STOCKHOLDERS pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
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(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement in
the event that this Agreement is terminated by VPI pursuant to Section
12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor,
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or as a sales representative, in any noncommercial property management,
rental or sales business or hotel management business in direct competition
with VPI or any of its subsidiaries, (A) within 100 miles of the locations
in which VPI or any of its subsidiaries (except the COMPANY as long as the
COMPANY is located on Nantucket Island) conduct a noncommercial property
management, rental or sales business or hotel management business or (B)
within the geographic boundary of Nantucket Island as long as the COMPANY
is located on Nantucket Island (the geographic areas set forth in the
foregoing clauses (A) and (B) are collectively referred to herein as the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition
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candidate or at least one (1) year has elapsed since VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding anything in this Section 13 to the contrary, the foregoing
covenant shall not be deemed to prohibit any STOCKHOLDER from (A) acquiring as
an investment not more than two percent (2%) of the capital stock of a competing
business whose stock is traded on a national securities exchange or
over-the-counter or (B) engaging in business as a real estate broker, other than
as an employee of the COMPANY while employed by the COMPANY, in any location
other than Nantucket Island after any termination of STOCKHOLDER's employment
with the COMPANY.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
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It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
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13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
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color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on
their ability to disseminate confidential information with respect to the
COMPANY.
14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI or NEWCO, (ii) disclosure is required
by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI and NEWCO shall, unless otherwise required by law or such order, give two
days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and
provide the COMPANY and the STOCKHOLDERS
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with the opportunity within such two-day period to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. VPI
will disclose confidential information relating to the COMPANY to the Other
Founding Companies only if such companies have agreed, in advance, to treat such
information as confidential. In the event of a breach or threatened breach by
VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS
shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any
other available remedy for as such breach or threatened breach, including the
recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after
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the Closing Date, except pursuant to Section 17 hereof, none of the STOCKHOLDERS
shall sell, assign, exchange, transfer, distribute or otherwise dispose of any
shares of VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1. The
certificates evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to
Section 3 of this Agreement shall bear a legend substantially in the form set
forth below and containing such other information as VPI may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such
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STOCKHOLDER must be made in accordance with this Section 15.2. The terms of this
Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and
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proposed officers and directors of VPI, the plans for the operations of the
business of VPI, the business, operations and financial condition of the
Founding Companies other than the COMPANY, and any plans for additional
acquisitions and the like. The STOCKHOLDERS have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be
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sold by persons other than VPI, the STOCKHOLDERS and the stockholders of the
Other Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders on a pro rata basis based on the number
of shares proposed to be registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any
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of its securities in a public offering under the 1933 Act, no registration of
the Founding Stockholders' VPI Stock shall be initiated under this Section 17.2
until 90 days after the effective date of such registration unless VPI is no
longer proceeding diligently to effect such registration (in which case the
delay contemplated by this sentence would not be applicable); provided that VPI
shall provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or
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successor provision) promulgated under the 1933 Act are available to such
STOCKHOLDER with respect to such STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
VPI will reimburse such seller and each such director, officer, underwriter and
controlling Person for any expenses (including but not limited to reasonable
attorneys' fees) reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
VPI shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in
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reliance upon and in conformity with written information furnished to VPI by
such seller expressly for use in the preparation thereof, and provided further
that VPI shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, underwriter or
controlling Person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person,
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if any, who controls such underwriter within the meaning of the 1933 Act, in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of such Person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any underwriter, VPI or any such director, officer or
controlling Person and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling holder of Registrable
Securities under this Section 17.6(b) be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such
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indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge,
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access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 17.6(c) hereof, any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
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18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and
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understanding among the STOCKHOLDERS, the COMPANY, NEWCO and VPI and supersede
any prior agreement and understanding relating to the subject matter of this
Agreement, including but not limited to any letter of intent entered into by any
of the parties hereto. This Agreement, upon execution, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its terms
and may be modified or amended only by a written instrument executed by the
STOCKHOLDERS, the COMPANY, NEWCO and VPI, acting through their respective
officers or trustees, duly authorized by their respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld,
L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by the
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COMPANY and the STOCKHOLDERS under this Agreement, including the fees and
expenses of accountants and legal counsel to the COMPANY and the STOCKHOLDERS.
Notwithstanding the foregoing, if the transactions contemplated by this
Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger, other than
Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the
COMPANY or VPI, shall pay all taxes due upon receipt of the consideration
payable pursuant to Section 3 hereof, and shall assume all tax risks and
liabilities of such STOCKHOLDER in connection with the transactions contemplated
hereby; provided, however, that the foregoing shall not in any way prejudice the
ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained
in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
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with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
The Maury People, Inc.
35 Main Street
Nantucket Island, MA 02554
Facsimile no.: (508) 325-5476
Attention: Sharon Benson Doucette
and marked "Personal and Confidential"
with copies to:
Kenneth M. Goldberg
Bernkopf, Goodman & Baseman LLP
125 Summer Street
Boston, MA 02110-1621
Facsimile no.: (617) 790-3300
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any
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similar breach or default occurring later; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default occurring
before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Merger and each future holder of such
VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
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18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
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"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such
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employment agreement of the STOCKHOLDER subject to the Noncompetition Period,
one (1) year following the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
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"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
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"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
MAURY ACQUISITION CORP.
By:/s/ Leonard Potter
----------------------------------
Leonard Potter
Vice President
THE MAURY PEOPLE, INC.
By:/s/ Sharon Benson Doucette
----------------------------------
Sharon Benson Doucette
President and Treasurer
STOCKHOLDERS:
/s/ Sharon Benson Doucette
- ----------------------------------
Sharon Benson Doucette
EXHIBIT 2.9
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
PRISCILLA ACQUISITION CORP.
REALTY CONSULTANTS ACQUISITION CORP.
(each a subsidiary of Vacation Properties International, Inc.)
HOWEY ACQUISITION, INC.
REALTY CONSULTANTS, INC.
and
the STOCKHOLDERS named herein
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGERS..............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporations..............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANIES, VPI and NEWCOS...........................................4
1.5 Effect of Merger.....................................................5
2. CONVERSION OF STOCK......................................................6
2.1 Manner of Conversion.................................................6
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................7
4. CLOSING..................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.............9
(A) Representations and Warranties of COMPANIES and STOCKHOLDERS.........9
5.1 Due Organization.................................................10
5.2 Authority........................................................11
Capital Stock of the COMPANIES.......................................11
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................12
5.6 Subsidiaries.....................................................12
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANIES........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................14
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers...........................................17
5.16 Material Contracts and Commitments..............................17
5.17 Real Property...................................................18
5.18 Insurance.......................................................19
5.19 Compensation; Employment Agreements; Organized Labor Matters....19
5.20 Employee Plans..................................................20
5.21 Compliance with ERISA...........................................21
5.22 Conformity with Law; Litigation.................................23
5.23 Taxes...........................................................23
5.24 No Violations...................................................26
5.25 Government Contracts............................................26
5.26 Absence of Changes..............................................26
5.27 Deposit Accounts; Powers of Attorney............................28
5.28 Validity of Obligations.........................................29
5.29 Relations with Governments......................................29
5.30 Disclosure......................................................29
5.31 Prohibited Activities...........................................30
(B) Representations and Warranties of STOCKHOLDERS......................30
5.32 Authority; Ownership............................................30
5.33 Preemptive Rights...............................................30
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5.34 No Intention to Dispose of VPI Stock............................31
6. REPRESENTATIONS OF VPI AND NEWCOS.......................................31
6.1 Due Organization....................................................32
6.2 Authorization.......................................................32
6.3 Capital Stock of VPI and NEWCOS.....................................32
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................33
6.6 Financial Statements................................................33
6.7 Liabilities and Obligations.........................................34
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................34
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................35
6.12 No Side Agreements.................................................35
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................36
6.15 Completion of Due Diligence........................................38
6.16 Disclosure........................................................38
6.17 Tax Treatment......................................................39
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................40
7.3 Prohibited Activities...............................................41
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................43
7.6 Agreements..........................................................43
7.7 Notification of Certain Matters.....................................43
7.8 Amendment of Schedules..............................................44
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................47
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................49
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................50
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS...................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificates............................................53
9.5 No Material Adverse Effect..........................................53
9.6 STOCKHOLDERS' Release...............................................53
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9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
9.18 Termination of Defined Benefit Plans...............................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
11. INDEMNIFICATION........................................................58
11.1 General Indemnification by the STOCKHOLDERS........................58
11.2 Indemnification by VPI.............................................59
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................62
12. TERMINATION OF AGREEMENT...............................................64
12.1 Termination........................................................64
12.2 Liabilities in Event of Termination................................64
13. NONCOMPETITION.........................................................65
13.1 Prohibited Activities..............................................65
13.2 Damages............................................................67
13.3 Reasonable Restraint...............................................67
13.4 Severability; Reformation..........................................68
13.5 Independent Covenant...............................................68
13.6 Materiality........................................................68
13.7 Limitation.........................................................68
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69
14.1 STOCKHOLDERS.......................................................69
14.2 VPI AND NEWCOS.....................................................70
14.3 Damages............................................................71
14.4 Survival...........................................................71
14.5 Return of Data Submitted...........................................71
15. TRANSFER RESTRICTIONS..................................................71
15.1 Transfer Restrictions..............................................71
15.2 Certain Transfers..................................................72
16. SECURITIES LAW REPRESENTATIONS.........................................72
16.1 Compliance with Law................................................73
16.2 Economic Risk; Sophistication......................................73
17. REGISTRATION RIGHTS....................................................74
17.1 Piggyback Registration Rights......................................74
17.2 Demand Registration Rights.........................................75
17.3 Registration Procedures............................................76
17.4 Underwriting Agreement.............................................76
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17.5 Availability of Rule 144...........................................76
17.6 Registration Rights Indemnification................................76
18. GENERAL................................................................81
18.1 Press Releases.....................................................81
18.2 Cooperation........................................................82
18.3 Successors and Assigns; Third Party Beneficiaries..................82
18.4 Entire Agreement...................................................82
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................83
18.7 Expenses...........................................................83
18.8 Notices............................................................84
18.9 Governing Law......................................................85
18.10 Exercise of Rights and Remedies...................................85
18.11 Time..............................................................85
18.12 Reformation and Severability......................................85
18.13 Remedies Cumulative...............................................86
18.14 Captions..........................................................86
18.15 Amendments and Waivers............................................86
18.16 Incorporation by Reference........................................86
18.17 Defined Terms.....................................................86
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation, ("VPI"), PRISCILLA ACQUISITION CORP., a Delaware corporation REALTY
CONSULTANTS ACQUISITION CORP., a Delaware Corporation (individually, a "NEWCO"
and collectively, the "NEWCOS"), REALTY CONSULTANTS, INC., a Florida
Corporation, and, HOWEY ACQUISITION, INC., a Florida corporation (each, a
"COMPANY" and collectively, the "COMPANIES"), and the stockholders of the
COMPANIES set forth on Annex IV hereof (the "STOCKHOLDERS").
WHEREAS, each NEWCO is a corporation duly organized and existing under
the laws of the State of Delaware, each having been incorporated on March
4, 1998, solely for the purpose of completing the transactions set forth
herein, and each NEWCO is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of each NEWCO and each
COMPANY (which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that (i)
PRISCILLA ACQUISITION CORP. merge with and into HOWEY ACQUISTION, INC. and
(ii) REALTY CONSULTANTS ACQUISITION CORP. merge with and into REALTY
CONSULTANTS, INC., pursuant to this Agreement and the applicable provisions
of the laws of the State of Delaware and the State in which each of the
COMPANIES is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal
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Resorts Management, Inc., a Delaware corporation, Collection of Fine
Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a
Colorado corporation, First Resort Software, Inc., a Colorado corporation,
Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and
O'Leary Company, a Colorado corporation, Jupiter Property Management at
Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc.,
a Hawaii corporation, The Maury People, Inc., a Massachusetts corporation,
Resort Property Management, Inc., a Utah corporation, Telluride Resort
Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises,
Inc., a Georgia corporation, THE Management Company, a Georgia corporation,
and Whistler Chalets Limited, a British Columbia corporation, and their
respective stockholders in order to acquire additional businesses (the
COMPANIES, together with each of the entities with which VPI has entered
into the Other Agreements, are collectively referred to herein as the
"Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Boards of Directors of the
COMPANIES have approved this Agreement as part of the VPI Plan of
Organization in order to transfer the capital stock of the COMPANIES to
VPI;
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGERS
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which each of the COMPANIES is incorporated and will deliver stamped
receipt copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Mergers, (i)
PRISCILLA ACQUISITION CORP. shall be merged with and into HOWEY ACQUISITION
CORP. and (ii) REALTY CONSULTANTS ACQUISITION CORP. shall be merged with and
into REALTY CONSULTANTS, INC., each in accordance with the Articles of Merger,
the separate existence of each NEWCO shall cease and each COMPANY shall be the
surviving party in the Mergers (each COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). Each Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATIONS. At the Effective Time of each Merger:
(i) the Certificate of Incorporation then in effect of each COMPANY
shall be the Certificate of Incorporation of the Surviving Corporation in
such Merger until changed as provided by law;
(ii) the Bylaws of each NEWCO then in effect shall become the Bylaws
of the Surviving Corporation in such Merger; and subsequent to the
Effective Time of such Merger, such Bylaws shall be the Bylaws of the
Surviving Corporation in such Merger until they shall thereafter be duly
amended;
(iii) the Board of Directors of each Surviving Corporation shall
consist of the persons who are, immediately prior to the Effective Time of
the Merger, on the Board of
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Directors of the COMPANY merging into such Surviving Corporation, provided
that the Chief Executive Officer of VPI shall be elected as a director of
each Surviving Corporation effective as of the Effective Time of each
Merger; the Board of Directors of each Surviving Corporation shall hold
office subject to the provisions of the laws of the state in which the
Surviving Corporation is located and of the Certificate of Incorporation
and Bylaws of the Surviving Corporation; and
(iv) the officers of each COMPANY immediately prior to the Effective
Time of each Merger shall continue as the officers of the Surviving
Corporation into which such COMPANY is merged in the same capacity or
capacities, and effective upon the Effective Time of each Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of each Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of each Surviving Corporation, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES,
VPI AND NEWCOS. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the COMPANIES,
VPI and the NEWCOS as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
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(iii) as of the date of this Agreement, the authorized capital stock
of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10)
shares are issued and outstanding.
1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of
the Mergers shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State of Florida. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of each COMPANY shall continue unaffected and unimpaired by the
Mergers and the corporate franchises, existence and rights of each NEWCO shall
be merged with and into the respective COMPANIES, and the COMPANIES, as the
Surviving Corporations, shall be fully vested therewith. At the Effective Time
of the Mergers, the separate existence of each NEWCO shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporations shall
possess all of the rights, privileges, immunities and franchises, of a public,
as well as of a private, nature, and all property, real, personal and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
Taxes, including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to each NEWCO
and each COMPANY shall be taken and deemed to be transferred to, and vested in,
the respective Surviving Corporations without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectively the property of the respective
Surviving Corporations as they were of each NEWCO and each COMPANY; and the
title to any real estate, or interest therein, whether by deed or otherwise,
under the laws of the states of incorporation vested in each respective NEWCO
and COMPANY, shall not revert or be in any way impaired by reason of the
Mergers. Except as otherwise provided herein, each Surviving Corporation shall
thenceforth be responsible and liable for all of the liabilities and obligations
of the respective NEWCO and COMPANY and any claim existing, or action or
proceeding pending, by or against a NEWCO or COMPANY may be prosecuted as if the
Merger involving such NEWCO or COMPANY had not taken place, or the respective
Surviving Corporation may be substituted in their place. Neither the rights of
creditors nor any liens
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upon the property of a NEWCO or COMPANY shall be impaired by the Merger
involving such NEWCO or COMPANY, and all debts, liabilities and duties of such
NEWCO and COMPANY shall attach to the respective Surviving Corporation, and may
be enforced against such Surviving Corporation to the same extent as if said
debts, liabilities and duties had been incurred or contracted by such Surviving
Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of each COMPANY (collectively, "COMPANY Stock") and
(ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time
of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock
of the Surviving Corporations, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock of each COMPANY issued and
outstanding immediately prior to the Effective Time of each respective
Merger, by virtue of such Merger and without any action on the part of the
holder thereof, automatically shall be deemed to represent (l) the right to
receive the number of fully paid and nonassessable shares of VPI Stock set
forth on Annex III hereto with respect to such holder and (2) the right to
receive the amount of cash, subject to adjustment pursuant to Section 3.3
hereof, set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by each COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock of each NEWCO issued and outstanding
immediately prior to the Effective Time of each respective Merger, shall,
by virtue of such Merger and without any action on the part of VPI,
automatically be converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation involved in such
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Merger which shall constitute all of the issued and outstanding shares of
common stock of such Surviving Corporation immediately after the Effective
Time of such Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Mergers, VPI shall have no
class of capital stock (including preferred stock) issued and outstanding other
than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers
and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working
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capital (defined as current assets minus current liabilities, excluding all
customer deposits and similar escrow-type accounts); and (iii) all customer
deposit accounts and other similar escrow-type accounts fully funded in cash or
cash equivalents. To the extent that any condition set forth in clauses (i)
through (iii) is not met, the cash portion of the consideration to be paid to
the STOCKHOLDERS pursuant to this Section 3 shall be reduced by the amount
required to cure any such failure. Indebtedness of each COMPANY in excess of the
amount set forth on Annex III that was incurred in connection with the
acquisition of such COMPANY by the STOCKHOLDERS, or the acquisition of
nonoperating assets by such COMPANY or the STOCKHOLDERS, shall result in a
corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Mergers (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Mergers) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Mergers or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
the NEWCOS hereby covenant and agree to do all things required by Delaware law
and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are
required by the laws of the State of Florida in order to rescind the effects, if
any, of the filing of the Articles of Merger as described in this Section and to
pay all related costs of the COMPANIES directly associated with such rescission.
The taking of the actions described in clauses (i) and (ii) above (the
"Pre-Closing") shall take place on the pre-closing date (the "Pre-Closing Date")
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at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire
Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x) the Articles of
Merger shall have been filed with the appropriate state authorities so that they
shall be or, as of 8:00 a.m. New York City time on the Closing Date, shall
become effective and the Mergers shall thereby be effected, (y) all transactions
contemplated by this Agreement, including the conversion and delivery of shares,
the delivery of a certified check or checks or wire transfer(s) in an amount
equal to the cash portion of the consideration which the STOCKHOLDERS shall be
entitled to receive pursuant to the Mergers referred to in Section 3 hereof
shall occur and (z) the closing with respect to the IPO shall be completed. The
taking of the actions described in the preceding clauses (x), (y) and (z) shall
constitute the closing of the transactions hereunder (the "Closing"), and the
date on which the actions described in the preceding clauses (x), (y) and (z)
occur shall be referred to as the "Closing Date." Except as provided in Sections
8 and 9 hereof with respect to actions to be taken on the Closing Date, during
the period from the Pre-Closing Date to the Closing Date this Agreement may only
be terminated by a party if the underwriting agreement in respect of the IPO is
terminated pursuant to the terms of such agreement. This Agreement shall in any
event terminate if the Closing Date has not occurred within 15 business days of
the Pre-Closing Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.
Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANIES and the STOCKHOLDERS agrees that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 5.23
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hereof shall survive until such time as the limitations period has run for all
Tax periods ended on or prior to the Closing Date, which shall be deemed to be
the Expiration Date for Section 5.23 and (ii) solely for purposes of determining
whether a claim for indemnification under Section 11.1(iii) hereof has been made
on a timely basis, and solely to the extent that in connection with the IPO, VPI
actually incurs liability under the 1933 Act, the 1934 Act or any other federal
or state securities laws as a result of a breach of a representation or warranty
by the COMPANIES or the STOCKHOLDERS, the representations and warranties set
forth herein shall survive until the expiration of any applicable limitations
period, which shall be deemed to be the Expiration Date for such purposes. For
purposes of this Section 5, the term "COMPANY" shall mean and refer to the
COMPANY and all of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and such COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY
taken as a whole (as used herein with respect to such COMPANY, or with respect
to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which each COMPANY is incorporated and contains a list of all
such jurisdictions in which each COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of each COMPANY, as
heretofore made available to VPI, are correct and complete in all material
respects. There are no minutes in the possession of each COMPANY or the
STOCKHOLDERS which have not been made available to VPI, and all of such minutes
are correct and complete in all material respects. Except as
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set forth on Schedule 5.1, the most recent minutes of each COMPANY, which are
dated no earlier than ten business days prior to the date hereof, affirm and
ratify all prior acts after January 1, 1997, of such COMPANY, and of its
officers and directors on behalf of such COMPANY, .
5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority
to enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANIES The authorized capital stock of each
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of each COMPANY have been
duly authorized and validly issued, are fully paid and nonassessable, are owned
of record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by such COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates any of the COMPANIES to issue any
of its capital stock; (ii) neither COMPANY has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (iii) neither the voting stock structure of each COMPANY
nor the relative ownership of shares among any of their respective stockholders
has been altered or changed in contemplation of the Mergers and/or the VPI Plan
of Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants
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or other rights to acquire shares of each COMPANY's stock and the material terms
of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each
COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as
set forth on Schedule 5.6, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and claims of every
kind. Except as set forth on Schedule 5.6, each COMPANY does not presently own,
of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity nor is any COMPANY, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of each COMPANY, including the names of any
entities acquired by each COMPANY (by stock purchase, merger or otherwise) or
owned by each COMPANY or from whom the COMPANIES previously acquired material
assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of any of the
COMPANIES since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of each of
the COMPANIES: the COMPANY's audited (i) Balance Sheets, if any, as of December
31, 1997 and 1996; (ii) Statements of
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Operations, if any, for each of the years in the two-year period ended December
31, 1997 (December 31, 1997 being hereinafter referred to as the "Balance Sheet
Date"); (iii) Statements of Changes in Stockholders' Equity, if any, for each of
the years in the two-year period ended on the Balance Sheet Date; and (iv)
Statements of Cash Flows, if any, for each of the years in the two-year period
ended on the Balance Sheet Date. Except as set forth on Schedule 5.9, such
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 5.9). Except as set forth on
Schedule 5.9, such Balance Sheets as of December 31, 1997 and 1996 present
fairly the financial position of such COMPANY as of the dates indicated thereon,
and such Statements of Operations, Statements of Changes in Stockholders' Equity
and Statements of Cash Flows present fairly the results of operations for the
periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance
Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the
COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of such COMPANY (including all liabilities in excess of $10,000) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements, together with true, correct and
complete copies of such documents. Except as set forth on Schedule 5.10, since
the Balance Sheet Date neither COMPANY has incurred any material liabilities of
any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business. Each of the COMPANIES has also delivered to VPI on
Schedule 5.10, in the case of those contingent liabilities related to pending
or, to the knowledge of the COMPANIES, threatened litigation, or other
liabilities which are not fixed or are being contested, the following
information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
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(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of such COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate
list of all receivables obtained subsequent to the Balance Sheet Date up to the
Pre-Closing Date and (y) an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the
extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a
writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
each COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of such COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses,
franchises, permits and other governmental authorizations that are necessary for
the operation of the business of such COMPANY as now conducted, and such COMPANY
has delivered to VPI an accurate list and summary description (which is set
forth on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates,
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trademarks, trade names, patents, patent applications and copyrights owned or
held by such COMPANY (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). The licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and
such COMPANY has not received any notice that any governmental authority intends
to cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. Each of the COMPANIES has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 and is not in
violation of any of the foregoing, except for inadvertent, immaterial
noncompliance with such requirements, standards, criteria and conditions
(provided that any such noncompliance shall be deemed a breach of this Section
5.12 for purposes of Section 11 hereof). Except as specifically provided on
Schedule 5.12, the transactions contemplated by this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to each COMPANY by, any such licenses, franchises, permits
or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each
of the COMPANIES has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) each COMPANY has obtained and adhered to all permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list
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of all of which permits and approvals is set forth on Schedule 5.13, and has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by each
COMPANY where Hazardous Wastes or Hazardous Substances have been treated,
stored, disposed of or otherwise handled; (iii) there have been no releases or
threats of releases (as defined in Environmental Laws) at, from, in or on any
property owned or operated by such COMPANY except as permitted by Environmental
Laws; (iv) such COMPANY knows of no on-site or off-site location to which such
COMPANY has transported or disposed of Hazardous Wastes and Hazardous Substances
or arranged for the transportation of Hazardous Wastes and Hazardous Substances,
which site is the subject of any federal, state, local or foreign enforcement
action or any other investigation which could lead to any claim against any of
the COMPANIES, VPI or the NEWCOS for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any claim under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; and (v) such COMPANY has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of such COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
such COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by such COMPANY with a value
in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of such COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that
are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule
5.14, (i) all
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personal property used by each COMPANY in its business is either owned by such
COMPANY or leased by such COMPANY pursuant to a lease included on Schedule 5.14,
(ii) all of the personal property listed on Schedule 5.14 is in good working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on Schedule 5.14 are in full force and effect and, assuming
due execution and delivery thereof by the parties thereto other than such
COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and
binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of
such COMPANY or the STOCKHOLDERS, the other parties (and their successors)
thereto in accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
such COMPANY's annual revenues as of the Balance Sheet Date. Except to the
extent set forth on Schedule 5.15, none of any COMPANY's significant customers
(or persons or entities that are sources of a significant number of customers)
have canceled or substantially reduced or, to the knowledge of any COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by such COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on
Schedule 5.16 all material contracts, commitments and similar agreements to
which such COMPANY currently is a party or by which it or any of its properties
are bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. Each COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule
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5.16 and no notice of default under any such contract or agreement has been
received. Each COMPANY has also indicated on Schedule 5.16 a summary description
of all pending plans or projects involving the opening of new operations,
expansion of existing operations, and the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $25,000 by
such COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by each COMPANY in the conduct of its business. Each COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of each COMPANY with respect to real property owned by such COMPANY.
Each COMPANY has also delivered to VPI an accurate list of real property
leased by such COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by such COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by the STOCKHOLDERS or
business or personal
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affiliates of such COMPANY or the STOCKHOLDERS. Except as set forth on Schedule
5.17, all of such leases included on Schedule 5.17 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than such COMPANY, the STOCKHOLDERS and their respective affiliates, constitute
valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the
knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by such COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that such COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Closing Date. No insurance carried by such
COMPANY has ever been canceled by the insurer and such COMPANY has never been
unable to obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of such COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
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Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or
subject to (and none of their respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of any
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign
to establish such representation is in progress and (iv) there is no pending or,
to the best of each COMPANY's knowledge, threatened labor dispute involving any
COMPANY and any group of its employees nor has any COMPANY experienced any labor
interruptions over the past three years. Each COMPANY believes its relationship
with employees to be good.
Each COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of such COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20,
neither COMPANY sponsors, maintains or contributes to any plan program, fund or
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arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section (3)(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) nor has any COMPANY any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). Neither COMPANY has sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is
any COMPANY required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of such COMPANY's employees.
All accrued contribution obligations of each COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of such COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of each COMPANY that are currently maintained or contributed to by such
COMPANY or cover employees or former employees of such COMPANY listed on
Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not
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limited to, actuarial reports, audit reports, Forms 5500, summary plan
descriptions or Tax Returns) have been timely filed or distributed, and copies
thereof for the three most recent plan years are included as part of Schedule
5.21 hereof. No such plan listed on Schedule 5.20, nor any COMPANY, nor any
STOCKHOLDER with respect to any such plan or any COMPANY, has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and each COMPANY has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS further
represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) each COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) each COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which any COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than a COMPANY that is, or at any time
was, a member of a
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"controlled group" (as defined in Section 412(n)(6)(B) of the Code) that
includes such COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Each COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations,
and is not in violation of any of the foregoing.
5.23 TAXES.
(a) Each COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANIES or their respective officers or
employees responsible for maintaining the financial records of such COMPANY
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 5.23, there are no
examinations in
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progress (and the COMPANIES and their respective employees are not aware of any
proposed examinations) or claims against any COMPANY (including liens against
the COMPANY's assets) for federal, state, local and other Taxes (including
penalties and interest) for any period or periods prior to and including the
Balance Sheet Date and no notice of any claim for Taxes, whether pending or
threatened, has been received. Except as set forth on Schedule 5.23, neither any
COMPANY nor the STOCKHOLDERS have entered into an agreement or waiver or have
been requested to enter into an agreement or waiver extending any statute of
limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by any COMPANY, any member of an affiliated or
consolidated group which includes or included any of the COMPANIES, or with
respect to any payment made or deemed made by any COMPANY, required to be paid
by the date hereof, have been paid. All amounts required to be deposited,
withheld or collected under applicable federal, state, local or other Tax laws
and regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, neither COMPANY has been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). Neither COMPANY is a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
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(e) Except as set forth on Schedule 5.23, neither COMPANY has (i)
assumed or is liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which any COMPANY
or such person or entity was the surviving corporation or a consolidation) or
(ii) indemnified any other person or entity or otherwise agreed to pay on behalf
of any other person or entity any Taxes arising from or which may be asserted on
the basis of any Tax treatment adopted with respect to all or any aspect of such
business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of each COMPANY for its last three (3) fiscal years or
such shorter period of time as such COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) Each COMPANY has a taxable year ended on the date set forth as
such on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, each COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) Neither COMPANY is an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) Neither COMPANY has filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code agreed to have section 341(f)(2)
of the Code apply to any
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disposition of any subsection (f) asset (as defined in section 341(f) of the
Code) owned by such COMPANY.
5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter
Document. Neither COMPANY or, to the knowledge of either COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of each COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.24, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect, and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.24, none of the
Material Documents prohibits the use or publication by any COMPANY, VPI or any
NEWCO of the name of any other party to such Material Document, and none of the
Material Documents prohibits or restricts either COMPANY from freely providing
services to any other customer or potential customer of such COMPANY, VPI, the
NEWCOS or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither
COMPANY is now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
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(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of any COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of any
COMPANY;
(iii) any change in the authorized capital of any COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANIES to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of any COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by any COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of any COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of any COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to any COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation
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(provided that any such cancellation or agreement to cancel shall be deemed
a breach of this Section 5.26 for purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of any COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of any COMPANY's business;
(xi) any waiver of any material rights or claims of any COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which any COMPANY is a party;
(xiii) any transaction by any COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by any COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has
delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as
of the date of the Agreement of:
(i) the name of each financial institution in which each COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held; (iii) the type
of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from each COMPANY and a description of the terms of such power.
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5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of the COMPANIES and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of each
of the COMPANIES and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of each
COMPANY, enforceable against such COMPANY in accordance with its terms except as
may be limited by (i) bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally or (ii) the discretionary power of a court exercising equity
jurisdiction. The individual signing this Agreement on behalf of each COMPANY
has the legal power, authority and capacity to bind such COMPANY to the terms of
this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause any COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of each COMPANY
for the time periods with respect to which such information was requested. Each
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which any COMPANY is a party, or to which their respective properties are
subject, or (ii) any other fact or circumstance regarding any COMPANY (which
fact or circumstance was, or should reasonably, after due inquiry, have been
known to any COMPANY) that is not disclosed pursuant to this Agreement or to
such delivered documents.
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(b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree
(i) that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to any COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with any COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither
COMPANY has, between the Balance Sheet Date and the date hereof, taken any of
the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such
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STOCKHOLDER has or may have had on the date hereof other than rights of the
STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
6. REPRESENTATIONS OF VPI AND NEWCOS
VPI and the NEWCOS jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and, subject to Section 7.8 hereof, shall be true at the
time of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
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6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS
(the "VPI Charter Documents") are all attached hereto as Annex II. The VPI
Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS
executing this Agreement have the authority to enter into and bind VPI and the
NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full
legal right, power and authority to enter into and perform this Agreement and
the Mergers, and all required approvals of the shareholders and board of
directors of VPI and NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date,
the authorized capital stock of VPI and the NEWCOS is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of each NEWCO are owned by VPI and all of the issued and
outstanding shares of the capital stock of VPI are owned by the persons set
forth on Annex V hereof, and further are owned, in each case, free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. Upon consummation of the IPO, the number
of outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and each
NEWCO have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by VPI and the persons set
forth on Annex V, respectively, and further, such shares were offered, issued,
sold and delivered by VPI and the NEWCOS in compliance with all applicable state
and federal laws concerning the issuance of securities. Further, none of such
shares
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was issued in violation of the preemptive rights of any past or present
stockholder of VPI or the NEWCOS.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or the NEWCOS to
issue any of their respective authorized but unissued capital stock; and (ii)
neither VPI nor NEWCO has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof.
Schedule 6.4 also includes complete and accurate copies of all stock option or
stock purchase plans, including a list, accurate as of the date hereof, of all
outstanding options, warrants or other rights to acquire shares of the stock of
VPI.
6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries
except for the NEWCOS and each of the companies identified as "NEWCO" in each of
the Other Agreements. Except as set forth in the preceding sentence, neither VPI
nor any NEWCO presently owns, of record or beneficially, or controls, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity nor
is VPI or any NEWCO, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
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6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and the NEWCOS have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or
regulation, or of any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them; and except to the extent set forth on
Schedule 6.8, there are no material claims, actions, suits or proceedings,
pending or, to the knowledge of VPI or the NEWCOS, threatened, against or
affecting VPI or the NEWCOS, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over either of them and no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received. VPI and the NEWCOS have conducted and are conducting their
respective businesses in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and are not in violation of any of the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI
Charter Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any
other party thereto, is in default under any lease, instrument, agreement,
license or permit to which VPI or any NEWCO is a party, or by which VPI or any
NEWCO, or any of their respective properties, are bound (collectively, the "VPI
Documents"); and (a) the rights and benefits of VPI and the NEWCOS under the VPI
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any violation or breach or constitute a default under, any of the
terms or provisions of the VPI Documents or the VPI Charter Documents. Except
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as set forth on Schedule 6.9, none of the VPI Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCOS and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and the NEWCOS and this Agreement has been duly and validly authorized by
all necessary corporate action and is a legal, valid and binding obligation of
VPI and the NEWCOS, enforceable against each of VPI and the NEWCOS in accordance
with its terms except as limited by bankruptcy, insolvency or other similar laws
of general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and the NEWCOS have the legal power, authority and capacity to bind such
parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will
enter into any agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies or VPI other than the Other Agreements
and the agreements specifically contemplated by each of the Other Agreements,
including the employment agreements referred to therein, and none of
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VPI, the NEWCOS, , their equity owners or affiliates have received any cash
compensation or payments in connection with this transaction except for
reimbursement of out-of-pocket expenses which are necessary or appropriate to
this transaction.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any
NEWCO has conducted any operations or business since inception other than
activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO
owns or has at any time owned any real property or any material personal
property or is a party to any other agreement, except as listed on Schedule 6.13
and except that VPI is a party to the Other Agreements and the agreements
contemplated thereby and to such agreements as will be filed as Exhibits to the
Registration Statement.
6.14 TAXES.
(a) VPI and the NEWCOS have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or the NEWCOS or their officers or employees
responsible for maintaining the financial records of VPI and the NEWCOS
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 6.14, there are no
examinations in progress (and VPI and the NEWCOS and their employees are not
aware of any proposed examinations) or claims against VPI or the NEWCOS
(including liens against assets of VPI or the NEWCOS) for federal, state, local
and other Taxes (including penalties and interest) for any period or periods
prior to and including the date hereof and no notice of any claim for Taxes,
whether pending or threatened, has been received. Except as set forth on
Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
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(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or
consolidated group which includes or included VPI or the NEWCOs, or with respect
to any payment made or deemed made by VPI or the NEWCOS, required to be paid by
the date hereof, have been paid. All amounts required to be deposited, withheld
or collected under applicable federal, state, local or other Tax laws and
regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the financial
statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
has been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to
or bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
(i) has assumed or is liable for any Taxes of any other person or entity,
including any predecessor corporation or partnership, as a result of any
purchase of assets or other business acquisition transaction (other than a
merger in which VPI or the NEWCOS or such person or entity was the surviving
corporation or a consolidation) and (ii) has indemnified any other person or
entity or otherwise agreed to pay on behalf of any other person or entity any
Taxes arising from or which may be asserted on the basis of any Tax treatment
adopted with respect to all or any aspect of such business acquisition
transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and the NEWCOS for their last three (3) fiscal
years or such shorter period of
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time as VPI or the NEWCOS shall have existed, (ii) any Tax examinations
commenced or closed or outstanding during their three (3) most recent fiscal
years, and (iii) currently outstanding extensions of statutory limitations, are
attached hereto as Schedule 6.14.
(g) VPI and the NEWCOS have a taxable year ended on the date set forth
as such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor the
NEWCOS' methods of accounting have changed in the past five years. No adjustment
to taxable income by reason of a change of accounting method is required in
respect of any period for which the statute of limitations has not expired.
(i) Neither VPI nor the NEWCOS is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on
Schedule 6.14.
(k) Neither VPI nor the NEWCOS has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANIES as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
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6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDERS set forth in the letter of representations
(referenced in the tax opinion letter to be delivered pursuant to Section 8.4
hereof) are true and correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, each COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of such COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of such COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. Each COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI, the
NEWCOS, the STOCKHOLDERS and the COMPANIES shall treat all information obtained
in connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of each COMPANY access to
all of VPI's and the NEWCOS'
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sites, properties, books and records and all due diligence, agreements,
documents and information of or concerning the Founding Companies and will
furnish each COMPANY with such additional financial and operating data and other
information as to the business and properties of VPI and the NEWCOS as each
COMPANY may from time to time reasonably request. VPI and the NEWCOS will
cooperate with each COMPANY, its representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to each
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. Each COMPANY will cause all information obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with such COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental
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authorities, except for inadvertent, immaterial noncompliance with any such
permit, law, rule, regulation or order (provided that any such
noncompliance shall be deemed a breach of this Section 7.2 for purposes of
Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, neither COMPANY shall, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANIES to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of such COMPANY, provided
that such COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of such COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANIES,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or
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commitment of any kind with respect to the COMPANIES' capital stock or the
purchase or other reacquisition of any outstanding shares for treasury
stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, any COMPANY or a merger, consolidation or business
combination of any COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide VPI on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between such COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between each COMPANY and any STOCKHOLDER not reflecting fair market terms,
except such existing agreements as are set forth on Schedule 9.7. Such
termination agreements are listed on Schedule 7.6 and copies thereof are
attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY
shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any
event the occurrence or
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non-occurrence of which would be likely to cause any representation or warranty
of any COMPANY or any STOCKHOLDERS contained herein to be untrue or inaccurate
in any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or any COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI and the NEWCOS shall give prompt notice to the COMPANIES of (i)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be likely to cause any representation or warranty of VPI or the
NEWCOS contained herein to be untrue or inaccurate in any material respect at or
prior to the Pre-Closing and (ii) any material failure of VPI or the NEWCOS to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 7.7 that is not accompanied by a proposed amendment or supplement to a
schedule pursuant to Section 7.8 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to Section 7.8, (ii) modify the
conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by any COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANIES consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or the NEWCOS that constitutes or reflects an event or occurrence that would
have a Material Adverse Effect may be made unless a majority of the Founding
Companies consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules
hereto shall be deemed to be the schedules as amended or supplemented pursuant
to this Section 7.8. In the event that one of the Other Founding Companies seeks
to amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANIES notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANIES do not give their consent, the
COMPANIES collectively may terminate this Agreement pursuant to Section 12.l(iv)
hereof. In the event that the COMPANIES seek to amend or supplement a Schedule
pursuant to this Section 7.8, and VPI and a majority of the Other Founding
Companies do not consent to such amendment or supplement, this Agreement shall
be deemed terminated by mutual consent as set forth in Section 12.1(i) hereof.
In the event that VPI or any NEWCO seeks to amend or supplement a Schedule
pursuant to this Section 7.8 and a majority of the Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8. No amendment of or
supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement. For purposes of this
Section 7.8, consent to an amendment or supplement to a schedule pursuant to
Section 7.8 of this Agreement or one of the Other Agreements shall have been
deemed given by VPI or any Founding Company if no response is received within 24
hours following receipt of notice of such amendment or supplement (or sooner if
required by the circumstances under which such consent is requested and so
requested in the notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and
the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the
Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with VPI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS
agree promptly to advise VPI if, at any time during the period in which a
prospectus relating to the offering is required to be delivered under the 1933
Act, any information contained in the prospectus concerning any COMPANY or the
STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. VPI will give the
COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to
review and comment on a substantially final draft of the Registration Statement
prior to filing, and with respect to all amendments thereto, VPI will give the
COMPANIES and STOCKHOLDERS an opportunity to review and comment on those
portions of such amendments that relate to the COMPANIES. Insofar as the
information contained in the Registration Statement relates solely to the
COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration
Statement each COMPANY represents and warrants as to such information with
respect to itself, and each STOCKHOLDER represents and warrants, as to such
information with respect to the COMPANIES and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading and that the STOCKHOLDERS and the COMPANIES have had the
opportunity to review and approve such information. If, prior to the 25th day
after the date of the final prospectus of VPI utilized in connection with the
IPO, the COMPANIES
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANIES or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANIES and
the STOCKHOLDERS shall immediately give notice of such fact or circumstance to
VPI. However, subject to the provisions of Section 7.8, such notification shall
not relieve either the COMPANIES or the STOCKHOLDERS of their respective
obligations under this Agreement, and, subject to the provisions of Section 7.8,
at the sole option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANIES, or on behalf of the COMPANIES and of
STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on
the Closing Date, contained in this Agreement (including the Schedules and
Annexes hereto) shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANIES as of the end of all fiscal
quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANIES for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANIES or the results of its
operations from the financial statements as of the Balance Sheet Date. For the
fiscal quarter ending March 31, 1998, such financial statements shall be
delivered to VPI on or before April 21, 1998, unless the Closing Date shall have
occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the COMPANIES for the periods indicated thereon and shall be for
such dates and time periods as required by Regulation S-X under the 1933 Act and
the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES
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The obligations of STOCKHOLDERS and the COMPANIES with respect to actions
to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on
or prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and the NEWCOS contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and the NEWCOS contained in Section 6 shall be true and correct in all
material respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and the NEWCOS on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Mergers or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANIES as a result of which
the management of the COMPANIES deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have
delivered to the COMPANIES a certificate, dated as of a date no later than ten
days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of
State and in each state in which VPI or the NEWCOS are authorized to do
business, showing that each of VPI and the NEWCOS is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for VPI and the NEWCOS, respectively, for all periods prior to the
Pre-Closing Date have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or the NEWCOS which would constitute a Material
Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material
loss or damages to any of its properties or assets, whether or not covered by
insurance, which change, loss or damage materially affects or impairs the
ability of VPI and/or the NEWCOS to conduct their respective business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a
certificate or certificates, dated the Pre-Closing Date and signed by the
secretary of VPI and of each NEWCO, certifying the truth and correctness of
attached copies of VPI's and the NEWCOS' respective Certificates of
Incorporation (including amendments thereto), Bylaws (including amendments
thereto), and resolutions of the boards of directors and, if required, the
stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into
this Agreement and the consummation of the transactions contemplated hereby.
Such certificate or certificates also shall be addressed to the Underwriters and
copies thereof shall be delivered to the Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS
The obligations of VPI and the NEWCOS with respect to actions to be taken
on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to
the Pre-Closing Date of all of the following conditions. The obligations of VPI
and the NEWCOS with respect to actions to be taken on the Closing Date are
subject to the satisfaction or waiver on or prior to the Closing Date of the
conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the
Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2,
9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied
shall be deemed to have been waived, except that no such waiver shall be deemed
to affect the survival of the representations and warranties of the COMPANY
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
each COMPANY, certifying the truth and correctness of attached copies of each
COMPANY's Charter Documents and resolutions of the board of directors and the
STOCKHOLDERS approving each COMPANY's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate also
shall be addressed to the Underwriters and a copy thereof shall be delivered to
the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to any COMPANY which would constitute a Material Adverse
Effect, and neither COMPANY shall have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of any COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i)
any and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANIES and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between any of the COMPANIES and the
STOCKHOLDERS not reflecting fair market terms shall have been canceled effective
prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI
certificates, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in each
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which each COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for each COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of each COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the
incremental cost of having VPI so named as an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall
have signed an agreement with the Underwriters, in form and substance identical
to agreements signed by the Other Founding Companies and the Founding
Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS
covenant to hold all of the VPI Stock acquired hereunder for a period of at
least 180 days after the Closing Date except for transfers to immediate family
members, and trusts for the benefit of STOCKHOLDERS and/or immediate family
members, who agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all personal guarantees, indemnities or
liabilities for any indebtedness, and from any and all pledges of assets that
they pledged to secure such indebtedness, for the benefit of the COMPANIES, with
all such guarantees, indemnifications and liabilities on indebtedness being
assumed by VPI. In the event that VPI cannot obtain such releases from the
lenders of any such guaranteed indebtedness on the Closing Date, VPI shall repay
all indebtedness of the COMPANIES relating to such personal guarantees on the
Closing Date. VPI shall indemnify and hold harmless the STOCKHOLDERS from the
payment of any guaranties on any indebtedness or contractual obligations that
the STOCKHOLDERS had incurred prior to the Pre-Closing Date provided that such
indebtedness or
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obligations are related to the business of the COMPANIES as being conducted at
the Pre-Closing Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANIES shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
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(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANIES, as defined in Section 1563 of the Code, to, provide to each of
the other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide explanation
of any documents or information so provided. Subject to the preceding
sentence, each party required to file Tax Returns pursuant to this
Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the transaction
as an exchange pursuant to which gain is not recognized under Section
351(a) of the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Charles O.
Howey to serve as a director of VPI effective as of the Closing Date. Such
designated person also shall be a member of the Executive Committee of the Board
of Directors effective as of the Closing Date, to serve subject to and in
accordance with the Certificate of Incorporation and Bylaws of VPI.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at any COMPANY until such
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time as VPI is able to replace such plan with a plan that is applicable to VPI
and all of its then existing subsidiaries. VPI shall have no obligation to
provide replacement plans that have the same terms and provisions as the
existing plans, except as may be required by ERISA or other applicable law;
provided, however, that any new health insurance plan shall provide for coverage
for preexisting conditions for employees of each COMPANY who were covered by
such COMPANY's health insurance plan immediately prior to the Closing Date or as
otherwise required by law.
10.6 MAINTENANCE OF BOOKS. VPI will cause such COMPANY (a) to maintain the
books and records of each COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, the NEWCOS and each COMPANY (as the Surviving Corporations)
at all times, from and after the date of this Agreement until the Expiration
Date, from and against all losses, claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving
Corporations) as a result of or arising
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from (i) any breach of the representations and warranties of the STOCKHOLDERS or
each COMPANY set forth herein or on the Schedules or certificates delivered in
connection herewith, (ii) any breach of any agreement on the part of the
STOCKHOLDERS or the COMPANIES under this Agreement, (iii) any liability under
the 1933 Act, the 1934 Act or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating solely to any COMPANY or
the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANIES or the
STOCKHOLDERS, contained in the Registration Statement or any prospectus forming
a part thereof, or any amendment thereof or supplement thereto, or arising out
of or based upon any omission or alleged omission to state therein a material
fact relating solely to the COMPANIES or the STOCKHOLDERS required to be stated
therein or necessary to make the statements therein not misleading, or (iv) the
matters described on Schedule 11.1(iv) (relating to specifically identified
matters such as ongoing claims and/or litigation), which Schedule shall be
prepared by VPI, provided, however, (A) that in the case of any indemnity
arising pursuant to clause (iii) such indemnity shall not inure to the benefit
of VPI, the NEWCOS, the COMPANIES or the Surviving Corporations to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to
VPI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
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STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS
of their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or the NEWCOS under this Agreement, (iii) any liabilities which the
STOCKHOLDERS may incur due to VPI's or the NEWCOS' failure to be responsible for
the liabilities and obligations of the COMPANIES as provided in Section 1 hereof
(except to the extent that VPI or the NEWCOS have claims against the
STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to VPI, the
NEWCOS or any of the Other Founding Companies contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, or arising out of or based upon
any omission or alleged omission to state therein a material fact relating to
VPI or the NEWCOS or any of the Other Founding Companies required to be stated
therein or necessary to make the statements therein not misleading, or (v) the
matters described on Schedule 11.2(v) (relating to specifically identified
matters including the release of the guarantees pursuant to Section 10.1
hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith
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and diligently, provided that the Indemnifying Party shall not settle any
criminal proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel.
Further, absent a conflict, the Indemnified Party may select counsel and have
such counsel participate in such matter at the sole cost of the Indemnified
Party. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested in writing by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
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defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving
Corporations and the other persons or entities indemnified pursuant to Section
11.1 shall not assert any claim for indemnification hereunder against the
STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of
all claims which such persons may have against the STOCKHOLDERS shall exceed
2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of
the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"),
provided, however, that VPI, the NEWCOS, the Surviving Corporations and the
other persons or entities indemnified pursuant to Section 11.1 may assert and
shall be indemnified for any claim under Section 11.l(iv) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any
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such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for
indemnification hereunder against VPI or the NEWCOS until such time as, and
solely to the extent that, the aggregate of all claims which the STOCKHOLDERS
may have against VPI and the NEWCOS shall exceed $50,000, provided, however,
that the STOCKHOLDERS and the other persons or entities indemnified pursuant to
Section 11.2 may assert and shall be indemnified for any claim under Section
11.2(v) at any time, regardless of whether the aggregate of all claims which
such persons may have against any of VPI and the NEWCOS exceeds $50,000, it
being understood that the amount of any such claim under Section 11.2(v) shall
not be counted towards such $50,000 amount. No person shall be entitled to
indemnification under this Section 11 if and to the extent that: (a) such
person's claim for indemnification is directly or indirectly related to a breach
by such person of any representation, warranty, covenant or other agreement set
forth in this Agreement; or (b) such person receives a tax benefit as a result
of the claim or loss for which indemnification is sought (i.e., the amount of
such claim or loss for which indemnification is provided hereunder shall be
reduced by the amount of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS
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pursuant to this Section 11 shall be deemed to be a reduction in the
consideration received by the STOCKHOLDERS pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANIES;
(ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or the COMPANIES, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs
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and out of pocket expenses relating to the transactions contemplated hereby. No
party hereto shall be liable to any other party if the Agreement is terminated
under Sections 12.1(i), (ii) (except as set forth therein), (iv) or (v),
provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement in
the event that this Agreement is terminated by VPI pursuant to Section
12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial resort property management, rental or
sales business or hotel management business in direct competition with VPI
or any of its subsidiaries, within 100 miles of the locations in which VPI
or the COMPANIES, or any of their subsidiaries, conduct a noncommercial
resort property management, rental or sales business or hotel management
business (the "Territory");
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(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of any COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial resort property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial resort property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that such COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
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Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a
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violation of this Section 13 if VPI (including VPI's subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities, or (iii) location, as applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree
that the covenants in this Section 13 are a material and substantial part of
this transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or any COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
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agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANIES, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANIES', the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
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herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on
their ability to disseminate confidential information with respect to each
COMPANY.
14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the COMPANIES, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the COMPANIES' businesses. VPI and
the NEWCOS agree that, prior to the Closing, or if the transactions contemplated
by this Agreement are not consummated, they will not use, except in connection
with the transactions contemplated hereby, or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except disclosures (a) to authorized
representatives of the COMPANIES, (b) to counsel and other advisors; provided,
however, that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 14.2 and (c) to the Other Founding Companies and
their representatives pursuant to Section 7.1(a), unless (i) such information
becomes known to the public generally through no fault of VPI or any NEWCOS,
(ii) disclosure is required by law or the order of any governmental authority
under color of law; provided, however, that prior to disclosing any information
pursuant to this clause (ii), VPI and the NEWCOS shall, unless otherwise
required by law or such order, give two days' prior written notice thereof to
the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the
STOCKHOLDERS with the opportunity within such two-day period to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. VPI will disclose confidential information relating to the
COMPANIES to the Other Founding Companies only if such companies have agreed, in
advance, to treat such information as confidential. In the event of a breach or
threatened breach by VPI or the NEWCOS of the provisions of this Section, the
COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining
VPI and the NEWCOS from
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disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANIES and the STOCKHOLDERS from
pursuing any other available remedy for as such breach or threatened breach,
including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANIES of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
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EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and
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therefore may not be resold without compliance with the 1933 Act. The VPI Stock
to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired
solely for their own respective accounts, for investment purposes only, and with
no present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANIES, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
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17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders on a pro rata basis based on the number
of shares proposed to be
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registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
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17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby
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does, indemnify and hold harmless each seller of any Registrable Securities
covered by such registration statement, its directors, officers, agents,
attorneys, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to which such seller
or any such director or officer or underwriter or controlling Person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and VPI will reimburse such seller and each
such director, officer, underwriter and controlling Person for any expenses
(including but not limited to reasonable attorneys' fees) reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that VPI shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to VPI by such seller expressly
for use in the preparation thereof, and provided further that VPI shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the 1933 Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final
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prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in
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such final prospectus. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any underwriter, VPI or
any such director, officer or controlling Person and shall survive the transfer
of such securities by such seller. In no event shall the liability of any
selling holder of Registrable Securities under this Section 17.6(b) be greater
in amount than the dollar amount of the proceeds received by such holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
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(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
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media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANIES and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and NEWCOS shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of each COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement, including but
not limited to any letter of intent entered into by any of the parties hereto.
This Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI, acting through their respective
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officers or trustees, duly authorized by their respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer &
Feld, L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this
Agreement, including the fees and expenses of accountants and legal counsel to
the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the
transactions contemplated by this Agreement are consummated, VPI shall reimburse
the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the
closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all
sales, use, transfer, real property transfer, recording, gains, stock transfer
and other similar taxes and fees ("Transfer Taxes") imposed in
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connection with the Mergers, other than Transfer Taxes, if any, imposed by the
State of Delaware. Each STOCKHOLDER shall file all necessary documentation and
Tax Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER
acknowledges that he or she, and not the COMPANIES or VPI, shall pay all taxes
due upon receipt of the consideration payable pursuant to Section 3 hereof, and
shall assume all tax risks and liabilities of such STOCKHOLDER in connection
with the transactions contemplated hereby; provided, however, that the foregoing
shall not in any way prejudice the ability of the STOCKHOLDERS and the COMPANIES
to rely upon the opinions contained in the tax opinion letter referenced in
Annex VI. VPI shall bear the expenses of any filing under the Hart-Scott Rodino
Anti-Trust Improvements Act of 1976 (the "HSR Act") in connection with the
transaction contemplated by this Agreement, provided that no filing under the
HSR Act shall be made in connection with the transaction contemplated hereunder
unless such filing is determined to be necessary in the opinion of counsel to
VPI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or the NEWCOS, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
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(c) If to the COMPANIES, addressed to it at:
Howey Acquisition, Inc.
Realty Consultants, Inc.
22333 Allen
Woodhaven, Michigan 48183
Facsimile no.: (313) 676-8308
Attention: Charles O. Howey
and marked "Personal and Confidential"
with copies to:
Raymond & Prokop, P.C.
2000 Town Center
Suite 2400
Southfield, MI 48075
Facsimile no.: (248) 357-2720
Attention: R. Peter Prokop
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining
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provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Mergers. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Mergers and each future holder of
such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means any COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean the NEWCOS and each of the other
Delaware companies wholly-owned by VPI prior to the Closing Date.
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"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual. "Agreement" has the meaning set forth in the first paragraph
hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph
of this Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Mergers shall mean the time as of which the Mergers
become effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
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"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Mergers" means the mergers of (i) PRISCILLA ACQUISITION CORP. with and
into HOWEY ACQUISITION, INC. and (ii) REALTY CONSULTANTS ACQUISITION CORP. with
and into REALTY CONSULANT, INC., pursuant to this Agreement and the applicable
provisions of the laws of the State of Delaware and other applicable state laws.
"NEWCO" or "NEWCOS"has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of each
respective NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANIES.
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"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANIES and any affiliated, combined,
consolidated, unitary or similar group of which any COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
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"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporations" shall mean each of the COMPANIES as the surviving
parties in the Mergers.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
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[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
PRISCILLA ACQUISITION CORP.
REALTY CONSULTANTS ACQUISITION CORP.
By:/s/ Leonard Potter
----------------------------------
Leonard Potter
Vice President
HOWEY ACQUISITION, INC.
REALTY CONSULTANTS, INC.
By:/s/ Charles O. Howey
----------------------------------
Name: Charles O. Howey
---------------------------
Title: President
--------------------------
STOCKHOLDERS:
/s/ Charles O. Howey
- -----------------------------------------------
Charles O. Howey
As trustee U/T/A dated March 9, 1979, as
amended, of Charles O. Howey, Revocable
Trust
/s/ Dolores C. Howey
- -----------------------------------------------
Dolores C. Howey
As trustee U/T/A dated March 9, 1979, as
amended, of Dolores C. Howey, Revocable
Trust
/s/ Paul N. Howey
- -----------------------------------------------
Paul N. Howey
As co-trustee U/T/A dated December 19,
1994, of Charles O. Howey Irrevocable Trust
f/b/o John K. Howey
/s/ John K. Howey
- -----------------------------------------------
John K. Howey
As co-trustee U/T/A dated December 19,
1994, of Charles O. Howey Irrevocable Trust
f/b/o Paul N. Howey
As trustee U/T/A dated December 19, 1994,
of Charles O. Howey Irrevocable Trust f/b/o
Charles O. Howey, Jr.
As trustee U/T/A dated December 19, 1994,
<PAGE>
of Charles O. Howey Irrevocable Trust f/b/o
Robert J. Howey
As trustee U/T/A dated December 19, 1994,
of Charles O. Howey Irrevocable Trust f/b/o
Sarah A. Howey
As trustee U/T/A dated December 19, 1994,
of Charles O. Howey Irrevocable Trust f/b/o
Michelle A. Fry
As trustee U/T/A dated December 19, 1994,
of Charles O. Howey Irrevocable Trust f/b/o
Beth A. Dixon
/s/ Allen Williams
- -----------------------------------------------
Allen Williams
/s/ Charles O. Howey
- -----------------------------------------------
Charles O. Howey
EXHIBIT 2.10
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
RPM ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
RESORT PROPERTY MANAGEMENT, INC.
and
the STOCKHOLDERS named herein
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER.................................................................3
1.1 Delivery and Filing of Articles of Merger..............................3
1.2 Effective Time of the Merger...........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors
of Surviving Corporation .............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO ...............................................4
1.5 Effect of Merger.......................................................4
2. CONVERSION OF STOCK........................................................5
2.1 Manner of Conversion...................................................5
3. DELIVERY OF MERGER CONSIDERATION...........................................6
3.1 Delivery of VPI Stock and Cash.........................................7
3.2 Delivery of COMPANY Stock..............................................7
3.3 Balance Sheet Test.....................................................7
4. CLOSING....................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.................9
(A) Representations and Warranties of COMPANY and STOCKHOLDERS.............9
5.1 Due Organization....................................................9
5.2 Authority..........................................................10
5.3 Capital Stock of the COMPANY.......................................10
5.4 Transactions in Capital Stock......................................11
5.5 No Bonus Shares....................................................11
5.6 Subsidiaries.......................................................11
5.7 Predecessor Status; etc............................................12
5.8 Spin-off by the COMPANY............................................12
5.9 Financial Statements...............................................12
5.10 Liabilities and Obligations.......................................13
5.11 Accounts and Notes Receivable.....................................13
5.12 Permits and Intangibles...........................................14
5.13 Environmental Matters.............................................15
5.14 Personal Property.................................................16
5.15 Significant Customers.............................................16
5.16 Material Contracts and Commitments................................17
5.17 Real Property.....................................................17
5.18 Insurance.........................................................18
5.19 Compensation; Employment Agreements; Organized Labor Matters......19
5.20 Employee Plans....................................................20
5.21 Compliance with ERISA.............................................21
5.22 Conformity with Law; Litigation...................................22
5.23 Taxes.............................................................23
5.24 No Violations.....................................................25
5.25 Government Contracts..............................................26
5.26 Absence of Changes................................................26
5.27 Deposit Accounts; Powers of Attorney..............................28
5.28 Validity of Obligations...........................................28
5.29 Relations with Governments........................................28
5.30 Disclosure........................................................28
5.31 Prohibited Activities.............................................29
(B) Representations and Warranties of STOCKHOLDERS........................30
5.32 Authority; Ownership..............................................30
5.33 Preemptive Rights.................................................30
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5.34 No Intention to Dispose of VPI Stock..............................30
6. REPRESENTATIONS OF VPI AND NEWCO..........................................31
6.1 Due Organization......................................................31
6.2 Authorization.........................................................32
6.3 Capital Stock of VPI and NEWCO........................................32
6.4 Transactions in Capital Stock.........................................33
6.5 Subsidiaries..........................................................33
6.6 Financial Statements..................................................33
6.7 Liabilities and Obligations...........................................33
6.8 Conformity with Law; Litigation.......................................34
6.9 No Violations.........................................................34
6.10 Validity of Obligations..............................................35
6.11 VPI Stock............................................................35
6.12 No Side Agreements...................................................35
6.13 Business; Real Property; Material Agreements.........................36
6.14 Taxes................................................................36
6.15 Completion of Due Diligence..........................................38
6.16 Disclosure..........................................................38
6.17 Tax Treatment........................................................38
7. COVENANTS PRIOR TO CLOSING................................................39
7.1 Access and Cooperation; Due Diligence.................................39
7.2 Conduct of Business Pending Closing...................................40
7.3 Prohibited Activities.................................................41
7.4 No Shop...............................................................43
7.5 Notice to Bargaining Agents...........................................43
7.6 Agreements............................................................43
7.7 Notification of Certain Matters.......................................43
7.8 Amendment of Schedules................................................44
7.9 Cooperation in Preparation of Registration Statement..................46
7.10 Final Financial Statements...........................................47
7.11 Further Assurances...................................................48
7.12 Authorized Capital...................................................48
7.13 Best Efforts to Consummate Transaction...............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY...........49
8.1 Representations and Warranties........................................49
8.2 Performance of Obligations............................................49
8.3 No Litigation.........................................................49
8.4 Opinion of Counsel....................................................50
8.5 Registration Statement................................................50
8.6 Consents and Approvals................................................50
8.7 Good Standing Certificates............................................50
8.8 No Material Adverse Change............................................50
8.9 Closing of IPO........................................................50
8.10 Secretary's Certificate..............................................51
8.11 Employment Agreements................................................51
8.12 Directors and Officers Insurance.....................................51
8.13 Stock Options........................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO......................52
9.1 Representations and Warranties........................................52
9.2 Performance of Obligations............................................52
9.3 No Litigation.........................................................52
9.4 Secretary's Certificate...............................................53
9.5 No Material Adverse Effect............................................53
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9.6 STOCKHOLDERS' Release.................................................53
9.7 Termination of Related Party Agreements...............................53
9.8 Opinion of Counsel....................................................54
9.9 Consents and Approvals................................................54
9.10 Good Standing Certificates...........................................54
9.11 Registration Statement...............................................54
9.12 Employment Agreements................................................54
9.13 Closing of IPO.......................................................54
9.14 FIRPTA Certificate...................................................54
9.15 Insurance............................................................54
9.16 Lockup Agreement.....................................................55
9.17 Letter of Representation.............................................55
9.18 Termination of Defined Benefit Plans.................................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING......................55
10.1 Release From Guarantees; Repayment of Certain Obligations............55
10.2 Preservation of Tax and Accounting Treatment.........................56
10.3 Preparation and Filing of Tax Returns................................56
10.4 Appointment of Directors.............................................57
10.5 Preservation of Employee Benefit Plans...............................57
10.6 Maintenance of Books.................................................58
10.7 Securities Covenants.................................................58
11. INDEMNIFICATION..........................................................58
11.1 General Indemnification by the STOCKHOLDERS..........................58
11.2 Indemnification by VPI...............................................59
11.3 Third Person Claims..................................................60
11.4 Exclusive Remedy.....................................................62
11.5 Limitations on Indemnification.......................................62
12. TERMINATION OF AGREEMENT.................................................63
12.1 Termination..........................................................63
12.2 Liabilities in Event of Termination..................................64
13. NONCOMPETITION...........................................................65
13.1 Prohibited Activities................................................65
13.2 Damages..............................................................66
13.3 Reasonable Restraint.................................................67
13.4 Severability; Reformation............................................67
13.5 Independent Covenant.................................................68
13.6 Materiality..........................................................68
13.7 Limitation...........................................................68
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................69
14.1 STOCKHOLDERS.........................................................69
14.2 VPI AND NEWCO........................................................70
14.3 Damages..............................................................70
14.4 Survival.............................................................71
14.5 Return of Data Submitted.............................................71
15. TRANSFER RESTRICTIONS....................................................71
15.1 Transfer Restrictions................................................71
15.2 Certain Transfers....................................................72
16. SECURITIES LAW REPRESENTATIONS...........................................72
16.1 Compliance with Law..................................................73
16.2 Economic Risk; Sophistication........................................73
17. REGISTRATION RIGHTS......................................................73
17.1 Piggyback Registration Rights........................................73
17.2 Demand Registration Rights...........................................74
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17.3 Registration Procedures..............................................75
17.4 Underwriting Agreement...............................................76
17.5 Availability of Rule 144.............................................76
17.6 Registration Rights Indemnification..................................76
18. GENERAL..................................................................81
18.1 Press Releases.......................................................81
18.2 Cooperation..........................................................82
18.3 Successors and Assigns; Third Party Beneficiaries....................82
18.4 Entire Agreement.....................................................82
18.5 Counterparts.........................................................82
18.6 Brokers and Agents...................................................83
18.7 Expenses.............................................................83
18.8 Notices..............................................................84
18.9 Governing Law........................................................85
18.10 Exercise of Rights and Remedies.....................................85
18.11 Time................................................................85
18.12 Reformation and Severability........................................85
18.13 Remedies Cumulative.................................................85
18.14 Captions............................................................86
18.15 Amendments and Waivers..............................................86
18.16 Incorporation by Reference..........................................86
18.17 Defined Terms.......................................................86
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), RPM ACQUISITION CORP., a Delaware corporation ("NEWCO"),
RESORT PROPERTY MANAGEMENT, INC., a Utah corporation (the "COMPANY"), Daniel L.
Meehan, Kimberlie C. Meehan and Nancy Hess (the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Hotel Corporation of
the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a
Colorado corporation, Jupiter Property Management at Park City, Inc., a
Utah corporation, Maui Condominium & Home Realty,
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Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts
corporation, Howey Acquisition, Inc., a Florida corporation, Realty
Consultants, Inc., a Florida corporation, Telluride Resort Accommodations,
Inc., a Colorado corporation, Trupp-Hodnett Enterprises, Inc., a Georgia
corporation, THE Management Company, a Georgia corporation, and Whistler
Chalets Limited, a British Columbia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in effect
shall be the Certificate of Incorporation of the Surviving Corporation
until changed as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of the laws of the state in which the Surviving
Corporation is located and of the Certificate of Incorporation and Bylaws
of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or
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capacities, and effective upon the Effective Time of the Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of the Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of the Surviving Corporation, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the COMPANY shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
NEWCO shall be merged with and into the COMPANY, and the COMPANY, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of NEWCO shall cease and, in accordance
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with the terms of this Agreement, the Surviving Corporation shall possess all of
the rights, privileges, immunities and franchises, of a public, as well as of a
private, nature, and all property, real, personal and mixed, and all debts due
on whatever account, including subscriptions to shares, and all Taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to NEWCO and the COMPANY
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectively the property of the Surviving Corporation as they were
of NEWCO and the COMPANY; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the states of incorporation
vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all of the
liabilities and obligations of NEWCO and the COMPANY and any claim existing, or
action or proceeding pending, by or against NEWCO or the COMPANY may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in their place. Neither the rights of creditors nor any liens
upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and
all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the
Surviving Corporation, and may be enforced against such Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
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(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and (2) the right to receive
the amount of cash, subject to adjustment pursuant to Section 3.3 hereof,
set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Merger, VPI shall have no
class of capital stock (including preferred stock) issued and outstanding other
than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
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3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall
result in a corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
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4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to
in Section 3 hereof shall occur and (z) the closing with respect to the IPO
shall be completed. The taking of the actions described in the preceding clauses
(x), (y) and (z) shall constitute the closing of the transactions hereunder (the
"Closing"), and the date on which the actions described in the preceding clauses
(x), (y) and (z) occur shall be referred to as the "Closing
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Date." Except as provided in Sections 8 and 9 hereof with respect to actions to
be taken on the Closing Date, during the period from the Pre-Closing Date to the
Closing Date this Agreement may only be terminated by a party if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Closing
Date has not occurred within 15 business days of the Pre-Closing Date. Time is
of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually incurs liability under
the 1933 Act, the 1934 Act or any other federal or state securities laws as a
result of a breach of a representation or warranty by the COMPANY or the
STOCKHOLDERS, the representations and warranties set forth herein shall survive
until the expiration of any applicable limitations period, which shall be deemed
to be the Expiration Date for such purposes. For purposes of this Section 5, the
term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries,
if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing
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and in good standing under the laws of the state of its incorporation, and the
COMPANY is duly authorized and qualified to do business under all applicable
laws, regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except (i) as set
forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified
would not have a material adverse effect on the business, operations, affairs,
properties, assets, condition (financial or otherwise) or, to the knowledge of
the COMPANY or the STOCKHOLDERS, prospects of the COMPANY taken as a whole (as
used herein with respect to the COMPANY, or with respect to any other person, a
"Material Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which
the COMPANY is incorporated and contains a list of all such jurisdictions in
which the COMPANY is authorized or qualified to do business. True, complete and
correct copies of the Certificate of Incorporation and Bylaws, each as amended,
of the COMPANY (the "Charter Documents") are all attached hereto as Schedule
5.1. The stock records of the COMPANY, as heretofore made available to VPI, are
correct and complete in all material respects. There are no minutes in the
possession of the COMPANY or the STOCKHOLDERS which have not been made available
to VPI, and all of such minutes are correct and complete in all material
respects. Except as set forth on Schedule 5.1, the most recent minutes of the
COMPANY, which are dated no earlier than ten business days prior to the date
hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and
directors on behalf of the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly
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issued, are fully paid and nonassessable, are owned of record and beneficially
by the STOCKHOLDERS and further, such shares were offered, issued, sold and
delivered by the COMPANY in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder
of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible
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into capital stock or any other equity interest in any corporation, association
or business entity nor is the COMPANY, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31,
1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited
Statement of Operations, if any, for the period ended December 31, 1997
(December 31, 1997 being hereinafter referred to as the "Balance Sheet Date")
and unaudited Statement of Operations, if any, for the period ended December 31,
1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for
the period ended on the Balance Sheet Date and unaudited Statement of Changes in
Stockholders' Equity, if any, for the period ended December 31, 1996; and (iv)
audited Statement of Cash Flows, if any, for the period ended on the Balance
Sheet Date and unaudited Statement of Cash Flows, if any, for the period ended
December 31, 1996. Except as set forth on Schedule 5.9, such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted thereon or on Schedule 5.9). Except as set forth on Schedule
5.9, such Balance Sheets as of December 31, 1997 and 1996 present fairly the
financial position of such COMPANY as of the dates
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indicated thereon, and such Statements of Operations, Statements of Changes in
Stockholders' Equity and Statements of Cash Flows present fairly the results of
operations for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of
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the Balance Sheet Date, including any such amounts which are not reflected in
the balance sheet as of the Balance Sheet Date, and including receivables from
and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide
to VPI (x) an accurate list of all receivables obtained subsequent to the
Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts
and notes receivable showing amounts due in 30 day aging categories (the "A/R
Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed
by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the
accounts, notes and other receivables shown on Schedule 5.11 and on the A/R
Aging Reports are and shall be collectible in the amounts shown, net of reserves
reflected in the balance sheet as of the Balance Sheet Date with respect to
accounts receivable as of the Balance Sheet Date, and net of reserves reflected
in the books and records of the COMPANY (consistent with the methods used for
the balance sheet) with respect to accounts receivable of the COMPANY after the
Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises,
permits and other governmental authorizations that are necessary for the
operation of the business of the COMPANY as now conducted, and the COMPANY has
delivered to VPI an accurate list and summary description (which is set forth on
Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the COMPANY (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). The licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and
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5.13 and is not in violation of any of the foregoing, except for inadvertent,
immaterial noncompliance with such requirements, standards, criteria and
conditions (provided that any such noncompliance shall be deemed a breach of
this Section 5.12 for purposes of Section 11 hereof). Except as specifically
provided on Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to the COMPANY by, any such licenses,
franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY except as permitted by
Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to
which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the COMPANY, VPI or NEWCO for any clean-up cost,
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remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) the
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are
currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the
knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a
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"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the COMPANY's significant customers (or persons or entities that are sources of
a significant number of customers) have canceled or substantially reduced or, to
the knowledge of the COMPANY, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
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(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property. Schedule 5.17 contains, without
limitation, true, complete and correct copies of all title reports and
title insurance policies currently in possession of the COMPANY with
respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery thereof by the parties
thereto other than the COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of the COMPANY, the
STOCKHOLDERS and, to the knowledge of the COMPANY or the STOCKHOLDERS, the other
parties (and their successors) thereto in accordance with their respective
terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is
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required to carry pursuant to all of its contracts and other agreements and
pursuant to all applicable laws. All of such insurance policies are currently in
full force and effect and shall remain in full force and effect through the
Closing Date. No insurance carried by the COMPANY has ever been canceled by the
insurer and the COMPANY has never been unable to obtain insurance coverage for
its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the best of the COMPANY's knowledge, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial
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noncompliance with such laws, rules, and regulations (provided that any such
noncompliance shall be deemed a breach of this Section 5.19 for purposes of
Section 11 hereof); (ii) is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the foregoing; (iii) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other employment-related benefits; and (iv) has provided
employees with the benefits to which they are entitled pursuant to the terms of
all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20, the
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section (3)(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of ERISA)or any
non-qualified deferred compensation arrangement). The COMPANY has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is
the COMPANY required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the COMPANY's employees.
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All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such
plan or the COMPANY, has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
COMPANY has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service nor any liability to the Pension Benefit Guaranty
Corporation. The COMPANY and STOCKHOLDERS further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
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(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the COMPANY and no
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notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. The COMPANY has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations, and is not in violation of any of the
foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the
STOCKHOLDERS have entered into an agreement or waiver or have been requested to
enter into an agreement or waiver extending any statute of limitations regarding
Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection
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has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the COMPANY Financial Statements (and, if applicable, any Financial
Statements delivered pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
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(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of the COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.24, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and
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effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on Schedule 5.24, none of the Material
Documents prohibits the use or publication by the COMPANY, VPI or NEWCO of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the COMPANY from freely providing services to
any other customer or potential customer of the COMPANY, VPI, NEWCO or any Other
Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
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(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
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5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights generally or (ii) the
discretionary power of a court exercising equity jurisdiction. The individual
signing this Agreement on behalf of the COMPANY has the legal power, authority
and capacity to bind the COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
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(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
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(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI
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Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the Merger, and
all required approvals of the shareholders and board of directors of VPI and
NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
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6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this
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Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated
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hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
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6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to
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be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by VPI and NEWCO for Taxes have been so
deposited, withheld or collected, and such deposit, withholding or collection
has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for its last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
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(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the
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STOCKHOLDERS set forth in the letter of representations (referenced in the tax
opinion letter to be delivered pursuant to Section 8.4 hereof) are true and
correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI,
NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
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(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
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(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-
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occurrence of which would be likely to cause any representation or warranty of
the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in
any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of VPI or NEWCO
contained herein to be untrue or inaccurate in any material respect at or prior
to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is
not accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or NEWCO that constitutes or reflects an event or occurrence that would have a
Material Adverse Effect may be made unless a majority of the Founding Companies
consent to such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto
shall be deemed to be the schedules as amended or supplemented pursuant to this
Section 7.8. In the event that one of the Other Founding Companies seeks to
amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANY notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANY does not give its consent, the COMPANY
may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event
that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours following receipt of
notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested and so requested in the
notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Pre-Closing Date and on the Closing
Date, contained in this Agreement (including the Schedules and Annexes hereto)
shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 21, 1998, unless the Closing Date shall have occurred on or before April
21, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANY for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANY for the
incremental cost of having VPI so named as an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation
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and information as any of them reasonably may request in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Tax Returns pursuant to
this Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to
serve as a director of VPI effective as of the Closing Date. Representatives of
the Founding Co mpanies shall constitute a majority of the directors of VPI
immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting
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conditions for employees of the COMPANY who were covered by the COMPANY's health
insurance plan immediately prior to the Closing Date or as otherwise required by
law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all
times, from and after the date of this Agreement until the Expiration Date, from
and against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a
result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or
certificates delivered in connection herewith, (ii) any breach of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out
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of or based upon any untrue statement or alleged untrue statement of a material
fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or
its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to the COMPANY or the
STOCKHOLDERS required to be stated therein or necessary to make the statements
therein not misleading, or (iv) the matters described on Schedule 11.1(iv)
(relating to specifically identified matters such as ongoing claims and/or
litigation), which Schedule shall be prepared by VPI, provided, however, (A)
that in the case of any indemnity arising pursuant to clause (iii) such
indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to VPI counsel and to VPI for inclusion in the final prospectus, and
such information was not so included or properly delivered, and (B) that no
STOCKHOLDER shall be liable for any indemnification obligation pursuant to this
Section 11.1 to the extent attributable to a breach of any representation,
warranty or agreement made herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that
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VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by
reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act
or other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to VPI, NEWCO or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying
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Party that are in the Indemnified Party's possession or control. All Indemnified
Parties shall use the same counsel, which shall be the counsel selected by the
Indemnifying Party, provided that if counsel to the Indemnifying Party shall
have a conflict of interest that prevents counsel for the Indemnifying Party
from representing the Indemnified Party, the Indemnified Party shall have the
right to participate in such matter through counsel of its own choosing and the
Indemnifying Party will reimburse the Indemnified Party for the reasonable
expenses of its counsel. Further, absent a conflict, the Indemnified Party may
select counsel and have such counsel participate in such matter at the sole cost
of the Indemnified Party. After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested in
writing by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a final
and complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder
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shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDERS until
such time as, and solely to the extent that, the aggregate of all claims which
such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of
(i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock
delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided,
however, that VPI, NEWCO, the Surviving Corporation and the other persons or
entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.l(iv) at any time, regardless of
whether the aggregate of all claims which such persons may have against the
STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the
amount of any such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for
indemnification hereunder against VPI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which the STOCKHOLDERS may have
against VPI and NEWCO shall exceed $50,000, provided, however, that the
STOCKHOLDERS and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether
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the aggregate of all claims which such persons may have against any of VPI and
NEWCO exceeds $50,000, it being understood that the amount of any such claim
under Section 11.2(v) shall not be counted towards such $50,000 amount. No
person shall be entitled to indemnification under this Section 11 if and to the
extent that: (a) such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement; or (b) such person
receives a tax benefit as a result of the claim or loss for which
indemnification is sought (i.e., the amount of such claim or loss for which
indemnification is provided hereunder shall be reduced by the amount of such tax
benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to
be a reduction in the consideration received by the STOCKHOLDERS pursuant to
Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANY;
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(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided,
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however (and notwithstanding anything in Section 18.7 to the contrary), that the
COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or sales
business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of the locations in which VPI or the
COMPANY, or any of their subsidiaries, conduct a noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the
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COMPANY or of any of the Other Founding Companies within the Territory for
the purpose of providing noncommercial property management, rental or sales
services or hotel management services to property owners and/or renters in
direct competition with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from (a) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter or (b) engaging in the
hotel management business in any location other than in Park City, Utah, and the
25-mile area around Park City, Utah.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that
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the foregoing covenant may be enforced by VPI in the event of breach by such
STOCKHOLDER, by injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof and through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such
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restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
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14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on
their ability to disseminate confidential information with respect to the
COMPANY.
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14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI or NEWCO, (ii) disclosure is required
by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI and NEWCO shall, unless otherwise required by law or such order, give two
days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and
provide the COMPANY and the STOCKHOLDERS with the opportunity within such
two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. VPI will disclose
confidential information relating to the COMPANY to the Other Founding Companies
only if such companies have agreed, in advance, to treat such information as
confidential. In the event of a breach or threatened breach by VPI or NEWCO of
the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be
entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available
remedy for as such breach or threatened breach, including the recovery of
damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and
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irreparable damage that would be caused for which they would have no other
adequate remedy, the parties hereto agree that, in the event of a breach by any
of them of the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
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15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
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16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANY, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses
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by VPI and (ii) registrations relating to employee benefit plans, VPI shall give
each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the
written request of any of the STOCKHOLDERS given within 30 days after receipt of
such notice, VPI shall cause to be included in such registration all of the VPI
Stock issued to such STOCKHOLDER pursuant to this Agreement which any such
STOCKHOLDER requests, provided that VPI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the reasonable opinion of tax counsel to VPI or its
independent auditors, jeopardize the status of the transactions contemplated
hereby and by the Registration Statement as an exchange pursuant to which gain
is not recognized under Section 351(a) of the Code. In addition, if VPI is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than VPI is greater than the number of such shares which can be offered without
adversely affecting the offering, VPI may reduce pro rata the number of shares
offered for the accounts of such persons (based upon the number of shares
desired to be sold by such person) to a number deemed satisfactory by such
managing underwriter, provided, however, that for each such offering made by VPI
after the IPO, such reduction shall be made first by reducing the number of
shares to be sold by persons other than VPI, the STOCKHOLDERS and the
stockholders of the Other Founding Companies who receive shares of VPI Stock
pursuant to the Other Agreements (collectively, the STOCKHOLDERS and the
stockholders of the other Founding Companies who receive shares of VPI Stock
pursuant to the Other Agreements being referred to herein as the "Founding
Stockholders"), and thereafter, if a further reduction is required, by reducing
the number of shares to be sold by the Founding Stockholders on a pro rata basis
based on the number of shares proposed to be registered by each of the Founding
Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or
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sold and which are not entitled to be sold under Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act may request in writing (the
"Demand Registration Request") that VPI file a registration statement under the
1933 Act covering the registration of up to all of the shares of VPI Stock
issued to the STOCKHOLDERS pursuant to this Agreement and the Other Agreements
then held by such Founding Stockholders (a "Demand Registration"). Within ten
(10) days of the receipt of the Demand Registration Request, VPI shall give
written notice of such request to all other Founding Stockholders and shall, as
soon as practicable but in no event later than 45 days after the Demand
Registration Request, file and use its best efforts to cause to become effective
a registration statement covering all shares requested to be registered pursuant
to this Section 17.2. VPI shall be obligated to effect only one Demand
Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the
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SEC as soon as reasonably practicable, a registration statement with respect to
the VPI Stock and use its best efforts to cause such registration to promptly
become and remain effective for a period of at least 45 days (or such shorter
period during which the Founding Stockholders shall have sold all VPI Stock
which they requested to be registered); (ii) use its best efforts to register
and qualify the VPI Stock covered by such registration statement under
applicable state securities laws as the holders shall reasonably request for the
distribution for the VPI Stock; and (iii) take such other actions as are
reasonable and necessary to comply with the requirements of the 1933 Act and the
regulations thereunder to enable the Founding Stockholders to sell their shares
pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any
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losses, claims, damages or liabilities, joint or several, to which such seller
or any such director or officer or underwriter or controlling Person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and VPI will reimburse such seller and each
such director, officer, underwriter and controlling Person for any expenses
(including but not limited to reasonable attorneys' fees) reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that VPI shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to VPI by such seller expressly
for use in the preparation thereof, and provided further that VPI shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the 1933 Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, to the
Person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect
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regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of any underwriter, VPI or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller. In no event shall the liability of any selling holder of
Registrable Securities under this Section 17.6(b) be greater in
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amount than the dollar amount of the proceeds received by such holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than
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the 1933 Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which
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the Registrable Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such underwriter
has otherwise been required to pay by reason on such untrue or alleged untrue
statement or omission or alleged omission, and no selling holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such selling holder were offered to
the public exceeds the amount of any damages which such selling holder has
otherwise been required to pay by reason of such untrue statement or omission.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDERS.
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18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld,
L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger, other than
Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the
COMPANY or VPI, shall pay all taxes due upon receipt of the consideration
payable pursuant to
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Section 3 hereof, and shall assume all tax risks and liabilities of such
STOCKHOLDER in connection with the transactions contemplated hereby; provided,
however, that the foregoing shall not in any way prejudice the ability of the
STOCKHOLDERS and the COMPANY to rely upon the opinions contained in the tax
opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
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(c) If to the COMPANY, addressed to it at:
Resort Property Management, Inc.
750 Kearns Boulevard
P.O. Box 3808
Park City, Utah 84060
Facsimile no.: (435) 649-6654
Attention: Dan Meehan
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
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18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Merger and each future holder of such
VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
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"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
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"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
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"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll,
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employment, excise, property, deed, stamp, alternative or add on minimum,
environmental or other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, whether disputed or not, together
with any interest, penalties, additions to tax or additional amounts with
respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
RPM ACQUISITION CORP.
By:/s/ Leonard Potter
-------------------------------
Leonard Potter
Vice President
RESORT PROPERTY MANAGEMENT, INC.
By:/s/ Daniel L. Meehan
-------------------------------
Name: Daniel L. Meehan
-------------------------
Title: President
-------------------------
STOCKHOLDERS:
/s/ Daniel L. Meehan
- ----------------------------------
Daniel L. Meehan
/s/ Kimberlie C. Meehan
- ----------------------------------
Kimberlie C. Meehan
/s/ Patti Hess
- ----------------------------------
Nancy (a/k/a Patti) Hess
EXHIBIT 2.11
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
TELLURIDE ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
TELLURIDE RESORT ACCOMMODATIONS, INC.
and
the STOCKHOLDERS named herein
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation...............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO..............................................4
1.5 Effect of Merger.....................................................4
2. CONVERSION OF STOCK......................................................5
2.1 Manner of Conversion.................................................6
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................7
4. CLOSING..................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............9
(A) Representations and Warranties of COMPANY and STOCKHOLDERS...........9
5.1 Due Organization.................................................10
5.2 Authority........................................................10
5.3 Capital Stock of the COMPANY.....................................10
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................11
5.6 Subsidiaries.....................................................11
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANY..........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................14
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers...........................................17
5.16 Material Contracts and Commitments..............................17
5.17 Real Property...................................................18
5.18 Insurance.......................................................19
5.19 Compensation; Employment Agreements; Organized Labor Matters....19
5.20 Employee Plans..................................................20
5.21 Compliance with ERISA...........................................21
5.22 Conformity with Law; Litigation.................................22
5.23 Taxes...........................................................23
5.24 No Violations...................................................25
5.25 Government Contracts............................................26
5.26 Absence of Changes..............................................26
5.27 Deposit Accounts; Powers of Attorney............................28
5.28 Validity of Obligations.........................................28
5.29 Relations with Governments......................................29
5.30 Disclosure......................................................29
5.31 Prohibited Activities...........................................30
(B) Representations and Warranties of STOCKHOLDERS......................30
5.32 Authority; Ownership............................................30
5.33 Preemptive Rights...............................................30
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5.34 No Intention to Dispose of VPI Stock............................30
6. REPRESENTATIONS OF VPI AND NEWCO........................................31
6.1 Due Organization....................................................31
6.2 Authorization.......................................................32
6.3 Capital Stock of VPI and NEWCO......................................32
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................33
6.6 Financial Statements................................................33
6.7 Liabilities and Obligations.........................................33
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................34
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................35
6.12 No Side Agreements.................................................35
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................36
6.15 Completion of Due Diligence........................................38
6.16 Disclosure........................................................38
6.17 Tax Treatment......................................................38
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................40
7.3 Prohibited Activities...............................................41
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................43
7.6 Agreements..........................................................43
7.7 Notification of Certain Matters.....................................43
7.8 Amendment of Schedules..............................................44
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................47
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.........49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................49
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................50
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
8.14 Termination of Defined Benefit Plans...............................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
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9.5 No Material Adverse Effect..........................................53
9.6 STOCKHOLDERS' Release...............................................53
9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
11. INDEMNIFICATION........................................................58
11.1 General Indemnification by the STOCKHOLDERS........................58
11.2 Indemnification by VPI.............................................59
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................62
12. TERMINATION OF AGREEMENT...............................................63
12.1 Termination........................................................63
12.2 Liabilities in Event of Termination................................64
13. NONCOMPETITION.........................................................65
13.1 Prohibited Activities..............................................65
13.2 Damages............................................................67
13.3 Reasonable Restraint...............................................67
13.4 Severability; Reformation..........................................68
13.5 Independent Covenant...............................................68
13.6 Materiality........................................................69
13.7 Limitation.........................................................69
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69
14.1 STOCKHOLDERS.......................................................69
14.2 VPI AND NEWCO......................................................70
14.3 Damages............................................................71
14.4 Survival...........................................................71
14.5 Return of Data Submitted...........................................71
15. TRANSFER RESTRICTIONS..................................................72
15.1 Transfer Restrictions..............................................72
15.2 Certain Transfers..................................................72
16. SECURITIES LAW REPRESENTATIONS.........................................73
16.1 Compliance with Law................................................73
16.2 Economic Risk; Sophistication......................................73
17. REGISTRATION RIGHTS....................................................74
17.1 Piggyback Registration Rights......................................74
17.2 Demand Registration Rights.........................................75
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17.3 Registration Procedures............................................76
17.4 Underwriting Agreement.............................................77
17.5 Availability of Rule 144...........................................77
17.6 Registration Rights Indemnification................................77
18. GENERAL................................................................82
18.1 Press Releases.....................................................82
18.2 Cooperation........................................................82
18.3 Successors and Assigns; Third Party Beneficiaries..................83
18.4 Entire Agreement...................................................83
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................83
18.7 Expenses...........................................................83
18.8 Notices............................................................84
18.9 Governing Law......................................................86
18.10 Exercise of Rights and Remedies...................................86
18.11 Time..............................................................86
18.12 Reformation and Severability......................................86
18.13 Remedies Cumulative...............................................86
18.14 Captions..........................................................86
18.15 Amendments and Waivers............................................86
18.16 Incorporation by Reference........................................87
18.17 Defined Terms.....................................................87
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI FORM OF OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), TELLURIDE ACQUISITION CORP., a Delaware corporation
("NEWCO"), TELLURIDE RESORT ACCOMMODATIONS, INC., a Colorado corporation (the
"COMPANY"), and Steven A. Schein, Michael E. Gardner, Park Brady, Daniel Shaw,
Carolyn S. Shaw, Virginia C. Gordon, Joyce Allred, Ronald D. Allred, A.J. Wells,
Forrest Faulconer, Thomas McNamara, Donald J. Peterson, Nancy McNamara, Charles
E. Cobb, Jr., Sue M. Cobb, Stephen A. Martori, Anthony F. Martori, Arthur John
Martori and Alan Mishkin (the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
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Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Hotel Corporation of
the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a
Colorado corporation, Jupiter Property Management at Park City, Inc., a
Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii
corporation, The Maury People, Inc., a Massachusetts corporation, Howey
Acquisition, Inc., a Florida corporation, Realty Consultants, Inc., a
Florida corporation, Resort Property Management, Inc., a Utah corporation,
Trupp-Hodnett Enterprises, Inc., a Georgia corporation, THE Management
Company, a Georgia corporation, and Whistler Chalets Limited, a British
Columbia corporation, and their respective stockholders in order to acquire
additional businesses (the COMPANY, together with each of the entities with
which VPI has entered into the Other Agreements, are collectively referred
to herein as the "Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in effect
shall be the Certificate of Incorporation of the Surviving Corporation
until changed as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of
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the laws of the state in which the Surviving Corporation is located and of
the Certificate of Incorporation and Bylaws of the Surviving Corporation;
and
(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger the person designated by VPI to be appointed
as such officer shall be appointed as a vice president of the Surviving
Corporation and the person designated by VPI to be appointed as such
officer shall be appointed as an Assistant Secretary of the Surviving
Corporation, each of such officers to serve, subject to the provisions of
the Certificate of Incorporation and Bylaws of the Surviving Corporation,
until his or her successor is duly elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges,
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rights and immunities of the COMPANY shall continue unaffected and unimpaired by
the Merger and the corporate franchises, existence and rights of NEWCO shall be
merged with and into the COMPANY, and the COMPANY, as the Surviving Corporation,
shall be fully vested therewith. At the Effective Time of the Merger, the
separate existence of NEWCO shall cease and, in accordance with the terms of
this Agreement, the Surviving Corporation shall possess all of the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all Taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to NEWCO and the COMPANY
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectively the property of the Surviving Corporation as they were
of NEWCO and the COMPANY; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the states of incorporation
vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all of the
liabilities and obligations of NEWCO and the COMPANY and any claim existing, or
action or proceeding pending, by or against NEWCO or the COMPANY may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in their place. Neither the rights of creditors nor any liens
upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and
all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the
Surviving Corporation, and may be enforced against such Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
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2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and (2) the right to receive
the amount of cash, subject to adjustment pursuant to Section 3.3 hereof,
set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the
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STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At
the Effective Time of the Merger, VPI shall have no class of capital stock
(including preferred stock) issued and outstanding other than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of
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nonoperating assets by the COMPANY or the STOCKHOLDERS, shall result in a
corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to the Merger
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referred to in Section 3 hereof shall occur and (z) the closing with respect to
the IPO shall be completed. The taking of the actions described in the preceding
clauses (x), (y) and (z) shall constitute the closing of the transactions
hereunder (the "Closing"), and the date on which the actions described in the
preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing
Date." Except as provided in Sections 8 and 9 hereof with respect to actions to
be taken on the Closing Date, during the period from the Pre-Closing Date to the
Closing Date this Agreement may only be terminated by a party if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Closing
Date has not occurred within 15 business days of the Pre-Closing Date. Time is
of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually incurs liability under
the 1933 Act, the 1934 Act or any other federal or state securities laws as a
result of a breach of a representation or warranty by the COMPANY or the
STOCKHOLDERS, the representations and warranties set forth herein shall survive
until the expiration of any applicable
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limitations period, which shall be deemed to be the Expiration Date for such
purposes. For purposes of this Section 5, the term "COMPANY" shall mean and
refer to the COMPANY and all of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have
not been made available to VPI, and all of such minutes are correct and complete
in all material respects. Except as set forth on Schedule 5.1, the most recent
minutes of the COMPANY, which are dated no earlier than ten business days prior
to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its
officers and directors on behalf of the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital
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stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in
Annex IV and further, except as set forth on Schedule 5.3, are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of the COMPANY have been duly authorized
and validly issued, are fully paid and nonassessable, are owned of record and
beneficially by the STOCKHOLDERS and further, such shares were offered, issued,
sold and delivered by the COMPANY in compliance with all applicable state and
federal laws concerning the issuance of securities. Further, none of such shares
were issued in violation of the preemptive rights of any past or present
stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and
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outstanding, all of which shares (except as set forth on Schedule 5.6) are owned
by the COMPANY, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except as
set forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31,
1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited
Statement of Operations, if any, for the period ended December 31, 1997
(December 31, 1997 being hereinafter referred to as the "Balance Sheet Date")
and unaudited Statement of Operations, if any, for the period ended December 31,
1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for
the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash
Flows, if any, for the period ended on the Balance Sheet Date. Except as set
forth on Schedule 5.9, such Financial Statements have been prepared in
accordance with generally
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accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted thereon or on Schedule 5.9 and, with respect
to unaudited COMPANY Financial Statements, except for the requirement of
footnote disclosures). Except as set forth on Schedule 5.9, such Balance Sheets
as of December 31, 1997 and 1996 present fairly the financial position of such
COMPANY as of the dates indicated thereon, and such Statements of Operations,
Statements of Changes in Stockholders' Equity and Statements of Cash Flows
present fairly the results of operations for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
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(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all
receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing
Date and (y) an aging of all accounts and notes receivable showing amounts due
in 30 day aging categories (the "A/R Aging Reports"). Except to the extent
reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing
accompanying the A/R Aging Reports, the accounts, notes and other receivables
shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible
in the amounts shown, net of reserves reflected in the balance sheet as of the
Balance Sheet Date with respect to accounts receivable as of the Balance Sheet
Date, and net of reserves reflected in the books and records of the COMPANY
(consistent with the methods used for the balance sheet) with respect to
accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises,
permits and other governmental authorizations that are necessary for the
operation of the business of the COMPANY as now conducted, and the COMPANY has
delivered to VPI an accurate list and summary description (which is set forth on
Schedule 5.12) of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the COMPANY (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). The licenses, franchises, permits and other
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governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any
of the foregoing, except for inadvertent, immaterial noncompliance with such
requirements, standards, criteria and conditions (provided that any such
noncompliance shall be deemed a breach of this Section 5.12 for purposes of
Section 11 hereof). Except as specifically provided on Schedule 5.12, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the COMPANY by, any such licenses, franchises, permits or government
authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY
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except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site
or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) the COMPANY has no contingent liability in connection with any release of
any Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are
currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of the
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COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the
STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
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5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by STOCKHOLDERS or business or
personal affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on
Schedule 5.17, all of such leases included on Schedule 5.17 are in full force
and effect and, assuming due execution and delivery thereof by the parties
thereto other than the COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of the COMPANY, the
STOCKHOLDERS and, to
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the knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY has
ever been canceled by the insurer and the COMPANY has never been unable to
obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the best of the COMPANY's knowledge, no campaign to
establish
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such representation is in progress and (iv) there is no pending or, to the best
of the COMPANY's knowledge, threatened labor dispute involving the COMPANY and
any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20, the
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section (3)(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) nor has the COMPANY any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
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example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation arrangement). The COMPANY has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans, agreements, arrangements and trusts set forth on Schedule 5.20, nor is
the COMPANY required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the COMPANY's employees.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor the COMPANY, nor any STOCKHOLDER with respect to any such
plan or the COMPANY, has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
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listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
COMPANY has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service nor any liability to the Pension Benefit Guaranty
Corporation. The COMPANY and STOCKHOLDERS further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 8.14 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or
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instrumentality having jurisdiction over the COMPANY, except for inadvertent,
immaterial noncompliance with any such law, regulation or order (provided that
any such noncompliance shall be deemed a breach of this Section 5.22 for
purposes of Section 11 hereof); and except to the extent set forth on Schedules
5.10 or 5.13, there are no claims, actions, suits or proceedings, commenced or,
to the knowledge of the COMPANY, threatened, against or affecting the COMPANY,
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over the COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations,
and is not in violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor the
STOCKHOLDERS have entered into an agreement or waiver or have been requested to
enter into an agreement or waiver extending any
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statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
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(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of the
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COMPANY under the Material Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.24, none
of the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.24, none of the Material Documents
prohibits the use or publication by the COMPANY, VPI or NEWCO of the name of any
other party to such Material Document, and none of the Material Documents
prohibits or restricts the COMPANY from freely providing services to any other
customer or potential customer of the COMPANY, VPI, NEWCO or any Other Founding
Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the
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COMPANY to fail to meet the financial requirements, as of the Closing Date,
set forth in the first sentence of Section 3.3) or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock of
the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
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(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business; (xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights generally or (ii) the
discretionary power of a court exercising equity jurisdiction. The individual
signing this Agreement on behalf of the COMPANY has the legal power, authority
and capacity to bind the COMPANY to the terms of this Agreement.
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5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
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5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI Charter Documents
provide for indemnification of officers and directors to the full extent
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permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the Merger, and
all required approvals of the shareholders and board of directors of VPI and
NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
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6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this
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Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated
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hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
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6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to
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be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by VPI and NEWCO for Taxes have been so
deposited, withheld or collected, and such deposit, withholding or collection
has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
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(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the
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STOCKHOLDERS set forth in the letter of representations (referenced in the tax
opinion letter to be delivered pursuant to Section 8.4 hereof) are true and
correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI,
NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
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(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
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(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business; (viii) merge or consolidate or agree to merge or
consolidate with or into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-
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occurrence of which would be likely to cause any representation or warranty of
the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in
any material respect at or prior to the Pre-Closing and (ii) any material
failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. VPI and NEWCO shall give prompt notice to the COMPANY of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of VPI or NEWCO
contained herein to be untrue or inaccurate in any material respect at or prior
to the Pre-Closing and (ii) any material failure of VPI or NEWCO to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder. The delivery of any notice pursuant to this Section 7.7 that is
not accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or NEWCO that constitutes or reflects an event or occurrence that would have a
Material Adverse Effect may be made unless a majority of the Founding Companies
consent to such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto
shall be deemed to be the schedules as amended or supplemented pursuant to this
Section 7.8. In the event that one of the Other Founding Companies seeks to
amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANY notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANY does not give its consent, the COMPANY
may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event
that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours following receipt of
notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested and so requested in the
notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Pre-Closing Date and on the Closing
Date, contained in this Agreement (including the Schedules and Annexes hereto)
shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 21, 1998, unless the Closing Date shall have occurred on or before April
21, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANY for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
8.14 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with
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applicable laws and regulations.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a
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result of which the management of VPI deems it inadvisable to proceed with the
transactions hereunder.
9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form
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annexed hereto as Annex VII, and the Underwriters shall have received a copy of
the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI.
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VPI shall reimburse the COMPANY for the incremental cost of having VPI so named
as an additional insured.
9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation
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and information as any of them reasonably may request in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Tax Returns pursuant to
this Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Park Brady
to serve as a director of VPI effective as of the Closing Date. Representatives
of the Founding Companies shall constitute a majority of the directors of VPI
immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting
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conditions for employees of the COMPANY who were covered by the COMPANY's health
insurance plan immediately prior to the Closing Date or as otherwise required by
law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all
times, from and after the date of this Agreement until the Expiration Date, from
and against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a
result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or
certificates delivered in connection herewith, (ii) any breach of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out
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of or based upon any untrue statement or alleged untrue statement of a material
fact relating solely to the COMPANY or the STOCKHOLDERS, and provided to VPI or
its counsel by the COMPANY or the STOCKHOLDERS, contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to the COMPANY or the
STOCKHOLDERS required to be stated therein or necessary to make the statements
therein not misleading, or (iv) the matters described on Schedule 11.1(iv)
(relating to specifically identified matters such as ongoing claims and/or
litigation), which Schedule shall be prepared by VPI, provided, however, (A)
that in the case of any indemnity arising pursuant to clause (iii) such
indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to VPI counsel and to VPI for inclusion in the final prospectus, and
such information was not so included or properly delivered, and (B) that no
STOCKHOLDER shall be liable for any indemnification obligation pursuant to this
Section 11.1 to the extent attributable to a breach of any representation,
warranty or agreement made herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that
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VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1 hereof by
reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act
or other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to VPI, NEWCO or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying
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Party that are in the Indemnified Party's possession or control. All Indemnified
Parties shall use the same counsel, which shall be the counsel selected by the
Indemnifying Party, provided that if counsel to the Indemnifying Party shall
have a conflict of interest that prevents counsel for the Indemnifying Party
from representing the Indemnified Party, the Indemnified Party shall have the
right to participate in such matter through counsel of its own choosing and the
Indemnifying Party will reimburse the Indemnified Party for the reasonable
expenses of its counsel. Further, absent a conflict, the Indemnified Party may
select counsel and have such counsel participate in such matter at the sole cost
of the Indemnified Party. After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested in
writing by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses. If the Indemnifying Party desires to accept a final
and complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder
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shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDERS until
such time as, and solely to the extent that, the aggregate of all claims which
such persons may have against the STOCKHOLDERS shall exceed 2.0% of the sum of
(i) the cash paid to the STOCKHOLDERS and (ii) the value of the VPI Stock
delivered to the STOCKHOLDERS (the "Indemnification Threshold"), provided,
however, that VPI, NEWCO, the Surviving Corporation and the other persons or
entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.l(iv) at any time, regardless of
whether the aggregate of all claims which such persons may have against the
STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that the
amount of any such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDERS shall not assert any claim for
indemnification hereunder against VPI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which the STOCKHOLDERS may have
against VPI and NEWCO shall exceed $50,000, provided, however, that the
STOCKHOLDERS and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether
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the aggregate of all claims which such persons may have against any of VPI and
NEWCO exceeds $50,000, it being understood that the amount of any such claim
under Section 11.2(v) shall not be counted towards such $50,000 amount. No
person shall be entitled to indemnification under this Section 11 if and to the
extent that: (a) such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement; or (b) such person
receives a tax benefit as a result of the claim or loss for which
indemnification is sought (i.e., the amount of such claim or loss for which
indemnification is provided hereunder shall be reduced by the amount of such tax
benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to
be a reduction in the consideration received by the STOCKHOLDERS pursuant to
Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANY;
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(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided,
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however (and notwithstanding anything in Section 18.7 to the contrary), that the
COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management or short-term
rental business or hotel management business in direct competition with VPI
or any of its subsidiaries, within 100 miles of the locations in which VPI
or the COMPANY, or any of their subsidiaries, conduct a noncommercial
property management or short-term rental business or hotel management
business (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the
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COMPANY or of any of the Other Founding Companies within the Territory for
the purpose of providing noncommercial property management or short-term
rental services or hotel management services to property owners and/or
renters in direct competition with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management or short-term rental business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
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Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit (a) any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter or (b) any STOCKHOLDER who
is also as of the date hereof a shareholder of The Telluride Company, a Colorado
corporation (a "Telco STOCKHOLDER"), from engaging in any noncommercial property
management or short-term rental business or hotel management business in
competition with VPI or any subsidiary thereof in any location other than in
Telluride, Colorado, and the 100-mile area around Telluride, Colorado, or (c)
Steven A. Schein from engaging in any noncommercial property management or
short-term rental business or hotel management business in competition with VPI
or any subsidiary thereof in the State of Arizona. For purposes of this Section
13.1, the parties hereto agree that the phrase "short-term" shall mean thirty
(30) days with respect to the Telco STOCKHOLDERS and shall mean ninety (90) days
with respect to all other STOCKHOLDERS.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition
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to the locations currently established therefor, then the STOCKHOLDERS will be
precluded from soliciting customers or employees from such new location and from
directly competing within 100 miles of such new location(s) through the term of
the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in
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Section 13 shall have no effect if the transactions contemplated by this
Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable. In the event that
the criteria set forth on Schedule 13.7 are not met by the COMPANY, the
provisions of this Section 13, upon written notice from the STOCKHOLDERS who are
also stockholders of The Telluride Company, a Colorado corporation, shall not
apply to such STOCKHOLDERS who are also stockholders of The Telluride Company.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties
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for VPI or the Surviving Corporation and (c) to counsel and other advisors,
provided that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 14.1, unless (i) such information is or becomes known
to the public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, STOCKHOLDERS shall have none of the above-mentioned restrictions on
their ability to disseminate confidential information with respect to the
COMPANY.
14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i)
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such information becomes known to the public generally through no fault of VPI
or NEWCO, (ii) disclosure is required by law or the order of any governmental
authority under color of law; provided, however, that prior to disclosing any
information pursuant to this clause (ii), VPI and NEWCO shall, unless otherwise
required by law or such order, give two days' prior written notice thereof to
the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS
with the opportunity within such two-day period to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. VPI
will disclose confidential information relating to the COMPANY to the Other
Founding Companies only if such companies have agreed, in advance, to treat such
information as confidential. In the event of a breach or threatened breach by
VPI or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS
shall be entitled to an injunction restraining VPI and NEWCO from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any
other available remedy for as such breach or threatened breach, including the
recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
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15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the
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Future Sale except pursuant to such arrangements; provided, however, that the
terms of such sale (including commissions) are at least as favorable as the
terms the STOCKHOLDER would have received in the absence of this Section 15.2.
If VPI has not successfully arranged for a private sale of such shares through
one or more the Underwriters within such three (3) day period, the restrictions
of this Section 15.2 shall not apply to such Future Sale. Any subsequent Future
Sales by such STOCKHOLDER must be made in accordance with this Section 15.2. The
terms of this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford
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to sustain a total loss of such investment and has such knowledge and experience
in financial and business matters that he or she is capable of evaluating the
merits and risks of the proposed investment in the VPI Stock. The STOCKHOLDERS
have had an adequate opportunity to ask questions and receive answers from the
officers of VPI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of VPI, the plans for the
operations of the business of VPI, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like. The STOCKHOLDERS have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be
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sold by persons other than VPI is greater than the number of such shares which
can be offered without adversely affecting the offering, VPI may reduce pro rata
the number of shares offered for the accounts of such persons (based upon the
number of shares desired to be sold by such person) to a number deemed
satisfactory by such managing underwriter, provided, however, that for each such
offering made by VPI after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than VPI, the
STOCKHOLDERS and the stockholders of the Other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements (collectively, the
STOCKHOLDERS and the stockholders of the other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the Founding
Stockholders on a pro rata basis based on the number of shares proposed to be
registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
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Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
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17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or
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necessary to make the statements therein not misleading, and VPI will reimburse
such seller and each such director, officer, underwriter and controlling Person
for any expenses (including but not limited to reasonable attorneys' fees)
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that VPI shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to VPI by
such seller expressly for use in the preparation thereof, and provided further
that VPI shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such seller or any such director, officer, underwriter or
controlling Person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933
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Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in strict conformity with written
information furnished to VPI by such seller expressly for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement; provided that such prospective
seller shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any underwriter, VPI or any such director, officer or
controlling Person and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling holder of Registrable
Securities under this Section 17.6(b) be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this
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Section 17.6, except to the extent that the indemnifying party is actually
materially prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
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indemnified party as a result of such loss, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 17.6(c) hereof, any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
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Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
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18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance
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and compliance with all conditions to be performed by VPI under this Agreement,
including the fees and expenses of Arthur Andersen, LLP (including such fees and
expenses in connection with the audit of the COMPANY's financial statements),
Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity
retained by VPI, and the costs of preparing the Registration Statement. The
STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS,
the COMPANY and their respective agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by the COMPANY and the
STOCKHOLDERS under this Agreement, including the fees and expenses of
accountants and legal counsel to the COMPANY and the STOCKHOLDERS.
Notwithstanding the foregoing, if the transactions contemplated by this
Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger, other than
Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the
COMPANY or VPI, shall pay all taxes due upon receipt of the consideration
payable pursuant to Section 3 hereof, and shall assume all tax risks and
liabilities of such STOCKHOLDER in connection with the transactions contemplated
hereby; provided, however, that the foregoing shall not in any way prejudice the
ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained
in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the
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same in person to an officer or agent of such party or (iii) by facsimile
transmission when confirmation of receipt is received from the party being
notified by the party sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
Telluride Resort Accommodations, Inc.
P.O. Box 100
Telluride, Colorado 81435
Facsimile no.: (970) 728-1410
Attention: Park Brady
and marked "Personal and Confidential"
with copies to:
Robert Erie
P. O. Box 1247
238 East Colorado Avenue
Telluride, Colorado 81435
Facsimilie no.: (970) 728-9439
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
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18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Merger. Any amendment or waiver effected in
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accordance with this Section 18.15 shall be binding upon each of the parties
hereto, any other person receiving VPI Stock in connection with the Merger and
each future holder of such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
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"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
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"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision. "Pre-Closing" has
the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
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"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
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"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
TELLURIDE ACQUISITION CORP.
By:/s/ Leonard Potter
----------------------------------
Leonard Potter
Vice President
TELLURIDE RESORT ACCOMMODATIONS, INC.
By:/s/ Park Brady
----------------------------------
Name: Park Brady
---------------------------
Title: President
--------------------------
STOCKHOLDERS:
/s/ Steven A. Schein *
- ---------------------------------- ----------------------------------
Steven A. Schein Thomas McNamara
/s/ Michael E. Gardner *
- ---------------------------------- ----------------------------------
Michael E. Gardner Donald J. Peterson
/s/ Park Brady *
- ---------------------------------- ----------------------------------
Park Brady Nancy McNamara
/s/ Daniel Shaw *
- ---------------------------------- ----------------------------------
Daniel Shaw Charles E. Cobb, Jr.
/s/ Carolyn S. Shaw *
- ---------------------------------- ----------------------------------
Carolyn S. Shaw Sue M. Cobb
/s/ Virginia C. Gordon *
- ---------------------------------- ----------------------------------
Virginia C. Gordon Stephen A. Martori
* *
- ---------------------------------- ----------------------------------
Joyce Allred Anthony F. Martori
* *
- ---------------------------------- ----------------------------------
Ronald D. Allred Arthur John Martori
* *
- ---------------------------------- ----------------------------------
A.J. Wells Alan Mishkin
*
- ----------------------------------
Forrest Faulconer
*/s/ A.J. Wells
- ---------------
A.J. Wells
Power of Attorney
EXHIBIT 2.12
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
TRUPP ACQUISITION CORP. and
MANAGEMENT ACQUISITION CORP.
(each a subsidiary of Vacation Properties International, Inc.)
TRUPP-HODNETT ENTERPRISES, INC.
THE MANAGEMENT COMPANY
and
the STOCKHOLDERS named herein
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER.................................................................3
1.1 Delivery and Filing of Articles of Merger..............................3
1.2 Effective Time of the Merger...........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporations..................... ..........................4
1.4 Certain Information With Respect to the Capital Stock of the
COMPANIES, VPI and NEWCOS.................... ........................5
1.5 Effect of Mergers......................................................5
2. CONVERSION OF STOCK........................................................6
2.1 Manner of Conversion...................................................7
3. DELIVERY OF MERGER CONSIDERATION...........................................8
3.1 Delivery of VPI Stock and Cash.........................................8
3.2 Delivery of COMPANY Stock..............................................8
3.3 Balance Sheet Test.....................................................8
4. CLOSING....................................................................9
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS..............10
(A) Representations and Warranties of COMPANIES and STOCKHOLDERS..........10
5.1 Due Organization...................................................11
5.2 Authority..........................................................12
5.3 Capital Stock of the COMPANIES.....................................12
5.4 Transactions in Capital Stock......................................13
5.5 No Bonus Shares....................................................13
5.6 Subsidiaries.......................................................13
5.7 Predecessor Status; etc............................................14
5.8 Spin-off by the COMPANIES..........................................14
5.9 Financial Statements...............................................14
5.10 Liabilities and Obligations.......................................15
5.11 Accounts and Notes Receivable.....................................16
5.12 Permits and Intangibles...........................................16
5.13 Environmental Matters.............................................17
5.14 Personal Property.................................................18
5.15 Significant Customers.............................................19
5.16 Material Contracts and Commitments................................20
5.17 Real Property.....................................................20
5.18 Insurance.........................................................21
5.19 Compensation; Employment Agreements; Organized Labor Matters......22
5.20 Employee Plans....................................................23
5.21 Compliance with ERISA.............................................24
5.22 Conformity with Law; Litigation...................................26
5.23 Taxes.............................................................26
5.24 No Violations.....................................................29
5.25 Government Contracts..............................................30
5.26 Absence of Changes................................................30
5.27 Deposit Accounts; Powers of Attorney..............................32
5.28 Validity of Obligations...........................................32
5.29 Relations with Governments........................................33
5.30 Disclosure........................................................33
5.31 Prohibited Activities.............................................34
(B) Representations and Warranties of STOCKHOLDERS........................34
5.32 Authority; Ownership..............................................34
5.33 Preemptive Rights.................................................35
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5.34 No Intention to Dispose of VPI Stock..............................35
6. REPRESENTATIONS OF VPI AND NEWCOS.........................................35
6.1 Due Organization......................................................36
6.2 Authorization.........................................................36
6.3 Capital Stock of VPI and NEWCOS.......................................36
6.4 Transactions in Capital Stock.........................................36
6.5 Subsidiaries..........................................................37
6.6 Financial Statements..................................................38
6.7 Liabilities and Obligations...........................................38
6.8 Conformity with Law; Litigation.......................................38
6.9 No Violations.........................................................39
6.10 Validity of Obligations..............................................39
6.11 VPI Stock............................................................40
6.12 No Side Agreements...................................................40
6.13 Business; Real Property; Material Agreements.........................40
6.14 Taxes................................................................41
6.15 Completion of Due Diligence..........................................43
6.16 Disclosure..........................................................43
6.17 Tax Treatment........................................................44
7. COVENANTS PRIOR TO CLOSING................................................44
7.1 Access and Cooperation; Due Diligence.................................44
7.2 Conduct of Business Pending Closing...................................45
7.3 Prohibited Activities.................................................46
7.4 No Shop...............................................................48
7.5 Notice to Bargaining Agents...........................................49
7.6 Agreements............................................................49
7.7 Notification of Certain Matters.......................................49
7.8 Amendment of Schedules................................................50
7.9 Cooperation in Preparation of Registration Statement..................52
7.10 Final Financial Statements...........................................53
7.11 Further Assurances...................................................54
7.12 Authorized Capital...................................................54
7.13 Best Efforts to Consummate Transaction...............................54
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.........55
8.1 Representations and Warranties........................................55
8.2 Performance of Obligations............................................55
8.3 No Litigation.........................................................55
8.4 Opinion of Counsel....................................................56
8.5 Registration Statement................................................56
8.6 Consents and Approvals................................................56
8.7 Good Standing Certificates............................................56
8.8 No Material Adverse Change............................................56
8.9 Closing of IPO........................................................57
8.10 Secretary's Certificate..............................................57
8.11 Employment Agreements................................................57
8.12 Directors and Officers Insurance.....................................57
8.13 Stock Options........................................................57
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS.....................58
9.1 Representations and Warranties........................................58
9.2 Performance of Obligations............................................58
9.3 No Litigation.........................................................59
9.4 Secretary's Certificate...............................................59
9.5 No Material Adverse Effect............................................59
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9.6 STOCKHOLDERS' Release.................................................59
9.7 Termination of Related Party Agreements...............................60
9.8 Opinion of Counsel....................................................60
9.9 Consents and Approvals................................................60
9.10 Good Standing Certificates...........................................60
9.11 Registration Statement...............................................60
9.12 Employment Agreements................................................61
9.13 Closing of IPO.......................................................61
9.14 FIRPTA Certificate...................................................61
9.15 Insurance............................................................61
9.16 Lockup Agreement.....................................................61
9.17 Letter of Representation.............................................61
9.18 Termination of Defined Benefit Plans.................................62
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING......................62
10.1 Release From Guarantees; Repayment of Certain Obligations............62
10.2 Preservation of Tax and Accounting Treatment.........................62
10.3 Preparation and Filing of Tax Returns................................63
10.4 Appointment of Directors.............................................64
10.5 Preservation of Employee Benefit Plans...............................64
10.6 Maintenance of Books.................................................65
10.7 Securities Covenants.................................................65
11. INDEMNIFICATION..........................................................65
11.1 General Indemnification by the STOCKHOLDERS..........................65
11.2 Indemnification by VPI...............................................66
11.3 Third Person Claims..................................................67
11.4 Exclusive Remedy.....................................................69
11.5 Limitations on Indemnification.......................................70
12. TERMINATION OF AGREEMENT.................................................71
12.1 Termination..........................................................71
12.2 Liabilities in Event of Termination..................................72
13. NONCOMPETITION...........................................................73
13.1 Prohibited Activities................................................73
13.2 Damages..............................................................75
13.3 Reasonable Restraint.................................................75
13.4 Severability; Reformation............................................76
13.5 Independent Covenant.................................................76
13.6 Materiality..........................................................76
13.7 Limitation...........................................................76
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................77
14.1 STOCKHOLDERS.........................................................77
14.2 VPI AND NEWCOS.......................................................78
14.3 Damages..............................................................79
14.4 Survival.............................................................79
14.5 Return of Data Submitted.............................................80
15. TRANSFER RESTRICTIONS....................................................80
15.1 Transfer Restrictions................................................80
15.2 Certain Transfers....................................................80
16. SECURITIES LAW REPRESENTATIONS...........................................81
16.1 Compliance with Law..................................................81
16.2 Economic Risk; Sophistication........................................82
17. REGISTRATION RIGHTS......................................................82
17.1 Piggyback Registration Rights........................................82
17.2 Demand Registration Rights...........................................84
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17.3 Registration Procedures..............................................85
17.4 Underwriting Agreement...............................................85
17.5 Availability of Rule 144.............................................86
17.6 Registration Rights Indemnification..................................86
18. GENERAL..................................................................91
18.1 Press Releases.......................................................91
18.2 Cooperation..........................................................92
18.3 Successors and Assigns; Third Party Beneficiaries....................92
18.4 Entire Agreement.....................................................92
18.5 Counterparts.........................................................93
18.6 Brokers and Agents...................................................93
18.7 Expenses.............................................................93
18.8 Notices..............................................................94
18.9 Governing Law........................................................95
18.10 Exercise of Rights and Remedies.....................................95
18.11 Time................................................................96
18.12 Reformation and Severability........................................96
18.13 Remedies Cumulative.................................................96
18.14 Captions............................................................96
18.15 Amendments and Waivers..............................................96
18.16 Incorporation by Reference..........................................96
18.17 Defined Terms.......................................................97
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), TRUPP ACQUISITION CORP., a Delaware corporation, MANAGEMENT
ACQUISITION CORP., a Delaware corporation (individually, a "NEWCO" and
collectively, the "NEWCOS"), TRUPP-HODNETT ENTERPRISES, INC., a Georgia
corporation, and THE MANAGEMENT COMPANY, a Georgia corporation (each, a
"COMPANY" and collectively, the "COMPANIES"), and Hans F. Trupp, Roy K. Hodnett,
Pat Hodnett Cooper and Austin Trupp (the "STOCKHOLDERS").
WHEREAS, each NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, each having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and each
NEWCO is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of each NEWCO and each COMPANY
(which together are hereinafter collectively referred to as the "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that (i) TRUPP ACQUISITION CORP.
merge with and into TRUPP-HODNETT ENTERPRISES, INC. and (ii) MANAGEMENT
ACQUISITION CORP. merge with and into THE MANAGEMENT COMPANY, pursuant to this
Agreement and the applicable provisions of the laws of the State of Delaware and
the State in which each of the COMPANIES is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is entitled
"Agreement and
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Plan of Organization," with each of B&B On The Beach, Inc., a North Carolina
corporation, Brindley & Brindley Realty & Development, Inc., a North Carolina
corporation, Coastal Resorts Realty L.L.C., a Delaware limited liability
company, Coastal Resorts Management, Inc., a Delaware corporation, Collection of
Fine Properties, Inc., a Colorado corporation, Ten Mile Holdings, Ltd., a
Colorado corporation, First Resort Software, Inc., a Colorado corporation, Hotel
Corporation of the Pacific, Inc., a Hawaii corporation, Houston and O'Leary
Company, a Colorado corporation, Jupiter Property Management at Park City, Inc.,
a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii corporation,
The Maury People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a
Florida corporation, Realty Consultants, Inc., a Florida corporation, Resort
Property Management, Inc., a Utah corporation, Telluride Resort Accommodations,
Inc., a Colorado corporation, and Whistler Chalets Limited, a British Columbia
corporation, and their respective stockholders in order to acquire additional
businesses (the COMPANIES, together with each of the entities with which VPI has
entered into the Other Agreements, are collectively referred to herein as the
"Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the stockholders
of VPI, each of the Other Founding Companies and each of the subsidiaries of VPI
that are parties to the Other Agreements intend to consummate the VPI Plan of
Organization as an integrated plan pursuant to which the STOCKHOLDERS and the
stockholders of the Other Founding Companies shall transfer the capital stock of
the Founding Companies to VPI or a subsidiary of VPI, and the STOCKHOLDERS and
the public will
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acquire the stock of VPI as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding Companies
pursuant to the Other Agreements, the Boards of Directors of the COMPANIES have
approved this Agreement as part of the VPI Plan of Organization in order to
transfer the capital stock of the COMPANIES to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which each of the COMPANIES is incorporated and will deliver stamped
receipt copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Mergers, (i)
TRUPP ACQUISITION CORP. shall be merged with and into TRUPP-HODNETT ENTERPRISES,
INC. and (ii) MANAGEMENT ACQUISITION CORP. shall be merged with and into THE
MANAGEMENT COMPANY, each in accordance with the Articles of Merger, the separate
existence of each NEWCO shall cease and each COMPANY shall be the surviving
party in the Mergers (each COMPANY is sometimes hereinafter referred to as the
"Surviving Corporation" and collectively the COMPANIES are sometimes hereinafter
referred to as the "Surviving Corporations" ). Each Merger will be effected in a
single transaction.
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1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATIONS. At the Effective Time of each Merger:
(i) the Certificate of Incorporation then in effect of each COMPANY
shall be the Certificate of Incorporation of the Surviving Corporation in
such Merger until changed as provided by law;
(ii) the Bylaws of each NEWCO then in effect shall become the Bylaws
of the Surviving Corporation in such Merger; and subsequent to the
Effective Time of such Merger, such Bylaws shall be the Bylaws of the
Surviving Corporation in such Merger until they shall thereafter be duly
amended;
(iii) the Board of Directors of each Surviving Corporation shall
consist of the persons who are, immediately prior to the Effective Time of
the Merger, on the Board of Directors of the COMPANY merging into such
Surviving Corporation, provided that the Chief Executive Officer of VPI
shall be elected as a director of each Surviving Corporation effective as
of the Effective Time of each Merger; the Board of Directors of each
Surviving Corporation shall hold office subject to the provisions of the
laws of the state in which the Surviving Corporation is located and of the
Certificate of Incorporation and Bylaws of the Surviving Corporation; and
(iv) the officers of each COMPANY immediately prior to the Effective
Time of each Merger shall continue as the officers of the Surviving
Corporation into which such COMPANY is merged in the same capacity or
capacities, and effective upon the Effective Time of each Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of each Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of each
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Surviving Corporation, each of such officers to serve, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation, until his or her successor is duly elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES,
VPI AND NEWCOS. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the COMPANIES,
VPI and NEWCOS as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10)
shares are issued and outstanding.
1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of
the Mergers shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which each COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of each COMPANY shall continue unaffected and
unimpaired by the Mergers and the corporate franchises, existence and rights of
each NEWCO shall be merged with and into the respective COMPANIES, and the
COMPANIES, as the Surviving Corporations, shall be fully vested therewith. At
the Effective Time of the Mergers, the separate existence of each NEWCO shall
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cease and, in accordance with the terms of this Agreement, the Surviving
Corporations shall possess all of the rights, privileges, immunities and
franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all Taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to each NEWCO and each COMPANY shall be taken and deemed to
be transferred to, and vested in, the respective Surviving Corporations without
further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectively
the property of the respective Surviving Corporations as they were of each NEWCO
and each COMPANY; and the title to any real estate, or interest therein, whether
by deed or otherwise, under the laws of the states of incorporation vested in
each respective NEWCO and COMPANY, shall not revert or be in any way impaired by
reason of the Mergers. Except as otherwise provided herein, each Surviving
Corporation shall thenceforth be responsible and liable for all of the
liabilities and obligations of the respective NEWCO and COMPANY and any claim
existing, or action or proceeding pending, by or against a NEWCO or COMPANY may
be prosecuted as if the Merger involving such NEWCO or COMPANY had not taken
place, or the respective Surviving Corporation may be substituted in their
place. Neither the rights of creditors nor any liens upon the property of a
NEWCO or COMPANY shall be impaired by the Merger involving such NEWCO or
COMPANY, and all debts, liabilities and duties of such NEWCO and COMPANY shall
attach to the respective Surviving Corporation, and may be enforced against such
Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
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2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of each COMPANY (collectively "COMPANY Stock") and
(ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time
of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock
of the Surviving Corporations, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock of each COMPANY issued and
outstanding immediately prior to the Effective Time of each respective
Merger, by virtue of such Merger and without any action on the part of the
holder thereof, automatically shall be deemed to represent (l) the right to
receive the number of fully paid and nonassessable shares of VPI Stock set
forth on Annex III hereto with respect to such holder and (2) the right to
receive the amount of cash, subject to adjustment pursuant to Section 3.3
hereof, set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by each COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock of each NEWCO issued and outstanding
immediately prior to the Effective Time of each respective Merger, shall,
by virtue of such Merger and without any action on the part of VPI,
automatically be converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation involved in such Merger which
shall constitute all of the issued and outstanding shares of common stock
of such Surviving Corporation immediately after the Effective Time of such
Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of
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the other shares of outstanding VPI Stock by reason of the provisions of the
Certificate of Incorporation of VPI or as otherwise provided by the Delaware
GCL. All voting rights of such VPI Stock received by the STOCKHOLDERS shall be
fully exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived
nor restricted in exercising those rights. At the Effective Time of the Mergers,
VPI shall have no class of capital stock (including preferred stock) issued and
outstanding other than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers
and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar
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escrow-type accounts); and (iii) all customer deposit accounts and other similar
escrow-type accounts fully funded in cash or cash equivalents. To the extent
that any condition set forth in clauses (i) through (iii) is not met, the cash
portion of the consideration to be paid to the STOCKHOLDERS pursuant to this
Section 3 shall be reduced by the amount required to cure any such failure.
Indebtedness each COMPANY in excess of the amount set forth on Annex III that
was incurred in connection with the acquisition of such COMPANY by the
STOCKHOLDERS, or the acquisition of nonoperating assets by such COMPANY or the
STOCKHOLDERS, shall result in a corresponding dollar-for-dollar reduction in the
cash portion of the consideration paid to the STOCKHOLDERS pursuant to this
Section 3. If necessary, a post-Closing adjustment shall be made to effect the
intent of this Section 3.3.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Mergers (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Mergers) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Mergers or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
the NEWCOS hereby covenant and agree to do all things required by Delaware law
and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are
required by applicable laws of the State in which the COMPANIES are incorporated
in order to rescind the effects, if any, of the filing of the Articles of Merger
as described in
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this Section and to pay all related costs of the COMPANIES directly associated
with such rescission. The taking of the actions described in clauses (i) and
(ii) above (the "Pre-Closing") shall take place on the pre-closing date (the
"Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing Date (x)
the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Mergers shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to the Mergers referred
to in Section 3 hereof shall occur and (z) the closing with respect to the IPO
shall be completed. The taking of the actions described in the preceding clauses
(x), (y) and (z) shall constitute the closing of the transactions hereunder (the
"Closing"), and the date on which the actions described in the preceding clauses
(x), (y) and (z) occur shall be referred to as the "Closing Date." Except as
provided in Sections 8 and 9 hereof with respect to actions to be taken on the
Closing Date, during the period from the Pre-Closing Date to the Closing Date
this Agreement may only be terminated by a party if the underwriting agreement
in respect of the IPO is terminated pursuant to the terms of such agreement.
This Agreement shall in any event terminate if the Closing Date has not occurred
within 15 business days of the Pre-Closing Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.
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Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANIES and the STOCKHOLDERS agrees that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 5.23 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
5.23 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, VPI actually incurs
liability under the 1933 Act, the 1934 Act or any other federal or state
securities laws as a result of a breach of a representation or warranty by the
COMPANIES or the STOCKHOLDERS, the representations and warranties set forth
herein shall survive until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for such purposes. For purposes
of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and
all of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and such COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of such COMPANY or the STOCKHOLDERS,
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prospects of such COMPANY taken as a whole (as used herein with respect to such
COMPANY, or with respect to any other person, a "Material Adverse Effect").
Schedule 5.1 sets forth the jurisdiction in which each COMPANY is incorporated
and contains a list of all such jurisdictions in which each COMPANY is
authorized or qualified to do business. True, complete and correct copies of the
Certificate of Incorporation and Bylaws, each as amended, of each COMPANY (the
"Charter Documents") are all attached hereto as Schedule 5.1. The stock records
of each COMPANY, as heretofore made available to VPI, are correct and complete
in all material respects. There are no minutes in the possession of each COMPANY
or the STOCKHOLDERS which have not been made available to VPI, and all of such
minutes are correct and complete in all material respects. Except as set forth
on Schedule 5.1, the most recent minutes of each COMPANY, which are dated no
earlier than ten business days prior to the date hereof, affirm and ratify all
prior acts of such COMPANY, and of its officers and directors on behalf of such
COMPANY.
5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority
to enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of each COMPANY have been
duly authorized and validly issued, are fully paid and nonassessable, are owned
of record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by such COMPANY in compliance with all
applicable state and federal laws concerning the issuance of
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securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates any of the COMPANIES to issue any
of its capital stock; (ii) neither COMPANY has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (iii) neither the voting stock structure of each COMPANY
nor the relative ownership of shares among any of its respective stockholders
has been altered or changed in contemplation of the Mergers and/or the VPI Plan
of Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of each COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each
COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as
set forth on Schedule 5.6, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and claims of every
kind. Except as set forth on Schedule 5.6, each COMPANY does
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not presently own, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity nor is
any COMPANY, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of each COMPANY, including the names of any
entities acquired by each COMPANY (by stock purchase, merger or otherwise) or
owned by each COMPANY or from whom the COMPANIES previously acquired material
assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of any of the
COMPANIES since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") each of the
COMPANIES: the COMPANY's audited (i) Balance Sheets, if any, as of December 31,
1997 and 1996; (ii) Statements of Operations, if any, for each of the years in
the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter
referred to as the "Balance Sheet Date"); (iii) Statements of Changes in
Stockholders' Equity, if any, for each of the years in the two-year period ended
on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each
of the years in the two-year period ended on the Balance Sheet Date. Except as
set forth on Schedule 5.9, such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
5.9). Except as set forth on Schedule 5.9, such Balance Sheets as of December
31, 1997 and 1996 present fairly the financial
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position of such COMPANY as of the dates indicated thereon, and such Statements
of Operations, Statements of Changes in Stockholders' Equity and Statements of
Cash Flows present fairly the results of operations for the periods indicated
thereon.
5.10 LIABILITIES AND OBLIGATIONS. Each of COMPANIES has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of such COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
such COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date neither COMPANY has incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. Each of the COMPANIES has also delivered to VPI on Schedule 5.10,
in the case of those contingent liabilities related to pending or, to the
knowledge of the COMPANIES, threatened litigation, or other liabilities which
are not fixed or are being contested, the following information:
(i) a summary description of the liability together with the following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
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(iv) a good faith and reasonable estimate of the maximum amount, if any,
which is likely to become payable with respect to each such liability. If no
estimate is provided, the estimate shall for purposes of this Agreement be
deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of such COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate
list of all receivables obtained subsequent to the Balance Sheet Date up to the
Pre-Closing Date and (y) an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the
extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a
writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
each COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of such COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses,
franchises, permits and other governmental authorizations that are necessary for
the operation of the business of such COMPANY as now conducted, and such COMPANY
has delivered to VPI an accurate list and summary description (which is set
forth on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by such
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COMPANY (including interests in software or other technology systems, programs
and intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
5.13). The licenses, franchises, permits and other governmental authorizations
listed on Schedules 5.12 and 5.13 are valid, and such COMPANY has not received
any notice that any governmental authority intends to cancel, terminate or not
renew any such license, franchise, permit or other governmental authorization.
Each of the COMPANIES has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth in the
licenses, franchises, permits and other governmental authorizations listed on
Schedules 5.12 and 5.13 and is not in violation of any of the foregoing, except
for inadvertent, immaterial noncompliance with such requirements, standards,
criteria and conditions (provided that any such noncompliance shall be deemed a
breach of this Section 5.12 for purposes of Section 11 hereof). Except as
specifically provided on Schedule 5.12, the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the COMPANY by, any such
licenses, franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each
of the COMPANIES has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law);
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(ii) each COMPANY has obtained and adhered to all permits and other approvals
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes and Hazardous Substances, a list of all of which permits and approvals is
set forth on Schedule 5.13, and has reported to the appropriate authorities, to
the extent required by all Environmental Laws, all past and present sites owned
and operated by each COMPANY where Hazardous Wastes or Hazardous Substances have
been treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by such COMPANY except as permitted by
Environmental Laws; (iv) such COMPANY knows of no on-site or off-site location
to which such COMPANY has transported or disposed of Hazardous Wastes and
Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) such
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of such COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
such COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by such COMPANY with a value
in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date and
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(z) all leases and agreements in respect of personal property used in the
operation of such COMPANY's business as now conducted, including, true, complete
and correct copies of all such leases and agreements. The COMPANIES shall
indicate on Schedule 5.14 those assets listed thereon that are currently owned,
or that were formerly owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or
Affiliates of such COMPANY. Except as set forth on Schedule 5.14, (i) all
personal property used by each COMPANY in its business is either owned by such
COMPANY or leased by such COMPANY pursuant to a lease included on Schedule 5.14,
(ii) all of the personal property listed on Schedule 5.14 is in good working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on Schedule 5.14 are in full force and effect and, assuming
due execution and delivery thereof by the parties thereto other than such
COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute valid and
binding agreements of such COMPANY, the STOCKHOLDERS and, to the knowledge of
such COMPANY or the STOCKHOLDERS, the other parties (and their successors)
thereto in accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
such COMPANY's annual revenues as of the Balance Sheet Date. Except to the
extent set forth on Schedule 5.15, none of any COMPANY's significant customers
(or persons or entities that are sources of a significant number of customers)
have canceled or substantially reduced or, to the knowledge of any COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by such COMPANY.
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5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on
Schedule 5.16 all material contracts, commitments and similar agreements to
which such COMPANY currently is a party or by which it or any of its properties
are bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. Each COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. Each COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by such COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by each COMPANY in the conduct of its business. Each COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
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(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of each COMPANY with respect to real property owned by such COMPANY.
Each COMPANY has also delivered to VPI an accurate list of real property
leased by such COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by such COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by the STOCKHOLDERS or
business or personal affiliates of such COMPANY or the STOCKHOLDERS. Except as
set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in
full force and effect and, assuming due execution and delivery thereof by the
parties thereto other than such COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of such COMPANY, the
STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the
other parties (and their successors) thereto in accordance with their respective
terms.
5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by such COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that such COMPANY is
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required to carry pursuant to all of its contracts and other agreements and
pursuant to all applicable laws. All of such insurance policies are currently in
full force and effect and shall remain in full force and effect through the
Closing Date. No insurance carried by such COMPANY has ever been canceled by the
insurer and such COMPANY has never been unable to obtain insurance coverage for
its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of such COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or
subject to (and none of their respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of any
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign
to establish such representation is in progress and (iv) there is no pending or,
to the best of each COMPANY's knowledge, threatened labor dispute involving any
COMPANY and any group of its employees nor has any COMPANY experienced any labor
interruptions over the past three years. Each COMPANY believes its relationship
with employees to be good.
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Each COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of such COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20,
neither COMPANY sponsors, maintains or contributes to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or
accrue or pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan"
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(within the meaning of Section 3(36) of ERISA) or any non-qualified deferred
compensation arrangement). Neither COMPANY has sponsored, maintained or
contributed to any employee pension benefit plan other than the plans,
agreements, arrangements and trusts set forth on Schedule 5.20, nor is any
COMPANY required to contribute to any retirement plan pursuant to the provisions
of any collective bargaining agreement establishing the terms and conditions or
employment of any of such COMPANY's employees.
All accrued contribution obligations of each COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of such COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of each COMPANY that are currently maintained or contributed to by such
COMPANY or cover employees or former employees of such COMPANY listed on
Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor any COMPANY,
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nor any STOCKHOLDER with respect to any such plan or any COMPANY, has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and each COMPANY has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS further
represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) each COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) each COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which any COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than a COMPANY that is, or at any time
was, a member of a
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"controlled group" (as defined in Section 412(n)(6)(B) of the Code) that
includes such COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANIES, threatened, against or affecting any of the COMPANIES, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Each COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations,
and is not in violation of any of the foregoing.
5.23 TAXES.
(a) Each COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known
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to the COMPANIES or their respective officers or employees responsible for
maintaining the financial records of the such COMPANY subsequent to the filing
of such Tax Returns to the contrary of any information contained therein. Except
as set forth on Schedule 5.23, there are no examinations in progress (and the
COMPANIES and their respective employees are not aware of any proposed
examinations) or claims against any COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither any COMPANY nor the
STOCKHOLDERS have entered into an agreement or waiver or have been requested to
enter into an agreement or waiver extending any statute of limitations regarding
Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by any COMPANY, any member of an affiliated or
consolidated group which includes or included any of the COMPANIES, or with
respect to any payment made or deemed made by any COMPANY, required to be paid
by the date hereof, have been paid. All amounts required to be deposited,
withheld or collected under applicable federal, state, local or other Tax laws
and regulations by any COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof)
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are sufficient for the payment of all Taxes of the kinds indicated (including
penalties and interest) for all fiscal periods ended on or before that date.
(d) Except as set forth on Schedule 5.23, neither COMPANY has been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). Neither COMPANY is a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, neither COMPANY has (i)
assumed or is liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which any COMPANY
or such person or entity was the surviving corporation or a consolidation) or
(ii) indemnified any other person or entity or otherwise agreed to pay on behalf
of any other person or entity any Taxes arising from or which may be asserted on
the basis of any Tax treatment adopted with respect to all or any aspect of such
business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of each COMPANY for its last three (3) fiscal years or
such shorter period of time as such COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) Each COMPANY has a taxable year ended on the date set forth as
such on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, each COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a
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change of accounting method is required in respect of any period for which the
statute of limitations has not expired.
(i) Neither COMPANY is an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) Neither COMPANY has filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code or agreed to have section
341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as
defined in section 341(f) of the Code) owned by such COMPANY.
5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter
Document. Neither COMPANY or, to the knowledge of either COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of each COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.24, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third
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party with respect to any of the transactions contemplated hereby in order to
remain in full force and effect, and consummation of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any right or benefit. Except as set forth on Schedule
5.24, none of the Material Documents prohibits the use or publication by any
COMPANY, VPI or any NEWCO of the name of any other party to such Material
Document, and none of the Material Documents prohibits or restricts either
COMPANY from freely providing services to any other customer or potential
customer of such COMPANY, VPI, the NEWCOS or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither
COMPANY is now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of any COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of any
COMPANY;
(iii) any change in the authorized capital of any COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANIES to fail to meet the financial requirements,
as of the Closing Date, set forth
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in the first sentence of Section 3.3) or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of any COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by any COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of any COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of any COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to any COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of any COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
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(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of any COMPANY's business;
(xi) any waiver of any material rights or claims of any COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which any COMPANY is a party;
(xiii) any transaction by any COMPANY outside the ordinary course of
its business; (xiv) any cancellation or termination of a material contract
with a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by any COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has
delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as
of the date of the Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from each COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of the COMPANIES and the performance of the transactions contemplated
herein have been duly
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and validly authorized by the Board of Directors of each of the COMPANIES and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of each COMPANY, enforceable
against such COMPANY in accordance with its terms except as may be limited by
(i) bankruptcy, insolvency or other similar laws of general application relating
to or affecting the enforcement of creditors' rights generally or (ii) the
discretionary power of a court exercising equity jurisdiction. The individual
signing this Agreement on behalf of each COMPANY has each legal power, authority
and capacity to bind such COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause any COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of each COMPANY
for the time periods with respect to which such information was requested. Each
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which any COMPANY is a party, or to which their respective properties are
subject, or (ii) any other fact or circumstance regarding any COMPANY (which
fact or circumstance was, or should reasonably, after due inquiry, have been
known to any COMPANY) that is not disclosed pursuant to this Agreement or to
such delivered documents.
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(b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree
(i) that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to any COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with any COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31,
neither COMPANY has, between the Balance Sheet Date and the date hereof, taken
any of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
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5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
6. REPRESENTATIONS OF VPI AND NEWCOS
VPI and the NEWCOS jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and, subject to Section 7.8 hereof, shall be true at the
time of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a
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timely basis, and solely to the extent that in connection with the IPO, the
STOCKHOLDERS or the COMPANIES actually incur liability under the 1933 Act, the
1934 Act, or any other federal or state securities laws, the representations and
warranties set forth herein shall survive until the expiration of any applicable
limitations period, which shall be deemed to be the Expiration Date for such
purposes.
6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS
(the "VPI Charter Documents") are all attached hereto as Annex II. The VPI
Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS
executing this Agreement have the authority to enter into and bind VPI and the
NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full
legal right, power and authority to enter into and perform this Agreement and
the Mergers, and all required approvals of the shareholders and board of
directors of VPI and the NEWCOS, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date,
the authorized capital stock of VPI and the NEWCOS is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of each NEWCO are owned by VPI and all of the issued and
outstanding shares of the capital stock of VPI are owned by the persons set
forth on Annex V hereof, and further are owned, in each case, free and clear of
all liens,
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security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and each
NEWCO have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by VPI and the persons set
forth on Annex V, respectively, and further, such shares were offered, issued,
sold and delivered by VPI and the NEWCOS in compliance with all applicable state
and federal laws concerning the issuance of securities. Further, none of such
shares was issued in violation of the preemptive rights of any past or present
stockholder of VPI or the NEWCOS.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or the NEWCOS to
issue any of their respective authorized but unissued capital stock; and (ii)
neither VPI nor the NEWCOS has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. Schedule 6.4 also includes complete and accurate copies of all stock
option or stock purchase plans, including a list, accurate as of the date
hereof, of all outstanding options, warrants or other rights to acquire shares
of the stock of VPI.
6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries
except for the NEWCOS and each of the companies identified as "NEWCO" in each of
the Other Agreements. Except as set forth in the preceding sentence, neither VPI
nor any NEWCO presently owns, of record or beneficially, or controls, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity nor
is VPI or any
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NEWCO, directly or indirectly, a participant in any joint venture, partnership
or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and the NEWCOS have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or
regulation, or of any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them; and except to the extent set forth on
Schedule 6.8, there are no material claims, actions, suits or proceedings,
pending or, to the knowledge of VPI or the NEWCOS, threatened, against or
affecting VPI or the NEWCOS, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over either of them and no notice
of any claim, action, suit or
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proceeding, whether pending or threatened, has been received. VPI and the NEWCOS
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI
Charter Document. None of VPI, the NEWCOS, or, to the knowledge of VPI and the
NEWCOS, any other party thereto, is in default under any lease, instrument,
agreement, license or permit to which VPI or any NEWCO is a party, or by which
VPI or any NEWCO, or any of their respective properties, are bound
(collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and
the NEWCOS under the VPI Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the VPI Documents
or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the
VPI Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect and consummation
of the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and the NEWCOS and the performance of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of VPI and the NEWCOS and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and binding
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obligation of VPI and the NEWCOS, enforceable against each of VPI and the NEWCOS
in accordance with its terms except as limited by bankruptcy, insolvency or
other similar laws of general application relating to or affecting the
enforcement of creditors' rights generally, and the individuals signing this
Agreement on behalf of VPI and the NEWCOS have the legal power, authority and
capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will
enter into any agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies or VPI other than the Other Agreements
and the agreements specifically contemplated by each of the Other Agreements,
including the employment agreements referred to therein, and none of VPI, the
NEWCOS, their equity owners or affiliates have received any cash compensation or
payments in connection with this transaction except for reimbursement of
out-of-pocket expenses which are necessary or appropriate to this transaction.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any
NEWCO has conducted any operations or business since inception other than
activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO
owns or has at any time owned any real property or any
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material personal property or is a party to any other agreement, except as
listed on Schedule 6.13 and except that VPI is a party to the Other Agreements
and the agreements contemplated thereby and to such agreements as will be filed
as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and the NEWCOS have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or the NEWCOS or their officers or employees
responsible for maintaining the financial records of VPI and the NEWCOS
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 6.14, there are no
examinations in progress (and VPI and the NEWCOS and their employees are not
aware of any proposed examinations) or claims against VPI or the NEWCOS
(including liens against assets of VPI or the NEWCOS) for federal, state, local
and other Taxes (including penalties and interest) for any period or periods
prior to and including the date hereof and no notice of any claim for Taxes,
whether pending or threatened, has been received. Except as set forth on
Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or
consolidated group which includes or included VPI or the NEWCOS, or with respect
to any payment made or deemed made by VPI or the NEWCOS, required to be paid by
the date hereof, have been paid.
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All amounts required to be deposited, withheld or collected under applicable
federal, state, local or other Tax laws and regulations by VPI and the NEWCOS
for Taxes have been so deposited, withheld or collected, and such deposit,
withholding or collection has either been paid to the respective governmental
agencies or set aside and secured in accounts for such purpose or secured and
reserved against and entered on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
has been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to
or bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
(i) has assumed or is liable for any Taxes of any other person or entity,
including any predecessor corporation or partnership, as a result of any
purchase of assets or other business acquisition transaction (other than a
merger in which VPI or the NEWCOS or such person or entity was the surviving
corporation or a consolidation) and (ii) has indemnified any other person or
entity or otherwise agreed to pay on behalf of any other person or entity any
Taxes arising from or which may be asserted on the basis of any Tax treatment
adopted with respect to all or any aspect of such business acquisition
transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and the NEWCOS for their last three (3) fiscal
years or such shorter period of time as VPI or the NEWCOS shall have existed,
(ii) any Tax examinations commenced or closed
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or outstanding during their three (3) most recent fiscal years, and (iii)
currently outstanding extensions of statutory limitations, are attached hereto
as Schedule 6.14.
(g) VPI and the NEWCOS have a taxable year ended on the date set forth
as such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCOS'
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor the NEWCOS is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on
Schedule 6.14.
(k) Neither VPI nor the NEWCOS has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANIES as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the
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statements made herein or therein, in light of the circumstances under which
they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDERS set forth in the letter of representations
(referenced in the tax opinion letter to be delivered pursuant to Section 8.4
hereof) are true and correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, each COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of such COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of such COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. Each COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI, the
NEWCOS, the STOCKHOLDERS and the COMPANIES shall treat all information obtained
in connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this
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Section 7.1 requiring each such Other Founding Company, its stockholders,
directors, officers, representatives, employees and agents to keep confidential
any information regarding the COMPANY obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of each COMPANY access to
all of VPI's and the NEWCOS' sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish each COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and
the NEWCOS will cooperate with each COMPANY, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. VPI will provide complete access to its operations and key officers
and employees to each COMPANY, its representatives and advisors on a continuing
basis through the Closing Date. Each COMPANY will cause all information obtained
in connection with the negotiation and performance of this Agreement to be
treated as confidential in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
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(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with such COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, neither COMPANY shall, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
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(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANIES to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
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(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of such COMPANY, provided
that such COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of such COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANIES,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the COMPANIES'
capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
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(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, any COMPANY or a merger, consolidation or business
combination of any COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide VPI on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between such COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between each COMPANY and any STOCKHOLDER not reflecting fair market terms,
except such existing agreements as are set forth on Schedule 9.7. Such
termination agreements are listed on Schedule 7.6 and copies thereof are
attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY
shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of any COMPANY or any STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the
Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. VPI and the NEWCOS shall give prompt
notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely
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to cause any representation or warranty of VPI or the NEWCOS contained herein to
be untrue or inaccurate in any material respect at or prior to the Pre-Closing
and (ii) any material failure of VPI or the NEWCOS to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 7.7 that is not
accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by any COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANIES consent to such amendment or supplement; and provided further, that no
amendment or supplement to a schedule prepared by VPI or the NEWCOS that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless a majority of the Founding Companies consent
to such amendment or supplement. For all
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purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the Other
Founding Companies seeks to amend or supplement a schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, VPI shall give the COMPANIES notice promptly after
it has knowledge thereof. If VPI and a majority of the Founding Companies
consent to such amendment or supplement, but the COMPANIES do not give their
consent, the COMPANIES collectively may terminate this Agreement pursuant to
Section 12.l(iv) hereof. In the event that the COMPANIES seek to amend or
supplement a Schedule pursuant to this Section 7.8, and VPI and a majority of
the Other Founding Companies do not consent to such amendment or supplement,
this Agreement shall be deemed terminated by mutual consent as set forth in
Section 12.1(i) hereof. In the event that VPI or any NEWCO seeks to amend or
supplement a Schedule pursuant to this Section 7.8 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
7.8. No amendment of or supplement to a Schedule shall be made later than 24
hours prior to the anticipated effectiveness of the Registration Statement. For
purposes of this Section 7.8, consent to an amendment or supplement to a
schedule pursuant to Section 7.8 of this Agreement or one of the Other
Agreements shall have been deemed given by VPI or any Founding Company if no
response is received within 24 hours following receipt of notice of such
amendment or supplement (or sooner if required by the circumstances under which
such consent is requested and so requested in the notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and
the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the
Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with VPI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS
agree promptly to advise VPI if, at any time during the period in which a
prospectus relating to the offering is required to be delivered under the 1933
Act, any information contained in the prospectus concerning any COMPANY or the
STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. VPI will give the
COMPANIES and the STOCKHOLDERS an opportunity and a reasonable amount of time to
review and comment on a substantially final draft of the Registration Statement
prior to filing, and with respect to all amendments thereto, VPI will give the
COMPANIES and STOCKHOLDERS an opportunity to review and comment on those
portions of such amendments that relate to the COMPANIES. Insofar as the
information contained in the Registration Statement relates solely to the
COMPANIES or the STOCKHOLDERS, as of the effective date of the Registration
Statement each COMPANY represents and warrants as to such information with
respect to itself, and each STOCKHOLDER represents and warrants, as to such
information with respect to the COMPANIES and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light
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of the circumstances in which they were made, not misleading and that the
STOCKHOLDERS and the COMPANIES have had the opportunity to review and approve
such information. If, prior to the 25th day after the date of the final
prospectus of VPI utilized in connection with the IPO, the COMPANIES or the
STOCKHOLDERS become aware of any fact or circumstance which would change (or, if
after the Closing Date, would have changed) a representation or warranty of the
COMPANIES or the STOCKHOLDERS in this Agreement or would affect any document
delivered pursuant hereto in any material respect, the COMPANIES and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANIES or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANIES, or on behalf of the COMPANIES and of
STOCKHOLDERS at the date of this Agreement and on the Pre-Closing Date and on
the Closing Date, contained in this Agreement (including the Schedules and
Annexes hereto) shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANIES as of the end of all fiscal
quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANIES for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANIES or the results of its
operations from the financial statements as of the Balance Sheet Date. For the
fiscal quarter ending March 31, 1998, such financial statements shall be
delivered to VPI on or before April 21, 1998, unless the Closing Date shall have
occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such
financial statements shall have
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been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANIES for
the periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES
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The obligations of STOCKHOLDERS and the COMPANIES with respect to actions
to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on
or prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and the NEWCOS contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and the NEWCOS contained in Section 6 shall be true and correct in all
material respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and the NEWCOS on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Mergers or the IPO and no governmental agency or body shall have
taken any other action or made any request of the
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COMPANIES as a result of which the management of the COMPANIES deems it
inadvisable to proceed with the transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have
delivered to the COMPANIES a certificate, dated as of a date no later than ten
days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of
State and in each state in which VPI or the NEWCOS are authorized to do
business, showing that each of VPI and the NEWCOS is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for VPI and the NEWCOS, respectively, for all periods prior to the
Pre-Closing Date have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or the NEWCOS which would constitute a Material
Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material
loss or damages to any of its properties or assets,
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whether or not covered by insurance, which change, loss or damage materially
affects or impairs the ability of VPI and/or the NEWCOS to conduct their
respective businesses.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a
certificate or certificates, dated the Pre-Closing Date and signed by the
secretary of VPI and each NEWCO, certifying the truth and correctness of
attached copies of VPI's and the NEWCOS' respective Certificates of
Incorporation (including amendments thereto), Bylaws (including amendments
thereto), and resolutions of the boards of directors and, if required, the
stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into
this Agreement and the consummation of the transactions contemplated hereby.
Such certificate or certificates also shall be addressed to the Underwriters and
copies thereof shall be delivered to the Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all
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options granted under such stock option plan as of the Closing Date will be the
price per share of VPI Stock in the IPO, and all such options shall vest in four
equal installments commencing on the first anniversary of the Closing Date and
on each of the three anniversaries thereafter. The terms set forth in the
preceding sentence and all other terms of the options shall be no less favorable
than the options made available to the Other Founding Companies.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS
The obligations of VPI and the NEWCOS with respect to actions to be taken
on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to
the Pre-Closing Date of all of the following conditions. The obligations of VPI
and the NEWCOS with respect to actions to be taken on the Closing Date are
subject to the satisfaction or waiver on or prior to the Closing Date of the
conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the
Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2,
9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied
shall be deemed to have been waived, except that no such waiver shall be deemed
to affect the survival of the representations and warranties of the COMPANY
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANIES on or
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before the Pre-Closing Date or the Closing Date, as the case may be, shall have
been duly performed or complied with in all material respects; and the
STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date
and the Closing Date, respectively, and signed by them to such effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
each COMPANY, certifying the truth and correctness of attached copies of each
COMPANY's Charter Documents and resolutions of the board of directors and the
STOCKHOLDERS approving each COMPANY's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate also
shall be addressed to the Underwriters and a copy thereof shall be delivered to
the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to any COMPANY which would constitute a Material Adverse
Effect, and neither COMPANY shall have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of any COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i)
any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii)
obligations of the
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COMPANIES and VPI to the STOCKHOLDERS, except for (x) items specifically
identified on Schedules 5.10, 5.11 and 5.16 as being claims of or obligations to
the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to
their employment by the COMPANIES and (z) obligations arising under this
Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between any of the COMPANIES and the
STOCKHOLDERS not reflecting fair market terms shall have been canceled effective
prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI
certificates, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in each
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which each COMPANY is authorized to do business, showing each COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for each COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
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9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of each COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANIES for the
incremental cost of having VPI so named as an additional insured.
9.16 LOCKUP AGREEMENT. Each of the COMPANIES and the STOCKHOLDERS shall
have signed an agreement with the Underwriters, in form and substance identical
to agreements signed by the Other Founding Companies and the Founding
Stockholders in connection with the Other Agreements, by which the STOCKHOLDERS
covenant to hold all of the VPI Stock acquired hereunder for a period of at
least 180 days after the Closing Date except for transfers to immediate family
members, and trusts for the benefit of STOCKHOLDERS and/or immediate family
members, who agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
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9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANIES, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANIES as being conducted at the Pre-Closing
Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
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(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANIES shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end on
or before the Closing Date. All such Tax Returns shall have set forth all
material items required to be set forth therein and shall have been prepared in
compliance with applicable laws and shall be true, correct and complete in all
material respects. Each STOCKHOLDER shall pay or cause to be paid all Tax
liabilities (in excess of all amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the COMPANY Financial
Statements and books and records) required to be shown by such Tax Returns to be
due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns of,
or that include, any Acquired Party for all taxable periods ending after the
Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess
of amounts already paid with respect thereto or properly accrued or reserved
with respect thereto on the VPI Financial Statements and books and records)
required to be shown by such Tax Returns to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the COMPANIES,
as defined in Section 1563 of the Code, to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may request in
filing any Tax Return, amended Tax Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any audit or
other proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant Tax Returns,
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together with relevant accompanying schedules and relevant work papers, relevant
documents relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which such
party may possess. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Agreement shall bear all costs of filing
such Tax Returns.
(iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an exchange
pursuant to which gain is not recognized under Section 351(a) of the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to
serve as a director of VPI effective as of the Closing Date. Representatives of
the Founding Companies shall constitute a majority of the directors of VPI
immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at any COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting conditions for employees of each
COMPANY who were covered by such COMPANY's health insurance plan immediately
prior to the Closing Date or as otherwise required by law.
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10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the
books and records of such COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, the NEWCOS and each COMPANY (as the Surviving Corporations)
at all times, from and after the date of this Agreement until the Expiration
Date, from and against all losses, claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving
Corporations) as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or each COMPANY set forth
herein or on the Schedules or certificates delivered in connection herewith,
(ii) any breach of any agreement on the part of the STOCKHOLDERS or the
COMPANIES under this
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Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal
or state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
relating solely to any COMPANY or the STOCKHOLDERS, and provided to VPI or its
counsel by the COMPANIES or the STOCKHOLDERS, contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to the COMPANIES or
the STOCKHOLDERS required to be stated therein or necessary to make the
statements therein not misleading, or (iv) the matters described on Schedule
11.1(iv) (relating to specifically identified matters such as ongoing claims
and/or litigation), which Schedule shall be prepared by VPI, provided, however,
(A) that in the case of any indemnity arising pursuant to clause (iii) such
indemnity shall not inure to the benefit of VPI, the NEWCOS, the COMPANIES or
the Surviving Corporations to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to VPI counsel and to VPI for inclusion in the final prospectus, and
such information was not so included or properly delivered, and (B) that no
STOCKHOLDER shall be liable for any indemnification obligation pursuant to this
Section 11.1 to the extent attributable to a breach of any representation,
warranty or agreement made herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
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STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS
of their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or the NEWCOS under this Agreement, (iii) any liabilities which the
STOCKHOLDERS may incur due to VPI's or the NEWCOS' failure to be responsible for
the liabilities and obligations of the COMPANIES as provided in Section 1 hereof
(except to the extent that VPI or the NEWCOS have claims against the
STOCKHOLDERS under Section 11.1 hereof by reason of such liabilities); (iv) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to VPI, the
NEWCOS or any of the Other Founding Companies contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, or arising out of or based upon
any omission or alleged omission to state therein a material fact relating to
VPI or the NEWCOS or any of the Other Founding Companies required to be stated
therein or necessary to make the statements therein not misleading, or (v) the
matters described on Schedule 11.2(v) (relating to specifically identified
matters including the release of the guarantees pursuant to Section 10.1
hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a
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reasonable estimate of the amount thereof. The Indemnifying Party shall have the
right to defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel.
Further, absent a conflict, the Indemnified Party may select counsel and have
such counsel participate in such matter at the sole cost of the Indemnified
Party. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested in writing by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-
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pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
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11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving
Corporations and the other persons or entities indemnified pursuant to Section
11.1 shall not assert any claim for indemnification hereunder against the
STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of
all claims which such persons may have against the STOCKHOLDERS shall exceed
2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of
the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"),
provided, however, that VPI, the NEWCOS, the Surviving Corporations and the
other persons or entities indemnified pursuant to Section 11.1 may assert and
shall be indemnified for any claim under Section 11.l(iv) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any such claim under Section 11.1(iv) shall not be
counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert
any claim for indemnification hereunder against VPI or the NEWCOS until such
time as, and solely to the extent that, the aggregate of all claims which the
STOCKHOLDERS may have against VPI and the NEWCOS shall exceed $50,000, provided,
however, that the STOCKHOLDERS and the other persons or entities indemnified
pursuant to Section 11.2 may assert and shall be indemnified for any claim under
Section 11.2(v) at any time, regardless of whether the aggregate of all claims
which such persons may have against any of VPI and the NEWCOS exceeds $50,000,
it being understood that the amount of any such claim under Section 11.2(v)
shall not be counted towards such $50,000 amount. No person shall be entitled to
indemnification under this Section 11 if and to the extent that: (a) such
person's claim for indemnification is directly or indirectly related to a breach
by such person of any representation, warranty, covenant or other agreement set
forth in this Agreement; or (b) such person receives a tax benefit as a result
of the claim or loss for which indemnification is sought (i.e., the amount of
such
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claim or loss for which indemnification is provided hereunder shall be reduced
by the amount of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to
be a reduction in the consideration received by the STOCKHOLDERS pursuant to
Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANIES;
(ii) by the STOCKHOLDERS or the COMPANIES (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the
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willful failure of the party seeking to terminate this Agreement to perform any
of its obligations under this Agreement to the extent required to be performed
by it prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or the COMPANIES, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and
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the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and
expenses of its attorneys and accountants incurred in connection with the
transactions contemplated by this Agreement in the event that this Agreement is
terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or sales
business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of the locations in which VPI or the
COMPANIES, or any of their subsidiaries, conduct a noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
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(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of any COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that such COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from (a) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter or (b) owning
noncommercial property if such property is managed by the COMPANY.
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13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a
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violation of this Section 13 if VPI (including VPI's subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities, or (iii) location, as applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree
that the covenants in this Section 13 are a material and substantial part of
this transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or any COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such
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employment agreement), notwithstanding the definition of "Noncompetition Period"
in Section 18.17, the provisions of this Section 13 shall not be valid or
enforceable by VPI if such STOCKHOLDER waives the STOCKHOLDER's right to receive
severance compensation under such employment agreement. In the event such
employment agreement is terminated as a result of a material breach by the
COMPANY of the employment agreement, the provisions of this Section 13 likewise
shall not be valid or enforceable.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANIES, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANIES', the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the
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STOCKHOLDERS shall, if possible, give two days' prior written notice thereof to
VPI and provide VPI with the opportunity within such two-day period to contest
such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an
injunction restraining such STOCKHOLDERS from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
VPI from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none
of the above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the COMPANIES, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the COMPANIES' businesses. VPI and
the NEWCOS agree that, prior to the Closing, or if the transactions contemplated
by this Agreement are not consummated, they will not use, except in connection
with the transactions contemplated hereby, or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except disclosures (a) to authorized
representatives of the COMPANIES, (b) to counsel and other advisors; provided,
however, that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 14.2 and (c) to the Other Founding Companies and
their representatives pursuant to Section 7.1(a), unless (i) such information
becomes known to the public generally through no fault of VPI or any NEWCO, (ii)
disclosure is required by law or the order of any governmental authority under
color of law; provided, however, that prior to disclosing any information
pursuant to this clause
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(ii), VPI and the NEWCOS shall, unless otherwise required by law or such order,
give two days' prior written notice thereof to the COMPANIES and the
STOCKHOLDERS and provide the COMPANIES and the STOCKHOLDERS with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. VPI will disclose
confidential information relating to the COMPANIES to the Other Founding
Companies only if such companies have agreed, in advance, to treat such
information as confidential. In the event of a breach or threatened breach by
VPI or the NEWCOS of the provisions of this Section, the COMPANIES and the
STOCKHOLDERS shall be entitled to an injunction restraining VPI and the NEWCOS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the COMPANIES and the STOCKHOLDERS from
pursuing any other available remedy for as such breach or threatened breach,
including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
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14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANIES of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange,
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transfer, distribute or otherwise dispose of, in any transaction or series of
transactions involving more than 5,000 shares (a "Future Sale"), any shares of
VPI Stock received by the STOCKHOLDERS pursuant to Section 3.1 except in
accordance with this Section 15.2. If any STOCKHOLDER desires to make a Future
Sale, the STOCKHOLDER shall first provide written notice thereof to VPI. VPI
shall have three (3) days after receipt of such notice by VPI in which to
arrange for a private sale of such shares through one or more of the
Underwriters, and such STOCKHOLDER may not make the Future Sale except pursuant
to such arrangements; provided, however, that the terms of such sale (including
commissions) are at least as favorable as the terms the STOCKHOLDER would have
received in the absence of this Section 15.2. If VPI has not successfully
arranged for a private sale of such shares through one or more the Underwriters
within such three (3) day period, the restrictions of this Section 15.2 shall
not apply to such Future Sale. Any subsequent Future Sales by such STOCKHOLDER
must be made in accordance with this Section 15.2. The terms of this Section
15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned,
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pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act, the rules and
regulations of the SEC and applicable state securities laws. All of the VPI
Stock shall bear the following legend in addition to the legend required under
Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANIES, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than
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(i) any shelf registration of shares to be used as consideration for
acquisitions of additional businesses by VPI and (ii) registrations relating to
employee benefit plans, VPI shall give each of the STOCKHOLDERS prompt written
notice of its intent to do so. Upon the written request of any of the
STOCKHOLDERS given within 30 days after receipt of such notice, VPI shall cause
to be included in such registration all of the VPI Stock issued to such
STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests,
provided that VPI shall have the right to reduce the number of shares included
in such registration to the extent that inclusion of such shares could, in the
reasonable opinion of tax counsel to VPI or its independent auditors, jeopardize
the status of the transactions contemplated hereby and by the Registration
Statement as an exchange pursuant to which gain is not recognized under Section
351(a) of the Code. In addition, if VPI is advised in writing in good faith by
any managing underwriter of an underwritten offering of the securities being
offered pursuant to any registration statement under this Section 17.1 that the
number of shares to be sold by persons other than VPI is greater than the number
of such shares which can be offered without adversely affecting the offering,
VPI may reduce pro rata the number of shares offered for the accounts of such
persons (based upon the number of shares desired to be sold by such person) to a
number deemed satisfactory by such managing underwriter, provided, however, that
for each such offering made by VPI after the IPO, such reduction shall be made
first by reducing the number of shares to be sold by persons other than VPI, the
STOCKHOLDERS and the stockholders of the Other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements (collectively, the
STOCKHOLDERS and the stockholders of the other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the
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Founding Stockholders on a pro rata basis based on the number of shares proposed
to be registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such
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registration unless VPI is no longer proceeding diligently to effect such
registration (in which case the delay contemplated by this sentence would not be
applicable); provided that VPI shall provide the Founding Stockholders the right
to participate in such public offering pursuant to, and subject to, Section 17.1
hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
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17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
VPI will reimburse such seller and each such director, officer, underwriter and
controlling Person for any expenses (including but not limited to reasonable
attorneys' fees) reasonably incurred by them in connection with investigating
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or defending any such loss, claim, liability, action or proceeding; provided
that VPI shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to VPI by such seller expressly for use in the preparation thereof, and provided
further that VPI shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the 1933
Act, in any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the same may
be then supplemented or amended, to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, underwriter
or controlling Person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933
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Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in strict conformity with written
information furnished to VPI by such seller expressly for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement; provided that such prospective
seller shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the 1933 Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any underwriter, VPI or any such director, officer or
controlling Person and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling holder of Registrable
Securities under this Section 17.6(b) be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be
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made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 17.6, except to
the extent that the indemnifying party is actually materially prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
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(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately
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preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such underwriter has otherwise been required to pay by reason
on such untrue or alleged untrue statement or omission or alleged omission, and
no selling holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
selling holder were offered to the public exceeds the amount of any damages
which such selling holder has otherwise been required to pay by reason of such
untrue statement or omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, each COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
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media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANIES and the STOCKHOLDERS.
18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and the NEWCOS shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of each COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement, including but
not limited to any letter of intent entered into by any of the parties hereto.
This
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Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI, acting through their respective officers or
trustees, duly authorized by their respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Hauer &
Feld, L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by the
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COMPANIES and the STOCKHOLDERS under this Agreement, including the fees and
expenses of accountants and legal counsel to the COMPANIES and the STOCKHOLDERS.
Notwithstanding the foregoing, if the transactions contemplated by this
Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Mergers, other than
Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the
COMPANIES or VPI, shall pay all taxes due upon receipt of the consideration
payable pursuant to Section 3 hereof, and shall assume all tax risks and
liabilities of such STOCKHOLDER in connection with the transactions contemplated
hereby; provided, however, that the foregoing shall not in any way prejudice the
ability of the STOCKHOLDERS and the COMPANIES to rely upon the opinions
contained in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or the NEWCOS, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
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Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANIES, addressed to them at:
Trupp-Hodnett Enterprises, Inc.
520 Ocean Boulevard
St. Simons Island, Georgia 31522
Facsimile no.: (912) 638-2983
Attention: Hans Trupp
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any
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similar breach or default occurring later; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default occurring
before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Mergers. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Mergers and each future holder of
such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being
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applicable to another Schedule or another subsection of the same Schedule, such
item shall be deemed incorporated by reference in such Schedule or such other
subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means any COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean the NEWCOS and each of the other
Delaware companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
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"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph
of this Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Mergers" shall mean the time as of which the Mergers
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
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"Mergers" means the mergers of (i) TRUPP ACQUSITION CORP. with and into
TRUPP-HODNETT ENTERPRISES, INC. and (ii) MANAGEMENT ACQUSITION CORP. with and
into THE MANAGEMENT COMPANY, pursuant to this Agreement and the applicable
provisions of the laws of the State of Delaware and other applicable state laws.
"NEWCO" or "NEWCOS" has the meaning set forth in the first paragraph of
this Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of each
respective NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANIES.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
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"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANIES and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANIES is or was a
member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless
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the context otherwise requires, the owners of the membership interests of such
limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporations" shall mean each of the COMPANIES as the surviving
parties in the Mergers.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
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[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
TRUPP ACQUISITION CORP.
MANAGEMENT ACQUISITION CORP.
By:
--------------------------------
Leonard Potter
Vice President
TRUPP-HODNETT ENTERPRISES, INC.
THE MANAGEMENT COMPANY
By:/s/ Hans F. Trupp
----------------------------------
Name: Hans F. Trupp
--------------------------
Title: Chairman
--------------------------
STOCKHOLDERS:
/s/ Hans F. Trupp
- -------------------------------------
Hans F. Trupp
/s/ Roy K. Hodnett
- -------------------------------------
Roy K. Hodnett
/s/ Pat Hodnett Cooper
- -------------------------------------
Pat Hodnett Cooper
/s/ Austin Trupp
- -------------------------------------
Austin Trupp
EXHIBIT 2.13
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
WHISTLER CHALETS HOLDING CORP.
(a subsidiary of Vacation Properties International, Inc.)
WHISTLER CHALETS LIMITED
and
the STOCKHOLDERS named herein
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
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AGREEMENT AND PLAN OF ORGANIZATION............................................1
1. THE PURCHASE AND SALE.....................................................3
1.1 General...............................................................3
1.2 Intentionally Deleted.................................................3
1.3 Intetionally Deleted..................................................3
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY, VPI and NEWCO........................................3
2. NEWCO STOCK...............................................................3
2.1 Capitalization of NEWCO...............................................3
2.2 Rights and Obligations of VPI.........................................4
2.3 Voting Rights.........................................................9
3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE..............................9
3.1 Delivery of Dividend Access Shares and Cash...........................9
3.2 Delivery of COMPANY Stock.............................................9
3.3 Balance Sheet Test...................................................10
4. CLOSING..................................................................10
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS...............11
(A) Representations and Warranties of COMPANY and STOCKHOLDERS...........11
5.1 Due Organization..................................................12
5.2 Authority.........................................................13
5.3 Capital Stock of the COMPANY......................................13
5.4 Transactions in Capital Stock.....................................13
5.5 No Bonus Shares...................................................14
5.6 Subsidiaries......................................................14
5.7 Predecessor Status; etc...........................................14
5.8 Spin-off by the COMPANY...........................................14
5.9 Financial Statements..............................................14
5.10 Liabilities and Obligations......................................15
5.11 Accounts and Notes Receivable....................................16
5.12 Permits and Intangibles..........................................16
5.13 Environmental Matters............................................17
5.14 Personal Property................................................18
5.15 Significant Customers............................................19
5.16 Material Contracts and Commitments...............................19
5.17 Real Property....................................................20
5.18 Insurance........................................................21
5.19 Compensation; Employment Agreements; Organized Labor Matters.....21
5.20 Employee Plans...................................................23
5.21 Compliance with Laws Governing Pension and Other Benefit Plans...25
5.22 Conformity with Law; Litigation..................................28
5.23 Taxes............................................................28
5.24 No Violations....................................................30
5.25 Government Contracts.............................................31
5.26 Absence of Changes...............................................31
5.27 Deposit Accounts; Powers of Attorney.............................33
5.28 Validity of Obligations..........................................33
5.29 Relations with Governments.......................................34
5.30 Disclosure.......................................................34
5.31 Prohibited Activities............................................35
(B) Representations and Warranties of STOCKHOLDERS.......................35
5.32 Authority; Ownership.............................................35
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5.33 Preemptive Rights...................................................35
5.34 Resident Status ....................................................35
6. REPRESENTATIONS OF VPI AND NEWCO..........................................36
6.1 Due Organization.....................................................36
6.2 Authorization........................................................37
6.3 Capital Stock of VPI and NEWCO.......................................37
6.4 Transactions in Capital Stock........................................37
6.5 Subsidiaries.........................................................38
6.6 Financial Statements.................................................38
6.7 Liabilities and Obligations..........................................38
6.8 Conformity with Law; Litigation......................................38
6.9 No Violations........................................................39
6.10 Validity of Obligations.............................................39
6.11 Restricted Common Stock.............................................40
6.12 No Side Agreements..................................................40
6.13 Business; Real Property; Material Agreements........................40
6.14 Taxes...............................................................41
6.15 Completion of Due Diligence.........................................43
6.16 Disclosure.........................................................43
7. COVENANTS PRIOR TO CLOSING...............................................43
7.1 Access and Cooperation; Due Diligence................................43
7.2 Conduct of Business Pending Closing..................................44
7.3 Prohibited Activities................................................45
7.4 No Shop..............................................................47
7.5 Notice to Bargaining Agents..........................................48
7.6 Agreements...........................................................48
7.7 Notification of Certain Matters......................................48
7.8 Amendment of Schedules...............................................49
7.9 Cooperation in Preparation of Registration Statement.................50
7.10 Final Financial Statements..........................................51
7.11 Further Assurances..................................................52
7.12 Authorized Capital..................................................52
7.13 Best Efforts to Consummate Transaction..............................52
7.14 Section 85 Elections................................................53
7.15 British Columbia Securities Consents................................53
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY..........53
8.1 Representations and Warranties.......................................53
8.2 Performance of Obligations...........................................54
8.3 No Litigation........................................................54
8.4 Opinion of Counsel...................................................54
8.5 Registration Statement...............................................54
8.6 Consents and Approvals...............................................54
8.7 Good Standing Certificates...........................................55
8.8 No Material Adverse Change...........................................55
8.9 Closing of IPO.......................................................55
8.10 Secretary's Certificate.............................................55
8.11 Employment Agreements...............................................55
8.12 Directors and Officers Insurance....................................56
8.13 Stock Options.......................................................56
8.14 Support Agreement and Trust Agreement...............................56
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO.....................56
9.1 Representations and Warranties.......................................56
9.2 Performance of Obligations...........................................57
9.3 No Litigation........................................................57
9.4 Secretary's Certificate..............................................57
9.5 No Material Adverse Effect...........................................57
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9.6 STOCKHOLDERS' Release................................................58
9.7 Termination of Related Party Agreements..............................58
9.8 Opinion of Counsel...................................................58
9.9 Consents and Approvals...............................................58
9.10 Good Standing Certificates..........................................58
9.11 Registration Statement..............................................59
9.12 Employment Agreements...............................................59
9.13 Closing of IPO......................................................59
9.14 FIRPTA Certificate..................................................59
9.15 Insurance...........................................................59
9.16 Lockup Agreement....................................................59
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING.....................60
10.1 Release From Guarantees; Repayment of Certain Obligations...........60
10.2 Intentionally Deleted...............................................60
10.3 Preparation and Filing of Tax Returns...............................60
10.4 Appointment of Directors............................................61
10.5 Preservation of Employee Benefit Plans..............................61
10.6 Maintenance of Books................................................62
10.7 Liquidation.........................................................62
11. INDEMNIFICATION.........................................................62
11.1 General Indemnification by the STOCKHOLDERS.........................62
11.2 Indemnification by VPI..............................................63
11.3 Third Person Claims.................................................64
11.4 Exclusive Remedy....................................................66
11.5 Limitations on Indemnification......................................66
12. TERMINATION OF AGREEMENT................................................67
12.1 Termination.........................................................67
12.2 Liabilities in Event of Termination.................................68
13. NONCOMPETITION..........................................................69
13.1 Prohibited Activities...............................................69
13.2 Damages.............................................................70
13.3 Reasonable Restraint................................................71
13.4 Severability; Reformation...........................................71
13.5 Independent Covenant................................................72
13.6 Materiality.........................................................72
13.7 Limitation..........................................................72
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................73
14.1 STOCKHOLDERS........................................................73
14.2 VPI AND NEWCO.......................................................74
14.3 Damages.............................................................74
14.4 Survival............................................................75
14.5 Return of Data Submitted............................................75
15. TRANSFER RESTRICTIONS...................................................75
15.1 Transfer Restrictions...............................................75
15.2 Certain Transfers...................................................76
16. SECURITIES LAW REPRESENTATIONS..........................................76
16.1 Compliance with Law.................................................77
16.2 Economic Risk; Sophistication.......................................78
17. REGISTRATION RIGHTS.....................................................78
17.1 Piggyback Registration Rights.......................................78
17.2 Demand Registration Rights..........................................79
17.3 Registration Procedures.............................................80
17.4 Underwriting Agreement..............................................81
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17.5 Availability of Rule 144............................................81
17.6 Registration Rights Indemnification.................................81
18. GENERAL.................................................................86
18.1 Press Releases......................................................86
18.2 Cooperation.........................................................87
18.3 Successors and Assigns; Third Party Beneficiaries...................87
18.4 Entire Agreement....................................................87
18.5 Counterparts........................................................88
18.6 Brokers and Agents..................................................88
18.7 Expenses............................................................88
18.8 Notices.............................................................89
18.9 Governing Law.......................................................90
18.10 Exercise of Rights and Remedies....................................90
18.11 Time...............................................................90
18.12 Reformation and Severability.......................................90
18.13 Remedies Cumulative................................................90
18.14 Captions...........................................................91
18.15 Amendments and Waivers.............................................91
18.16 Incorporation by Reference.........................................91
18.17 Defined Terms......................................................91
ANNEX I EXHIBIT A - DIVIDEND ACCESS SHARE PROVISIONS
ANNEX I EXHIBIT B - SUPPORT AGREEMENT
ANNEX I EXHIBIT C - EXCHANGE AND VOTING TRUST AGREEMENT
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI FORM OF OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), WHISTLER HOLDING CORP., a Canadian corporation ("NEWCO"),
WHISTLER CHALETS LIMITED, a British Columbia corporation (the "COMPANY"), and J.
Patrick McCurdy (the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of Canada, having been incorporated on March [____], 1998, for the
purpose of completing the transactions set forth herein, and is a
wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that the
STOCKHOLDERS sell all of the COMPANY Stock owned by the STOCKHOLDERS to
NEWCO in exchange for cash and Dividend Access Shares of NEWCO pursuant to
this Agreement and the applicable provisions of the laws of the
jurisdictions in which NEWCO and the COMPANY are incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Hotel Corporation of
the Pacific, Inc., a Hawaii corporation, Houston and O'Leary Company, a
Colorado corporation, Jupiter Property
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Management at Park City, Inc., a Utah corporation, Maui Condominium & Home
Realty, Inc., a Hawaii corporation, The Maury People, Inc., a Massachusetts
corporation, Howey Acquisition, Inc., a Florida corporation, Realty
Consultants, Inc., a Florida corporation, Resort Property Management, Inc.,
a Utah corporation, Telluride Resort Accommodations, Inc., a Colorado
corporation, and Trupp-Hodnett Enterprises, Inc., a Georgia corporation,
THE Management Company, a Georgia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE PURCHASE AND SALE
1.1 GENERAL. Upon the terms and subject to the conditions of this
Agreement, the STOCKHOLDERS hereby agree to sell, assign, transfer and deliver
to NEWCO, and NEWCO hereby agrees to purchase, all of the outstanding capital
stock of the COMPANY (the "COMPANY Stock").
1.2 INTENTIONALLY DELETED.
1.3 INTENTIONALLY DELETED.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of an unlimited number shares of NEWCO stock, of which
ten (10) shares are issued and outstanding.
2. NEWCO STOCK
Prior to the Pre-Closing Date, the Articles of Incorporation of NEWCO,
shall be amended to provide for authorized capital consisting of (i) a class of
an unlimited number of voting common shares (all of the issued and outstanding
shares of which shall be held by VPI) and (ii) a class of non-voting capital
shares ("Dividend Access Shares") having the rights, privileges, restrictions
and conditions set forth on Exhibit A of Annex I hereto (the "Dividend Access
Share Provisions"). Each share of the Dividend Access Shares shall (x) entitle
the holder thereof (the "Holder") to dividend rights equal, after conversion
into Canadian dollars
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based on the Canadian/U.S. exchange rate in effect on the record date thereof,
to the per share dividend rights of VPI Stock; (y) subject to the "Liquidation
Call Right" (as defined in Section 2.2(i) hereof), entitle the Holder, on a
liquidation of NEWCO, to receive in exchange for each Dividend Access Share one
(1) share of VPI Stock as provided in Section 2.1(i)(a) for a period ending on
the twentieth (20th) anniversary of the Closing Date; (z) subject to the
"Retraction Call Right" (as defined in Section 6.1(c) of the Dividend Access
Share Provisions), entitle the Holder, at his election from time to time for a
period ending on the twentieth (20th) anniversary of the Closing Date, upon
thirty (30) days' written notice given by such Holder to NEWCO, to require NEWCO
to redeem any or all Dividend Access Shares and to exchange therefor, on a share
for share basis, shares of VPI Stock (the "Right of Retraction").
2.2 RIGHTS AND OBLIGATIONS OF VPI.
(i) VPI LIQUIDATION CALL RIGHT.
(a) Subject to Section 10.7, VPI shall have the overriding right (the
"Liquidation Call Right"), in the event of and notwithstanding the proposed
liquidation, dissolution or winding up of NEWCO pursuant to Article 5 of the
Dividend Access Share Provisions, to purchase all but not less than all of the
Dividend Access Shares held by each such Holder on payment by VPI to each such
Holder of an amount per Dividend Access Share as set forth in section 5.1 of the
Dividend Access Share Provisions (the "Liquidation Call Purchase Price");
provided, however, that if the record date for any such declared and unpaid
dividends occurs on or after the Liquidation Date, the
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Liquidation Call Purchase Price shall not include such additional amount
equivalent to such dividends. In the event of the exercise of the Liquidation
Call Right by VPI, each Holder shall be obligated to sell all of the Dividend
Access Shares held by such Holder to VPI on the Liquidation Date on payment by
VPI to the Holder of the Liquidation Call Purchase Price for each such Dividend
Access Share.
(b) To exercise the Liquidation Call Right, VPI must notify NEWCO and the
Holders of VPI's intention to exercise such right at least sixty (60) days
before the Liquidation Date in the case of a voluntary liquidation, dissolution
or winding up of NEWCO, or at least five (5) Business Days before the
Liquidation Date in the case of an involuntary liquidation, dissolution or
winding up of NEWCO. NEWCO will notify the Holders as to whether or not VPI has
exercised the Liquidation Call Right as soon as practicable after the end of the
period during which the Liquidation Call Right may be exercised by VPI. If VPI
exercises the Liquidation Call Right, on the Liquidation Date VPI will purchase
and the Holders will sell all of the Dividend Access Shares then outstanding for
a price per Dividend Access Share equal to the Liquidation Call Purchase Price.
(c) For purposes of completing the purchase of the Dividend Access Shares
pursuant to the Liquidation Call Right, VPI shall deposit with NEWCO or an
authorized agent or shall hold on behalf of NEWCO, on or before the Liquidation
Date, certificates representing the aggregate number of shares of VPI Stock
deliverable by VPI in payment of the total Liquidation Call Purchase Price and a
cheque or cheques in the amount of the remaining portion, if any, of the total
Liquidation Call Purchase Price. Provided that the total Liquidation Call
Purchase Price has been so deposited with NEWCO or an authorized agent or held
on behalf of NEWCO, on and after the Liquidation Date the rights of each Holder
of Dividend Access Shares will be limited to receiving such Holder's
proportionate part of the total Liquidation Call Purchase Price payable by VPI
upon presentation and surrender by the Holder of certificates representing the
Dividend Access Shares held by such Holder and the Holder shall on and after the
Liquidation Date be considered and deemed for all purposes to be the Holder of
the VPI Stock delivered to such Holder. Upon surrender to NEWCO or an authorized
agent of a certificate or certificates representing Dividend Access Shares,
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together with such other documents and instruments as may be required to effect
a transfer of Dividend Access Shares under the Canada Business Corporation Act
("CBCA") and the by-laws of NEWCO and such additional documents and instruments
as NEWCO or an authorized agent may reasonably require, the Holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and VPI or NEWCO on behalf of VPI or an authorized agent of VPI shall
deliver to such Holder, certificates representing the VPI Stock to which the
Holder is entitled and a cheque or cheques of VPI payable at par and in Canadian
dollars at any branch of the bankers of VPI or NEWCO in Canada in payment of the
remaining portion, if any, of the total Liquidation Call Purchase Price. If VPI
does not exercise the Liquidation Call Right in the manner described above, on
the Liquidation Date the Holders of the Dividend Access Shares will be entitled
to receive in exchange therefor the liquidation price otherwise payable by NEWCO
in connection with the liquidation, dissolution or winding up of NEWCO pursuant
to Article 5 of the Dividend Access Share Provisions.
(ii) VPI REDEMPTION CALL RIGHT.
(a) Subject to the "Automatic Redemption Date" (as defined in Section 1.1
of the Dividend Access Share Provisions), VPI shall have the overriding right
(the "Redemption Call Right"), notwithstanding the proposed redemption of
Dividend Access Shares by NEWCO pursuant to Article 7 of the Dividend Access
Share Provisions, to purchase from all but not less than all of the Holders of
Dividend Access Shares to be redeemed on the "Redemption Date" (as defined in
Section 7.2 of the Dividend Access Share Provisions) all but not less than all
of the Dividend Access Shares held by each such Holder that are otherwise to be
redeemed on payment by VPI to each such Holder of an amount per such Dividend
Access Share equal to (x) the Current Market Price of one (1) share of VPI Stock
on the last Business Day prior to the Redemption Date which shall be satisfied
in full by causing to be delivered to such Holder one (1) share of VPI Stock,
plus (y) an additional amount equivalent to the full amount of all dividends
declared and unpaid on such Dividend Access Share and all dividends declared on
Restricted Common Stock that have not been declared on such Dividend Access
Share in accordance with Section 7.1 of the Dividend Access Share Provisions
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(collectively, the "Redemption Call Purchase Price"); provided, however, that if
the record date for any such declared and unpaid dividends occurs on or after
the Redemption Date, the Redemption Call Purchase Price shall not include such
additional amount equivalent to such dividends. In the event of the exercise of
the Redemption Call Right by VPI, each Holder shall be obligated to sell all the
Dividend Access Shares held by such Holder and otherwise to be redeemed to VPI
on the Redemption Date on payment by VPI to the Holder of the Redemption Call
Purchase Price for each such Dividend Access Share.
(b) To exercise the Redemption Call Right, VPI must notify NEWCO and the
Holders or an authorized agent of VPI's intention to exercise such right at
least one hundred twenty-five (125) days before the Automatic Redemption Date
(as defined in Section 1.1 of the Dividend Access Share Provisions), in the case
of the "Automatic Redemption" (as defined in Section 7.1 of the Dividend Access
Share Provisions), or at least thirty-five (35) days before a "Section 12(g)
Redemption Date" (as defined in Section 7.2 of the Dividend Access Share
Provisions) in the case of a "Section 12(g) Redemption" (as defined in Section
7.1 of the Dividend Access Share Provisions). NEWCO or an authorized agent will
notify the Holders of Dividend Access Shares as to whether or not VPI has
exercised the Redemption Call Right as soon as practicable after the end of the
period during which the same may be exercised by VPI. If VPI exercises the
Redemption Call Right, on the Redemption Date VPI will purchase and the Holders
will sell all of the Dividend Access Shares to be redeemed for a price per
Dividend Access Share equal to the Redemption Call Purchase Price.
(c) For purposes of completing the purchase of Dividend Access Shares
pursuant to the Redemption Call Right, VPI shall deposit with NEWCO or an
authorized agent of NEWCO or will hold on behalf of NEWCO, on or before the
Redemption Date, certificates representing the aggregate number of shares of VPI
Stock deliverable by VPI in payment of the total Redemption Call Purchase Price
and a cheque or cheques in the amount of the remaining portion, if any, of the
total Redemption Call Purchase Price. Provided that the total Redemption Call
Purchase Price has been so deposited with NEWCO or an authorized agent or held
on behalf of NEWCO, on and after
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the Redemption Date the rights of each Holder of Dividend Access Shares so
purchased will be limited to receiving such Holder's proportionate part of the
total Redemption Call Purchase Price payable by VPI upon presentation and
surrender by the Holder of certificates representing the Dividend Access Shares
or held by such Holder and the Holder shall on and after the Redemption Date be
considered and deemed for all purposes to be the Holder of the VPI Stock
delivered to such Holder. Upon surrender to NEWCO of a certificate or
certificates representing Dividend Access Shares, together with such other
documents and instruments as may be required to effect a transfer of Dividend
Access Shares under the CBCA and the by-laws of NEWCO and such additional
documents and instruments as NEWCO may reasonably require, the Holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and VPI or NEWCO on behalf of VPI or an authorized agent of VPI shall
deliver to such Holder, certificates representing the VPI Stock to which the
Holder is entitled and a cheque or cheques of VPI payable at par and in Canadian
dollars at any branch of the bankers of VPI or NEWCO in Canada in payment of the
remaining portion, if any, of the total Redemption Call Purchase Price. If VPI
does not exercise the Redemption Call Right in the manner described above, on
the Redemption Date the Holders of the Dividend Access Shares will be entitled
to receive in exchange therefor the redemption price otherwise payable by NEWCO
in connection with the redemption of Dividend Access Shares pursuant to Article
7 of the Dividend Access Share Provisions.
(iii) WITHHOLDING RIGHTS. VPI and NEWCO shall be entitled to deduct and
withhold from the consideration otherwise payable to any Holder of Dividend
Access Shares, including any dividend payments in respect of the Dividend Access
Shares, such amount as VPI or NEWCO is required or permitted to deduct and
withhold with respect to such payment under the Code, the Income Tax Act
(Canada) or any provision of state, provincial, local or foreign tax law. VPI
and NEWCO shall not initially withhold any United States Tax on dividends paid
on the Dividend Access Shares. However, if any United States taxing authority
determines that VPI or NEWCO is liable for United States withholding Tax on
dividends paid to the Holders on the Dividend Access Shares, NEWCO shall be
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entitled to reduce the amount of any future dividends to be paid to the Holders
by such withholding obligation. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes hereof as having been paid to
the Holder of Dividend Access Shares in respect of which such deduction and
withholding was made; provided, however, that such withheld amounts are actually
remitted to the appropriate taxing authority. To the extent that the amount so
required or permitted to be deducted or withheld from any payment to a Holder
exceeds the cash portion of the consideration otherwise payable to the Holders,
VPI upon at least ten (10) days' prior written notice to such Holder, is hereby
authorized to sell or otherwise dispose of at fair market value such portion of
such non-cash consideration otherwise payable to the Holder as is necessary to
provide sufficient funds to VPI in order to enable it to comply with such
deduction or withholding requirement and VPI shall give an accounting to the
Holder with respect thereof and any balance of such proceeds of sale.
2.3 VOTING RIGHTS. Prior to the Closing Date, VPI shall provide voting
rights to the Holders, whereby each Holder will be entitled to the same rights
and privileges regarding the voting of his Dividend Access Shares as if each
Holder held the equivalent number of shares of VPI Stock.
3. DELIVERY OF CONSIDERATION FOR STOCK PURCHASE
3.1 DELIVERY OF DIVIDEND ACCESS SHARES AND CASH. On the Closing Date, the
STOCKHOLDERS, who are the holders of all outstanding certificates representing
shares of COMPANY Stock, shall, upon surrender of such certificates, receive the
respective number of Dividend Access Shares and the amount of cash (subject to
adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to
be payable by certified cheque or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to NEWCO at
the Pre-Closing (subject to Section 4) the certificates representing COMPANY
Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary
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transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense,
affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such COMPANY Stock or with respect to the stock
powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall
result in a corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
Notwithstanding anything set forth above, VPI acknowledges (i) that the
COMPANY has established a reserve in the amount of $385,000 on its balance sheet
relating to contingent liabilities and (ii) that this reserve shall be deemed to
have not been established (i.e., shall be ignored and not counted) when
conducting the above-referenced balance sheet tests, including positive net
working capital, positive net worth and fully funded customer deposits.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the transfer and delivery of the COMPANY Stock as
contemplated by Section 1 hereof and (ii) effect the delivery of the
consideration referred to in Section 3 hereof; provided, however, that such
actions shall not include the actual completion of the transfer and delivery of
the shares and check(s) referred to in Section 3 hereof, each of which actions
shall only be taken upon the Closing Date as herein provided. The taking of the
actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take
place in escrow on the pre-closing date (the "Pre-Closing Date") at the offices
of Akin, Gump, Strauss,
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Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036.
On the Closing Date such escrow shall automatically be terminated and (x) all
transactions contemplated by this Agreement, including the transfer and delivery
of shares, the delivery of a check or checks in an amount equal to the cash
portion of the consideration which the STOCKHOLDERS shall be entitled to receive
pursuant to Section 3 hereof shall occur and (y) the closing with respect to the
IPO shall be completed. The taking of the actions described in the preceding
clauses (x) and (y) shall constitute the closing of the transactions hereunder
(the "Closing"), and the date on which the actions described in the preceding
clauses (x) and (y) occur shall be referred to as the "Closing Date." Except as
provided in Sections 8 and 9 hereof with respect to actions to be taken on the
Closing Date, during the period from the Pre-Closing Date to the Closing Date
this Agreement may only be terminated by a party if the underwriting agreement
in respect of the IPO is terminated pursuant to the terms of such agreement.
This Agreement shall in any event terminate if the Closing Date has not occurred
within 15 business days of the Pre-Closing Date. Upon a termination of this
Agreement pursuant hereto after the Pre-Closing Date but prior to the Closing
Date, all documents delivered into escrow on the Pre-Closing Date shall be
redelivered to the respective parties from whom such documents originated. Time
is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23
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hereof shall survive until such time as the limitations period has run for all
Tax periods ended on or prior to the Closing Date, which shall be deemed to be
the Expiration Date for Section 5.23 and (ii) solely for purposes of determining
whether a claim for indemnification under Section 11.1(iii) hereof has been made
on a timely basis, and solely to the extent that in connection with the IPO, VPI
actually incurs liability under the 1933 Act, the 1934 Act or any other federal
or state securities laws as a result of a breach of a representation or warranty
by the COMPANY or the STOCKHOLDERS, the representations and warranties set forth
herein shall survive until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for such purposes. For purposes
of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and
all of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and the COMPANY is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except (i) as set forth on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, affairs, properties, assets, condition (financial or
otherwise) or, to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of
the COMPANY taken as a whole (as used herein with respect to the COMPANY, or
with respect to any other person, a "Material Adverse Effect"). Schedule 5.1
sets forth the jurisdiction in which the COMPANY is incorporated and contains a
list of all such jurisdictions in which the COMPANY is authorized or qualified
to do business. True, complete and correct copies of the Memorandum of
Association and Articles of Association, each as amended, of the COMPANY (the
"Charter Documents") are all attached hereto as Schedule 5.1. The stock records
of the COMPANY, as heretofore made available to VPI, are correct and complete in
all material respects. There are no minutes in the possession of the COMPANY or
the STOCKHOLDERS which have not been made available to VPI, and all of such
minutes are correct and complete in all material respects. Except as
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set forth on Schedule 5.1, the most recent minutes of the COMPANY, which are
dated no earlier than ten business days prior to the date hereof, affirm and
ratify all prior acts of the COMPANY, and of its officers and directors on
behalf of the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by the COMPANY in compliance with all
applicable provincial and Canadian federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the transactions contemplated hereby
and/or the VPI Plan of Organization. Schedule 5.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list of
all outstanding options, warrants or other rights
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to acquire shares of the COMPANY's stock and the material terms of such
outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's unaudited Comparative Balance Sheet,
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if any, as of December 31, 1997, 1996 and 1995, Comparative Statements of
Changes in Cash Position and Retained Earnings, if any, and spreadsheets showing
revenues and expenses for the four quarters for each of the years in the
three-year period ended December 31, 1997 (December 31, 1997 being hereinafter
referred to as the "Balance Sheet Date"). Also attached as Schedule 5.9 are
copies of the unaudited Balance Sheets as of April 30, 1997, 1996 and 1995 and
Statements of Earnings, Changes in Cash Position and Retained Earnings for each
of the three fiscal years in the three-year period ended April 30, 1997 (the
"Fiscal Financial Statements"). Except as set forth on Schedule 5.9, such Fiscal
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 5.9). Except as set forth on
Schedule 5.9, such Comparative Balance Sheets as of December 31, 1997, 1996 and
1995 and such Balance Sheets as of April 30, 1997, 1996 and 1995 present fairly
the financial position of the COMPANY as of the dates indicated thereon, and
such Comparative Statements of Changes in Cash Position and Retained Earnings,
spreadsheets and Statements of Earnings present fairly the results of operations
for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
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(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. The COMPANY shall also provide to VPI (x) an accurate list of all
receivables obtained subsequent to the Balance Sheet Date up to the Pre-Closing
Date and (y) an aging of all accounts and notes receivable showing amounts due
in 30 day aging categories (the "A/R Aging Reports"). Except to the extent
reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI in a writing
accompanying the A/R Aging Reports, the accounts, notes and other receivables
shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible
in the amounts shown, net of reserves reflected in the balance sheet as of the
Balance Sheet Date with respect to accounts receivable as of the Balance Sheet
Date, and net of reserves reflected in the books and records of the COMPANY
(consistent with the methods used for the balance sheet) with respect to
accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY holds all licenses, franchises,
permits and other governmental authorizations that are necessary for the
operation of the business of the
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COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list
and summary description (which is set forth on Schedule 5.12) of all such
licenses, franchises, permits and other governmental authorizations, including
permits, titles, licenses, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the COMPANY
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
5.13). The licenses, franchises, permits and other governmental authorizations
listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received
any notice that any governmental authority intends to cancel, terminate or not
renew any such license, franchise, permit or other governmental authorization.
Except as set forth on Schedule 5.12, the COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 and is not in
violation of any of the foregoing, except for inadvertent, immaterial
noncompliance with such requirements, standards, criteria and conditions
(provided that any such noncompliance shall be deemed a breach of this Section
5.12 for purposes of Section 11 hereof). Except as specifically provided on
Schedule 5.12, the transactions contemplated by this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to the COMPANY by, any such licenses, franchises, permits
or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, provincial,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including
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petroleum and petroleum products (as such terms are defined in any applicable
Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes and Hazardous Substances, a list of all of which permits
and approvals is set forth on Schedule 5.13, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no
on-site or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) the COMPANY has no contingent liability in connection with any release of
any Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are
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currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the
knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct
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copies (or, in the case of oral agreements, summaries of the material terms) of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY
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as lessee (which copies are attached to Schedule 5.17), and an indication as to
which such properties, if any, are currently owned, or were formerly owned, by
STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS.
Except as set forth on Schedule 5.17, all of such leases included on Schedule
5.17 are in full force and effect and, assuming due execution and delivery
thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and
their respective affiliates, constitute valid and binding agreements of the
COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the
STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY has
ever been canceled by the insurer and the COMPANY has never been unable to
obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the
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compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices. Except as set forth on Schedule 5.19, no
officer, director, key employee, or other employee is on short-term disability
leave, long-term disability leave, maternity/parental leave or other extended
absence or receiving workers' compensation. All current assessments under the
Workers' Compensation Act (British Columbia) and similar laws in other provinces
in relation to the COMPANY have been paid or accrued and the COMPANY has not
been subject to any special or penalty assessment under such legislation which
has not been paid.
Except for those written employment contracts with salaried employees or
consulting arrangements with former employees identified and fully described in
Schedule 5.19, there are no written contracts of employment or of a consulting
nature entered into with any employees or any oral contracts of employment or of
a consulting nature which are not terminable on the giving of reasonable notice
in accordance with applicable laws or which contain any additional obligations
as a result of the acquisition of COMPANY Stock by the VPI or otherwise.
Schedule 5.19 sets forth a complete list of all collective bargaining
agreements, either directly or by operation of law, with any trade union or
association which may qualify as a trade union.
To the knowledge of the COMPANY (i) there are no outstanding labor tribunal
proceedings of any kind, including any proceedings which could result in
certification of a trade union as bargaining agent for any employees or
dependent contractors of the COMPANY, and there have not been any such
proceedings within the last three years, and (ii) there are no threatened or
apparent union organizing activities involving employees or dependent
contractors of the COMPANY, not already covered by the collective bargaining
agreements.
The COMPANY is not in default under any collective bargaining agreements.
There is no strike or lock out occurring or threatened affecting the COMPANY.
The COMPANY does not have any serious grievances or pending arbitration cases or
other labor problems that might materially or adversely affect its value or lead
to an interruption of its operations at any location.
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The COMPANY has been and is being operated in full compliance with all laws
relating to employees, including employment standards, human rights,
occupational health and safety, pay equity and employment equity. There have
been no complaints under such laws against the COMPANY.
Except as set forth on Schedule 5.19, there are no complaints nor, to the
knowledge of the COMPANY, are there any threatened complaints, against the
COMPANY, before any employment standards branch or tribunal or human rights
commission or tribunal. To the knowledge of the COMPANY, nothing has occurred
which might lead to a complaint against the COMPANY under any human rights
legislation, employment standards legislation, health and safety legislation,
workers' compensation legislation, or pay equity legislation. There are no
outstanding decisions or settlements or pending settlements under employment
standards, human rights legislation, health and safety legislation, workers'
compensation legislation, pay equity legislation or labor relations legislation
which place any obligation upon the COMPANY to do or refrain from doing any act
or which place a financial obligation on the COMPANY. There have been no
accidents in the last three years of which the COMPANY has received notice or is
otherwise aware which could lead to health and safety claims or charges against
the COMPANY.
The COMPANY (i) is in compliance with all applicable Canadian federal,
provincial and local laws, rules and regulations (domestic or foreign)
respecting employment, employment practices, labor, terms and conditions of
employment and wages and hours; (ii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing; (iii)
is not liable for any payment to any trust or other fund or to any governmental
or administrative authority, with respect to unemployment compensation benefits,
social security or other employment-related benefits; and (iv) has provided
employees with the benefits to which they are entitled pursuant to the terms of
all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all plans, arrangements, agreements, programs, policies
or practices, whether oral or written, formal or informal, funded or unfunded,
to or by which the COMPANY is a party or
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bound or under which the COMPANY has any liability or contingent liability
relating to (a) retirement savings or pensions or compensation, including,
without limitation, any defined benefit pension plan, defined contribution
pension plan, group registered retirement savings plan or supplemental pension
or retirement income plan or (b) any bonus, profit sharing, deferred
compensation, incentive compensation, stock compensation, stock purchase,
hospitalization, health, drug, dental, legal, disability, insurance (including
without limitation unemployment insurance), vacation pay, severance pay or other
benefit plan, arrangement or practice with respect to any of its employees or
former employees, individuals working on contract with it or other individuals
providing services to it of a kind normally provided by employees; and all
statutory plans with which the COMPANY is required to comply (collectively,
"Pension/Benefit Plans").
Current and complete copies of all written Pension/Benefit Plans or, where
oral, written summaries of the material terms thereof, have been made available
to VPI and NEWCO together with current and complete copies of all documents
relating to the Pension/Benefit Plans, including, without limitation, as
applicable, (i) all documents establishing, creating or amending any
Pension/Benefit Plan; (ii) all trust agreements, funding agreements, insurance
contracts and investment management agreements; (iii) all financial statements
and accounting statements and reports, investment reports and actuarial reports
for each of the last seven years; (iv) all reports, returns, filings and
material correspondence with any Governmental Authority in the last seven years;
(v) all booklets, summaries, descriptions or manuals prepared for or circulated
to, and written communications of a general nature to employees concerning any
Pension/Benefit Plan; (vi) all professional opinions (whether or not internally
prepared) with respect to each Pension/Benefit Plan; and (vii) all material
internal memoranda concerning each Pension/Benefit Plan prepared within the last
seven years.
Except as set out and described in Schedule 5.20, there are no employment
policies or plans, including policies or plans regarding incentive compensation,
stock options, severance pay or other terms or conditions of employment or terms
or conditions upon which employees or any individual employee may be terminated,
which are binding upon the COMPANY.
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All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH LAWS GOVERNING PENSION AND OTHER BENEFIT PLANS. Each
Pension/Benefit Plan is, and has been, established, registered, qualified,
administered and invested, in compliance with the terms thereof, all applicable
laws, all collective bargaining agreements of the COMPANY, any other agreement
(past or present) relating to the benefits provided under one or more of the
Pension/Benefit Plans and all understandings, written or oral, between the
COMPANY and the employees and former employees. The COMPANY and STOCKHOLDERS
further represent that:
(i) no fact or circumstance exists which would adversely affect the
tax-exempt status of any Pension/Benefit Plan;
(ii) neither the COMPANY nor its agents has received, in the last
seven years, any notice from any Person questioning or challenging such
compliance (other than in respect of any claim related solely to that
Person), and the COMPANY has no knowledge of any such notice from any
Person questioning or challenging such compliance beyond the last seven
years;
(iii) all obligations under the Pension/Benefit Plans (whether
pursuant to the terms thereof or applicable law) have been satisfied,
and there are no outstanding defaults or violations thereunder by any
of the COMPANY or its agents nor does the COMPANY have any knowledge of
any default or violation by any other party to any Pension/Benefit
Plan;
(iv) there have been no amendments, modifications or restatements of
any Pension/Benefit Plan made, or any improvements in benefits promised,
under the Pension/Benefit Plans except as expressly provided therein or as
provided to VPI;
(v) all contributions or premiums required to be paid to or in respect
of each Pension/Benefit Plan have been paid in a timely fashion in
accordance with the terms thereof
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and all applicable laws, and no taxes, penalties or fees are owing or
exigible under or in respect of any Pension/Benefit Plan;
(vi) there is no investigation, examination, proceeding, action, suit
or claim (other than routine claims for benefits) pending or threatened
involving any Pension/Benefit Plan or its assets, and no facts exist which
presently or after notice or lapse of time or both could reasonably be
expected to give rise to any such investigation, examination, proceeding,
action, suit or claim (other than routine claims for benefits);
(vii) no event has occurred respecting any Pension/Benefit Plan which
would entitle any Person (without the consent of the COMPANY) to wind-up or
terminate any Pension/Benefit Plan, in whole or in part, or which could
reasonably be expected to materially or adversely affect the tax status
thereof
(viii) there are no going concern unfunded actuarial liabilities, past
service unfunded liabilities or solvency deficiencies respecting any of the
Pension/Benefit Plans;
(ix) no material changes have occurred in respect of any
Pension/Benefit Plan since the date of the most recent financial,
accounting or actuarial report, as applicable, issued in connection with
any Pension/Benefit Plan, which could reasonably be expected to materially
or adversely affect the relevant report (including, without limitation,
rendering it misleading in any material respect);
(x) neither the COMPANY nor any previous employer of members or former
members of any Pension/Benefit Plan has received, or applied for, any
payment of surplus or other funds out of any Pension/Benefit Plan;
(xi) neither the COMPANY nor any previous employer of members or
former members of any Pension/Benefit Plan has taken any contribution
holidays under or drawn any surplus or other funds from any Pension/Benefit
Plan;
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(xii) there have been no withdrawals or transfers of assets from any
Pension/Benefit Plan other than as contemplated and permitted by the
provisions of such Pension/Benefit Plan and applicable laws;
(xiii) all employee data necessary to administer each Pension/Benefit
Plan is in the possession of the COMPANY, and is complete, correct and in a
form which is sufficient for the proper administration of the
Pension/Benefit Plans, and none of the Pension/Benefit Plans, other than
any group registered retirement savings plan, provides benefits to retired
employees or to the beneficiaries or dependents of retired employees;
(xiv) none of the Pension/Benefit Plans requires or permits a
retroactive increase in premiums or payments, and the level of insurance
reserves, if any, under any insured Pension/Benefit Plan is reasonable and
sufficient to provide for all incurred but unreported claims;
(xv) neither the COMPANY nor its agents are in breach of any
contractual or fiduciary obligation with respect to the administration of
the Pension/Benefit Plans or the trusts or other funding media relating
thereto;
(xvi) none of the Pension/Benefit Plans are multiemployer pension
plans as defined under applicable laws;
(xvii) there exists no liability in connection with any former
Pension/Benefit Plan that has terminated and all procedures for termination
of each such former Pension/Benefit Plan has been properly followed in
accordance with the terms of such former Pension/Benefit Plan and
applicable laws;
(xviii) there are no merger or asset transfer applications pending
with any governmental authority with respect to any Pension/Benefit Plan;
and
(xix) neither the execution of this Agreement nor any agreement
referred to or contemplated herein, nor the consummation of any of the
transactions contemplated herein will result in any payment (including,
without limitation, severance, unemployment compensation,
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golden parachute or otherwise) becoming due under any Pension/Benefit Plan,
increase any benefits otherwise payable under any Pension/Benefit Plan or
result in the acceleration of the time of payment or vesting of any such
benefits.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, provincial, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over the COMPANY, except for inadvertent, immaterial
noncompliance with any such law, regulation or order (provided that any such
noncompliance shall be deemed a breach of this Section 5.22 for purposes of
Section 11 hereof); and except to the extent set forth on Schedules 5.10 or
5.13, there are no claims, actions, suits or proceedings, commenced or, to the
knowledge of the COMPANY, threatened, against or affecting the COMPANY, at law
or in equity, or before or by any federal, provincial, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over the COMPANY and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Except to the
extent set forth on Schedules 5.22 or 5.13, the COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, provincial and local statutes,
ordinances, orders, approvals, variances, rules and regulations, and is not in
violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, provincial,
local, foreign and other Tax returns, reports, declarations or Tax return filing
extension requests ("Tax Returns") for all fiscal periods ended on or before the
Balance Sheet Date. All such Tax Returns have set forth all material items
required to be set forth therein and were prepared in compliance with applicable
laws and were true, correct and complete in all material respects. No material
fact or information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of
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any information contained therein. Except as set forth on Schedule 5.23, there
are no examinations in progress (and the COMPANY and its employees are not aware
of any proposed examinations) or claims against the COMPANY (including liens
against the COMPANY's assets) for federal, provincial, local, foreign and other
Taxes (including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for Taxes, whether
pending or threatened, has been received. Except as set forth on Schedule 5.23,
neither the COMPANY nor the STOCKHOLDERS have entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, provincial, local, foreign or other Tax laws
and regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
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(e) Except as set forth on Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on behalf of any other person or entity any Taxes
arising from or which may be asserted on the basis of any Tax treatment adopted
with respect to all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, provincial, foreign and local income
tax returns and franchise tax returns, if any, of COMPANY for its last three (3)
fiscal years or such shorter period of time as the COMPANY shall have existed,
(ii) any Tax examinations commenced or closed or outstanding during their three
(3) most recent fiscal years, and (iii) currently outstanding extensions of
statutory limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) [INTENTIONALLY DELETED]
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) [INTENTIONALLY DELETED]
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under
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any lease, instrument, agreement, license or permit set forth on Schedules 5.12,
5.13, 5.14, 5.15, 5.16 or 5.17, or any other material agreement to which it is a
party or by which its properties are bound (the "Material Documents"); and,
except as set forth on Schedule 5.24, (a) the rights and benefits of the COMPANY
under the Material Documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
of the obligations hereunder and the consummation of the transactions
contemplated hereby will not result in any violation or breach or constitute a
default under, any of the terms or provisions of the Material Documents or the
Charter Documents. Except as set forth on Schedule 5.24, none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on Schedule 5.24, none of the Material Documents prohibits the use or
publication by the COMPANY, VPI or NEWCO of the name of any other party to such
Material Document, and none of the Material Documents prohibits or restricts the
COMPANY from freely providing services to any other customer or potential
customer of the COMPANY, VPI, NEWCO or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
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(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of
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the COMPANY or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto. Schedule 5.27 also sets forth a complete list of the names of each
person, corporation, firm or other entity holding a general or special
power of attorney from the COMPANY and a description of the terms of such
power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the
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COMPANY, enforceable against the COMPANY in accordance with its terms except as
may be limited by (i) bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally or (ii) the discretionary power of a court exercising equity
jurisdiction. The individual signing this Agreement on behalf of the COMPANY has
the legal power, authority and capacity to bind the COMPANY to the terms of this
Agreement.
5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
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at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 RESIDENT STATUS . None of the STOCKHOLDERS are non-residents within
the meaning of the Income Tax Act (Canada).
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6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.2(iv) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, the STOCKHOLDERS or
the COMPANY actually incur liability under the 1933 Act, the 1934 Act, or any
other federal or state securities laws, the representations and warranties set
forth herein shall survive until the expiration of any applicable limitations
period, which shall be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. NEWCO is a
corporation duly organized, validly existing and in good standing under the laws
of Canada. VPI and NEWCO each are duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of public
authorities to carry on their respective businesses in the places and in the
manner as now conducted except where the failure to be so authorized or
qualified would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and Bylaws, each as amended, of VPI
and NEWCO (the "VPI Charter Documents") are all attached hereto as Annex II. The
VPI
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Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and all required approvals of the shareholders
and board of directors of VPI and NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state, Canadian
provincial and federal laws concerning the issuance of securities. Further, none
of such shares was issued in violation of the preemptive rights of any past or
present stockholder of VPI or NEWCO.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make
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any distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this Agreement and the Other Agreements and except
for fees and expenses incurred in connection with the transactions contemplated
hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, provincial, Canadian, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them; and except to the
extent set
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forth on Schedule 6.8, there are no material claims, actions, suits or
proceedings, pending or, to the knowledge of VPI or NEWCO, threatened, against
or affecting VPI or NEWCO, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over either of them and no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received. VPI and NEWCO have conducted and are conducting their respective
businesses in compliance with the requirements, standards, criteria and
conditions set forth in applicable federal, state, foreign and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and are not in violation of any of the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by VPI and NEWCO and the performance of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of VPI and NEWCO and this Agreement has been
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duly and validly authorized by all necessary corporate action and is a legal,
valid and binding obligation of VPI and NEWCO, enforceable against each of VPI
and NEWCO in accordance with its terms except as limited by bankruptcy,
insolvency or other similar laws of general application relating to or affecting
the enforcement of creditors' rights generally, and the individuals signing this
Agreement on behalf of VPI and NEWCO have the legal power, authority and
capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS upon exchange of Dividend Access Shares pursuant
to this Agreement will constitute valid and legally issued shares of VPI, fully
paid and nonassessable, and with the exception of restrictions upon resale set
forth in Sections 15 and 16 hereof, will be identical in all material and
substantive respects, except with respect to voting rights, to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and
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except that VPI is a party to the Other Agreements and the agreements
contemplated thereby and to such agreements as will be filed as Exhibits to the
Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by VPI and NEWCO for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental
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agencies or set aside and secured in accounts for such purpose or secured and
reserved against and entered on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by
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reason of a change of accounting method is required in respect of any period for
which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will
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reasonably cooperate with VPI and the Other Founding Companies and their
respective representatives, including VPI's auditors and counsel, in the
preparation of any documents or other material (including the Registration
Statement) which may be required in connection with any documents or materials
required by this Agreement. VPI, NEWCO, the STOCKHOLDERS and the COMPANY shall
treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Other Founding Companies as confidential in accordance with the
provisions of Section 14 hereof. In addition, VPI will cause each of the Other
Founding Companies to enter into a provision similar to this Section 7.1
requiring each such Other Founding Company, its stockholders, directors,
officers, representatives, employees and agents to keep confidential any
information regarding the COMPANY obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
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(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
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(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
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(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the COMPANY's
capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
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7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the
Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. VPI and NEWCO shall give prompt notice to
the COMPANY of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty of VPI or NEWCO contained herein to be untrue or inaccurate in any
material respect at or prior to the Pre-Closing and (ii) any material failure of
VPI or NEWCO to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder. The delivery of any notice
pursuant to this Section 7.7 that is not accompanied by a proposed amendment or
supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.8, (ii) modify
the conditions set forth in Sections
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8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and provided further, that no
amendment or supplement to a schedule prepared by VPI or NEWCO that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless a majority of the Founding Companies consent to such amendment or
supplement. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 8.1 and 9.1
have been fulfilled, the Schedules hereto shall be deemed to be the schedules as
amended or supplemented pursuant to this Section 7.8. In the event that one of
the Other Founding Companies seeks to amend or supplement a schedule pursuant to
Section 7.8 of one of the Other Agreements, and such amendment or supplement
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect on such Other Founding Company, VPI shall give the COMPANY notice
promptly after it has knowledge thereof. If VPI and a majority of the Founding
Companies consent to such amendment or supplement, but the COMPANY does not give
its consent, the COMPANY may terminate this Agreement pursuant to Section
12.l(iv) hereof. In the event that the COMPANY seeks to amend or supplement a
Schedule pursuant to this Section 7.8, and
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VPI and a majority of the Other Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. In the event that VPI or NEWCO
seeks to amend or supplement a Schedule pursuant to this Section 7.8 and a
majority of the Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. No party to this Agreement shall be liable to
any other party if this Agreement shall be terminated pursuant to the provisions
of this Section 7.8. No amendment of or supplement to a Schedule shall be made
later than 24 hours prior to the anticipated effectiveness of the Registration
Statement. For purposes of this Section 7.8, consent to an amendment or
supplement to a schedule pursuant to Section 7.8 of this Agreement or one of the
Other Agreements shall have been deemed given by VPI or any Founding Company if
no response is received within 24 hours following receipt of notice of such
amendment or supplement (or sooner if required by the circumstances under which
such consent is requested and so requested in the notice). The provisions of
this Section 7.8 shall be contained in the Other Agreements executed in
connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
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STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY or the STOCKHOLDERS become aware of any
fact or circumstance which would change (or, if after the Closing Date, would
have changed) a representation or warranty of the COMPANY or the STOCKHOLDERS in
this Agreement or would affect any document delivered pursuant hereto in any
material respect, the COMPANY and the STOCKHOLDERS shall immediately give notice
of such fact or circumstance to VPI. However, subject to the provisions of
Section 7.8, such notification shall not relieve either the COMPANY or the
STOCKHOLDERS of their respective obligations under this Agreement, and, subject
to the provisions of Section 7.8, at the sole option of VPI, the truth and
accuracy of any and all warranties and representations of the COMPANY, or on
behalf of the COMPANY and of STOCKHOLDERS at the date of this Agreement and on
the Pre-Closing Date and on the Closing Date, contained in this Agreement
(including the Schedules and Annexes hereto) shall be a precondition to the
consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the
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COMPANY as of the end of all fiscal quarters following the Balance Sheet Date,
and the unaudited consolidated statement of income, cash flows and retained
earnings of the COMPANY for all fiscal quarters ended after the Balance Sheet
Date, disclosing no material adverse change in the financial condition of the
COMPANY or the results of its operations from the financial statements as of the
Balance Sheet Date. For the fiscal quarter ending March 31, 1998, such financial
statements shall be delivered to VPI on or before April 21, 1998, unless the
Closing Date shall have occurred on or before April 21, 1998. Except as set
forth on Schedule 7.10, such financial statements shall have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted therein). Except as
noted in such financial statements, all of such financial statements will
present fairly the results of operations of the COMPANY for the periods
indicated thereon and shall be for such dates and time periods as required by
Regulation S-X under the 1933 Act and the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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7.14 SECTION 85 ELECTIONS. Each of the STOCKHOLDERS and NEWCO hereby agrees
to jointly elect in the prescribed form and within the prescribed time elections
under subsection 85(l) of the Income Tax Act (Canada) at the respective amounts
selected by each STOCKHOLDER to be the proceeds of disposition and the cost of
the COMPANY Stock sold hereunder.
7.15 BRITISH COLUMBIA SECURITIES CONSENTS. VPI and NEWCO shall use their
commercially reasonable best efforts to obtain all necessary rulings, orders or
consents of the British Columbia Securities Commission (the "Securities
Consents") to permit the consummation of the transactions contemplated herein,
including without limitation, the acquisition and disposition of the Dividend
Access Shares and the rights of exchange contained therein, the acquisition of
the VPI Stock, and the disposition of the VPI Stock in circumstances
substantially the same as all other stockholders of the Other Founding
Companies, all in compliance with applicable United States and Canadian
securities laws.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing
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Date as though such representations and warranties had been made as of that
time; and a certificate to the foregoing effect dated the Pre-Closing Date and
signed by the President or any Vice President of VPI shall have been delivered
to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of the
COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter from counsel for VPI, dated the Pre-Closing
Date, in the form annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
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8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state or province in which VPI or NEWCO is authorized to do business, showing
that each of VPI and NEWCO is in good standing and authorized to do business and
that all state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
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8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
8.14 SUPPORT AGREEMENT AND TRUST AGREEMENT. The Support Agreement attached
as Exhibit B of Annex I hereto and the Trust Agreement attached as Exhibit C of
Annex I hereto shall have been executed and delivered by VPI, NEWCO and, where
applicable, the trustee under the Trust Agreement .
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all
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material respects as of the Pre-Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; and the
STOCKHOLDERS shall have delivered to VPI certificates dated the Pre-Closing Date
and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of VPI as a
result of which the management of VPI deems it inadvisable to proceed with the
transactions hereunder.
9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
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9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's province of incorporation and, unless waived by VPI, in each province
in which the COMPANY is authorized to do business, showing the COMPANY is in
good standing and authorized to do business and that all province franchise (if
any) and/or income tax returns and taxes for the COMPANY for all periods prior
to the Pre-Closing have been filed and paid.
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9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 INTENTIONALLY DELETED.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANY for the
incremental cost of having VPI so named as an additional insured.
9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
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10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
10.2 INTENTIONALLY DELETED.
10.3 PREPARATION AND FILING OF TAX RETURNS
(i) The COMPANY shall, if possible, file or cause to be filed
all separate Tax Returns of any Acquired Party for all taxable periods
that end on or before the Closing Date. All such Tax Returns shall have
set forth all material items required to be set forth therein and shall
have been prepared in compliance with applicable laws and shall be
true, correct and complete in all material respects. Each STOCKHOLDER
shall pay or cause to be paid all Tax liabilities (in excess of all
amounts already paid with respect thereto or properly accrued or
reserved with respect thereto on the COMPANY Financial Statements and
books and records) required to be shown by such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax
Returns of, or that include, any Acquired Party for all taxable periods
ending after the Closing Date. VPI shall pay or cause to be paid all
Tax liabilities (in excess of amounts already paid with respect thereto
or
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properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax
Returns to be due.
(iii) Each party hereto shall, and shall cause its
subsidiaries and component members of a controlled group of
corporations including the COMPANY, as defined in Section 1563 of the
Code, to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability
for Taxes or a right to refund of Taxes or in conducting any audit or
other proceeding in respect of Taxes. Such cooperation and information
shall include providing copies of all relevant portions of relevant Tax
Returns, together with relevant accompanying schedules and relevant
work papers, relevant documents relating to rulings or other
determinations by taxing authorities and relevant records concerning
the ownership and Tax basis of property, which such party may possess.
Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Tax Returns pursuant to this Agreement shall bear all
costs of filing such Tax Returns.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Patrick
McCurdy to serve as a director of VPI effective as of the Closing Date.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting
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conditions for employees of the COMPANY who were covered by the COMPANY's health
insurance plan immediately prior to the Closing Date or as otherwise required by
law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 LIQUIDATION. Each of VPI and NEWCO covenant and agree that it will not
liquidate NEWCO, or terminate the Support Agreement or the Exchange Trust
Agreement, until the earlier of (i) the tenth anniversary of the Closing Date
and (ii) the point in time at which no Dividend Access Shares are outstanding.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, NEWCO and the COMPANY at all times, from and after the date
of this Agreement until the Expiration Date, from and against all losses,
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by VPI, NEWCO or the
COMPANY as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
Schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of the STOCKHOLDERS or the COMPANY under this
Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal
or state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
relating solely to the COMPANY or the STOCKHOLDERS, and
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provided to VPI or its counsel by the COMPANY or the STOCKHOLDERS, contained in
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating solely to
the COMPANY or the STOCKHOLDERS required to be stated therein or necessary to
make the statements therein not misleading, or (iv) the matters described on
Schedule 11.1(iv) (relating to specifically identified matters such as ongoing
claims and/or litigation), which Schedule shall be prepared by VPI, provided,
however, (A) that in the case of any indemnity arising pursuant to clause (iii)
such indemnity shall not inure to the benefit of VPI, NEWCO or the COMPANY to
the extent that such untrue statement (or alleged untrue statement) was made in,
or omission (or alleged omission) occurred in, any preliminary prospectus and
the STOCKHOLDERS provided, in writing, corrected information to VPI counsel and
to VPI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1
hereof by reason of
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such liabilities); (iv) any liability under the 1933 Act, the 1934 Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to VPI, NEWCO or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
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same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel.
Further, absent a conflict, the Indemnified Party may select counsel and have
such counsel participate in such matter at the sole cost of the Indemnified
Party. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested in writing by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim in which no admission of
wrongdoing is required of the Indemnified Party and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnifying
Party shall reimburse the Indemnified Party for the amount paid in such
settlement and any other liabilities or expenses incurred by the Indemnified
Party in connection therewith, provided, however, that under no circumstances
shall the Indemnified Party settle any Third Person claim without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees
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in writing. The parties hereto will make appropriate adjustments for insurance
proceeds in determining the amount of any indemnification obligation under this
Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO and the other persons or
entities indemnified pursuant to Section 11.1 shall not assert any claim for
indemnification hereunder against the STOCKHOLDERS until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against the STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid
to the STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the
STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that VPI,
NEWCO and the other persons or entities indemnified pursuant to Section 11.1 may
assert and shall be indemnified for any claim under Section 11.l(iv) at any
time, regardless of whether the aggregate of all claims which such persons may
have against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any such claim under Section 11.1(iv) shall not be
counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert
any claim for indemnification hereunder against VPI or NEWCO until such time as,
and solely to the extent that, the aggregate of all claims which the
STOCKHOLDERS may have against VPI and NEWCO shall exceed $50,000, provided,
however, that the STOCKHOLDERS and the other persons or entities indemnified
pursuant to Section 11.2 may assert and shall be indemnified for any claim under
Section 11.2(v) at any time, regardless of whether the aggregate of all claims
which such persons may have against any of VPI and NEWCO exceeds $50,000, it
being understood that the amount of any such claim under Section
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11.2(v) shall not be counted towards such $50,000 amount. No person shall be
entitled to indemnification under this Section 11 if and to the extent that: (a)
such person's claim for indemnification is directly or indirectly related to a
breach by such person of any representation, warranty, covenant or other
agreement set forth in this Agreement; or (b) such person receives a tax benefit
as a result of the claim or loss for which indemnification is sought (i.e., the
amount of such claim or loss for which indemnification is provided hereunder
shall be reduced by the amount of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the transactions contemplated hereby, provided that a
STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not
be limited. Indemnity obligations hereunder may be satisfied through the payment
of cash or the delivery of VPI Stock, or a combination thereof, at the
STOCKHOLDER's election. For purposes of calculating the value of the VPI Stock
received or delivered by a STOCKHOLDER (for purposes of determining the
Indemnification Threshold, the limitation on indemnity set forth in the second
preceding sentence and the amount of any indemnity paid), VPI Stock shall be
valued at its initial public offering price as set forth in the Registration
Statement. Any indemnification payment made by the STOCKHOLDERS pursuant to this
Section 11 shall be deemed to be a reduction in the consideration received by
the STOCKHOLDERS pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANY;
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(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on the
other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of
Restricted Common Stock to be received by the STOCKHOLDERS is not less than the
Minimum Value set forth on Annex III), which breach or default has a Material
Adverse Effect, and the curing of such default shall not have been made on or
before the Closing Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable out of pocket
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided,
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however (and notwithstanding anything in Section 18.7 to the contrary), that the
COMPANY and the STOCKHOLDERS shall reimburse VPI for the reasonable out of
pocket fees and expenses of its attorneys and accountants incurred in connection
with the transactions contemplated by this Agreement (but excluding the
transactions contemplated by the Other Agreements) in the event that this
Agreement is terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any residential property management, rental or sales
business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of Whistler, British Columbia, and
the other locations in which VPI or the COMPANY, or any of their
subsidiaries, conduct a residential property management, rental or sales
business or hotel management business (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
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(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
residential property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the residential
property management, rental or sales business or hotel management business,
which candidate, to the actual knowledge of such STOCKHOLDER after due
inquiry, was called upon by VPI (including the subsidiaries thereof) or for
which, to the actual knowledge of such STOCKHOLDER after due inquiry, VPI
(or any subsidiary thereof) made an acquisition analysis, for the purpose
of acquiring such entity, unless VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one (1)
year has elapsed since VPI (or any subsidiary thereof) has taken any action
with respect to pursuing such acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from (A) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter or (B) engaging in
business as a real estate broker, other than as an employee of the COMPANY while
employed by the COMPANY, in any location other than Nantucket Island after any
termination of STOCKHOLDER'S employment with the COMPANY.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that
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the foregoing covenant may be enforced by VPI in the event of breach by such
STOCKHOLDER, by injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such
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restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or NEWCO and (c) to counsel and other advisors, provided that such advisors
(other than counsel) agree to the confidentiality provisions of this Section
14.1, unless (i) such information is or becomes known to the public generally or
to businesses operating in the residential property management, rental or sales
industry through no fault of the STOCKHOLDERS, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
however, that prior to disclosing any information pursuant to this clause (ii),
the STOCKHOLDERS shall, if possible, give two days' prior written notice thereof
to VPI and provide VPI with the opportunity within such two-day period to
contest such disclosure, or (iii) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by any of
the STOCKHOLDERS of the provisions of this Section, VPI shall be entitled to an
injunction restraining such STOCKHOLDERS from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
VPI from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated by this Agreement are not consummated, STOCKHOLDERS shall have none
of the above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
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14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI or NEWCO, (ii) disclosure is required
by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI and NEWCO shall, unless otherwise required by law or such order, give two
days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and
provide the COMPANY and the STOCKHOLDERS with the opportunity within such
two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. VPI will disclose
confidential information relating to the COMPANY to the Other Founding Companies
only if such companies have agreed, in advance, to treat such information as
confidential. In the event of a breach or threatened breach by VPI or NEWCO of
the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be
entitled to an injunction restraining VPI and NEWCO from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available
remedy for as such breach or threatened breach, including the recovery of
damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and
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irreparable damage that would be caused for which they would have no other
adequate remedy, the parties hereto agree that, in the event of a breach by any
of them of the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 2. The certificates evidencing
the Restricted Common Stock delivered to the STOCKHOLDERS pursuant to Section 2
of this Agreement shall bear a legend substantially in the form set forth below
and containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
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15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 2 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act and without compliance with the Securities Act (British Columbia). The VPI
Stock to be acquired by such STOCKHOLDERS pursuant to this Agreement is being
acquired solely for their own respective accounts, for investment purposes only,
and with no present intention of distributing, selling
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or otherwise disposing of it in connection with a distribution. The
STOCKHOLDERS acknowledge that VPI and NEWCO are not now, and may never become,
reporting issuers in the Province of British Columbia, and as a result, the
Dividend Access Shares and the VPI Stock will be issued either pursuant to a
statutory exemption, or an order of the British Columbia Securities Commission
granting an exemption, from the prospectus and registration requirements
contained in the Securities Act and thereafter may be subject to indefinite
resale restrictions and may not be resold except pursuant to an exemption from
the prospectus and registration requirements of the Securities Act (British
Columbia) or an order of the British Columbia Securities Commission, if any. In
the event that the Closing occurs without the requisite order of the British
Columbia Securities Commission granting VPI or NEWCO the right to issue the VPI
Stock to the STOCKHOLDERS without the requirement to file a prospectus under the
Securities Act (British Columbia), the STOCKHOLDERS covenant and agree (I) not
to exercise any of the rights attached to the Dividend Access Shares to obtain
VPI Stock unless the issue and delivery of the VPI Stock can be effected
pursuant to an exemption from the prospectus and registration requirements of
the Securities Act (British Columbia) and (ii) not to sell or otherwise dispose
of any of the Dividend Access Shares unless the transferee has provided a
similar acknowledgment and covenant to VPI and NEWCO.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state and
provincial securities laws. All of the VPI Stock shall bear the following legend
in addition to the legend required under Section 15 of this Agreement:
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THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANY, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
into which the Dividend Access Shares are exchangeable issued to such
STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER requests,
provided that VPI shall have the right to reduce the number of shares
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included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders on a pro rata basis based on the number
of shares proposed to be registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the Holders of a majority of the shares of VPI Stock into
which the Dividend Access Shares are exchangeable pursuant to this Agreement and
the VPI Stock issued pursuant to the Other Agreements which have not been
previously registered or sold and which are not entitled to be sold under Rule
144(k) (or any similar or successor provision) promulgated under the 1933 Act
may request in writing (the "Demand Registration Request") that VPI file a
registration statement under the 1933 Act covering the registration of up to all
of the shares of VPI Stock into which the Dividend Access Shares are
exchangeable pursuant to this Agreement and the VPI Stock issued
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pursuant to the Other Agreements then held by such Founding Stockholders (a
"Demand Registration"). Within ten (10) days of the receipt of the Demand
Registration Request, VPI shall give written notice of such request to all other
Founding Stockholders and shall, as soon as practicable but in no event later
than 45 days after the Demand Registration Request, file and use its best
efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock or VPI Stock into which the Dividend Access Shares are exchangeable shall
be initiated under this Section 17.2 until 90 days after the effective date of
such registration unless VPI is no longer proceeding diligently to effect such
registration (in which case the delay contemplated by this sentence would not be
applicable); provided that VPI shall provide the Founding Stockholders the right
to participate in such public offering pursuant to, and subject to, Section 17.1
hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and the VPI Stock into
which the Dividend Access Shares are exchangeable and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45
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days (or such shorter period during which the Founding Stockholders shall have
sold all VPI Stock and the VPI Stock into which the Dividend Access Shares are
exchangeable which they requested to be registered); (ii) use its best efforts
to register and qualify the VPI Stock and the VPI Stock into which the Dividend
Access Shares are exchangeable covered by such registration statement under
applicable state securities laws as the Holders shall reasonably request for the
distribution for the VPI Stock and the VPI Stock into which the Dividend Access
Shares are exchangeable; and (iii) take such other actions as are reasonable and
necessary to comply with the requirements of the 1933 Act and the regulations
thereunder to enable the Founding Stockholders to sell their shares pursuant
thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating Holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock into which the Dividend Access Shares are exchangeable at
any time when the resale provisions of Rule 144(k) (or any similar or successor
provision) promulgated under the 1933 Act are available to such STOCKHOLDER with
respect to such VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock into which
the Dividend Access Shares are exchangeable pursuant to this Agreement (the
"Registrable Securities") are included in a registration statement under this
Section 17, to the extent permitted by law, VPI will, and hereby does, indemnify
and hold harmless each seller of any Registrable Securities covered by such
registration statement, its directors, officers, agents, attorneys, each other
Person who participates as an underwriter in the offering or sale of such
securities and each
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other Person, if any, who controls such seller or any such underwriter within
the meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which such seller or any such director or officer or
underwriter or controlling Person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the 1933 Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and VPI will reimburse such seller and each such
director, officer, underwriter and controlling Person for any expenses
(including but not limited to reasonable attorneys' fees) reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that VPI shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to VPI by such seller expressly
for use in the preparation thereof, and provided further that VPI shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the 1933 Act, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, to the
Person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
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Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such seller
or any such director, officer, underwriter or controlling Person and shall
survive the transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of any underwriter, VPI or any such director,
officer or
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controlling Person and shall survive the transfer of such securities by such
seller. In no event shall the liability of any selling holder of Registrable
Securities under this Section 17.6(b) be greater in amount than the dollar
amount of the proceeds received by such holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in
the preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each
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seller of Registrable Securities with respect to any required registration or
other qualification of securities under any federal or state law or regulation
of any governmental authority other than the 1933 Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately
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preceding paragraph. Notwithstanding the provisions of this Section 17.6(f), no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such underwriter has otherwise been required to pay by reason
on such untrue or alleged untrue statement or omission or alleged omission, and
no selling holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
selling holder were offered to the public exceeds the amount of any damages
which such selling holder has otherwise been required to pay by reason of such
untrue statement or omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY, and the STOCKHOLDERS
hereby agree that they shall not issue any press release or otherwise make any
public announcement (including communications with trade publications and other
media), or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning
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VPI, the Founding Companies or the transactions contemplated hereby or by the
Other Agreements without the prior approval of VPI, the COMPANY and the
STOCKHOLDERS.
18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
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18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and NEWCO
and their respective agents, representatives, accountants and counsel incurred
in connection with the subject matter of this Agreement and any amendments
thereto, including all costs and expenses incurred in the performance and
compliance with all conditions to be performed by VPI under this Agreement,
including the fees and expenses of Arthur Andersen, LLP (including such fees and
expenses in connection with the audit of the COMPANY's financial statements),
Akin, Gump, Strauss, Hauer & Feld, L.L.P., and any other person or entity
retained by VPI, and the costs of preparing the Registration Statement. The
STOCKHOLDERS shall pay the fees, expenses and disbursements of the STOCKHOLDERS,
the COMPANY and their respective agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by the COMPANY and the
STOCKHOLDERS under this Agreement, including the fees and expenses of
accountants and legal counsel to the COMPANY and the STOCKHOLDERS.
Notwithstanding the foregoing, if the transactions contemplated by this
Agreement are consummated, VPI shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
US$50,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the transactions
contemplated hereby, other than
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Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he or she, and not the
COMPANY or VPI, shall pay all taxes due upon receipt of the consideration
payable pursuant to Section 3 hereof, and shall assume all tax risks and
liabilities of such STOCKHOLDER in connection with the transactions contemplated
hereby; provided, however, that the foregoing shall not in any way prejudice the
ability of the STOCKHOLDERS and the COMPANY to rely upon the opinions contained
in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
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(c) If to the COMPANY, addressed to it at:
Whistler Chalets Limited
4368 Main Street
Suite 216
Whistler, British Columbia
Canada V0N 1B4
Facsimile no.: (604) 938-6622
Attention: Patrick McCurdy
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
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18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the Dividend Access Shares issued or to be issued to the STOCKHOLDERS upon
consummation of the transactions contemplated hereby. Any amendment or waiver
effected in accordance with this Section 18.15 shall be binding upon each of the
parties hereto, any other person receiving Dividend Access Shares in connection
with the transactions contemplated hereby and each future holder of such
Dividend Access Shares.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under
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common control with such corporation, and shall mean, with respect to an
individual, any parent, spouse or child of such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"CBCA" has the meaning set forth in Section 2.2.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 1.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
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"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pension/Benefit Plans" has the meaning set forth in Section 5.20.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
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"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value US$0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
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"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value US$.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
WHISTLER CHALETS HOLDING CORP.
By:/s/ Leonard Potter
--------------------------------
Leonard Potter
Vice President
WHISTLER CHALETS LIMITED
By:/s/ J. Patrick McCurdy
--------------------------------
J. Patrick McCurdy
President
STOCKHOLDERS:
/s/ J. Patrick McCurdy
- -----------------------------------
J. Patrick McCurdy
EXHIBIT 2.14
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
FRS ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
FIRST RESORT SOFTWARE, INC.
and
the STOCKHOLDERS named herein
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER................................................................3
1.1 Delivery and Filing of Articles of Merger.............................3
1.2 Effective Time of the Merger..........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors
of Surviving Corporation.............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO................................................4
1.5 Effect of Merger......................................................4
2. CONVERSION OF STOCK.......................................................5
2.1 Manner of Conversion..................................................5
3. DELIVERY OF MERGER CONSIDERATION..........................................6
3.1 Delivery of VPI Stock and Cash........................................7
3.2 Delivery of COMPANY Stock.............................................7
3.3 Balance Sheet Test....................................................7
4. CLOSING...................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS................9
(A) Representations and Warranties of COMPANY and STOCKHOLDERS............9
5.1 Due Organization.................................................10
5.2 Authority........................................................10
5.3 Capital Stock of the COMPANY.....................................10
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................11
5.6 Subsidiaries.....................................................11
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANY..........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................13
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................16
5.14 Personal Property...............................................17
5.15 Significant Customers...........................................18
5.16 Material Contracts and Commitments..............................18
5.17 Real Property...................................................19
5.18 Insurance.......................................................20
5.19 Compensation; Employment Agreements; Organized Labor
Matters........................................................20
5.20 Employee Plans..................................................21
5.21 Compliance with ERISA...........................................22
5.22 Conformity with Law; Litigation.................................24
5.23 Taxes...........................................................24
5.24 No Violations...................................................27
5.25 Government Contracts............................................27
5.26 Absence of Changes..............................................27
5.27 Deposit Accounts; Powers of Attorney............................29
5.28 Validity of Obligations.........................................29
5.29 Relations with Governments......................................30
5.30 Disclosure......................................................30
5.31 Prohibited Activities...........................................31
(B) Representations and Warranties of STOCKHOLDERS.......................31
5.32 Authority; Ownership............................................31
5.33 Preemptive Rights...............................................31
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5.34 No Intention to Dispose of VPI Stock............................31
6. REPRESENTATIONS OF VPI AND NEWCO.........................................32
6.1 Due Organization.................................................32
6.2 Authorization....................................................33
6.3 Capital Stock of VPI and NEWCO...................................33
6.4 Transactions in Capital Stock....................................34
6.5 Subsidiaries.....................................................34
6.6 Financial Statements.............................................34
6.7 Liabilities and Obligations......................................34
6.8 Conformity with Law; Litigation..................................35
6.9 No Violations....................................................35
6.10 Validity of Obligations.........................................36
6.11 VPI Stock.......................................................36
6.12 No Side Agreements..............................................36
6.13 Business; Real Property; Material Agreements....................37
6.14 Taxes...........................................................37
6.15 Completion of Due Diligence.....................................39
6.16 Disclosure.....................................................39
6.17 Tax Treatment...................................................39
7. COVENANTS PRIOR TO CLOSING...............................................40
7.1 Access and Cooperation; Due Diligence............................40
7.2 Conduct of Business Pending Closing..............................41
7.3 Prohibited Activities............................................42
7.4 No Shop..........................................................44
7.5 Notice to Bargaining Agents......................................44
7.6 Agreements.......................................................44
7.7 Notification of Certain Matters..................................44
7.8 Amendment of Schedules...........................................45
7.9 Cooperation in Preparation of Registration Statement.............47
7.10 Final Financial Statements......................................48
7.11 Further Assurances..............................................49
7.12 Authorized Capital..............................................49
7.13 Best Efforts to Consummate Transaction..........................49
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY..........50
8.1 Representations and Warranties...................................50
8.2 Performance of Obligations.......................................50
8.3 No Litigation....................................................50
8.4 Opinion of Counsel...............................................51
8.5 Registration Statement...........................................51
8.6 Consents and Approvals...........................................51
8.7 Good Standing Certificates.......................................51
8.8 No Material Adverse Change.......................................51
8.9 Closing of IPO...................................................51
8.10 Secretary's Certificate.........................................52
8.11 Employment Agreements...........................................52
8.12 Directors and Officers Insurance................................52
8.13 Stock Options...................................................52
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO.....................53
9.1 Representations and Warranties...................................53
9.2 Performance of Obligations.......................................53
9.3 No Litigation....................................................53
9.4 Secretary's Certificate..........................................54
9.5 No Material Adverse Effect.......................................54
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9.6 STOCKHOLDERS' Release............................................54
9.7 Termination of Related Party Agreements..........................54
9.8 Opinion of Counsel...............................................54
9.9 Consents and Approvals...........................................55
9.10 Good Standing Certificates......................................55
9.11 Registration Statement..........................................55
9.12 Employment Agreements...........................................55
9.13 Closing of IPO..................................................55
9.14 FIRPTA Certificate..............................................55
9.15 Insurance.......................................................55
9.16 Lockup Agreement................................................56
9.17 Letter of Representation........................................56
9.18 Termination of Defined Benefit Plans............................56
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING......................56
10.1 Release From Guarantees; Repayment of Certain Obligations.......56
10.2 Preservation of Tax and Accounting Treatment....................57
10.3 Preparation and Filing of Tax Returns...........................57
10.4 Appointment of Directors........................................58
10.5 Preservation of Employee Benefit Plans..........................58
10.6 Maintenance of Books............................................59
10.7 Securities Covenants............................................59
10.8 License of Source Code..........................................59
11. INDEMNIFICATION..........................................................61
11.1 General Indemnification by the STOCKHOLDERS.....................61
11.2 Indemnification by VPI..........................................62
11.3 Third Person Claims.............................................62
11.4 Exclusive Remedy................................................64
11.5 Limitations on Indemnification..................................64
12. TERMINATION OF AGREEMENT.................................................66
12.1 Termination.....................................................66
12.2 Liabilities in Event of Termination.............................67
13. NONCOMPETITION...........................................................67
13.1 Prohibited Activities...........................................67
13.2 Damages.........................................................69
13.3 Reasonable Restraint............................................69
13.4 Severability; Reformation.......................................70
13.5 Independent Covenant............................................70
13.6 Materiality.....................................................70
13.7 Limitation......................................................71
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................71
14.1 STOCKHOLDERS....................................................71
14.2 VPI AND NEWCO...................................................72
14.3 Damages.........................................................73
14.4 Survival........................................................73
14.5 Return of Data Submitted........................................73
15. TRANSFER RESTRICTIONS....................................................73
15.1 Transfer Restrictions...........................................73
15.2 Certain Transfers...............................................74
16. SECURITIES LAW REPRESENTATIONS...........................................75
16.1 Compliance with Law.............................................75
16.2 Economic Risk; Sophistication...................................75
17. REGISTRATION RIGHTS......................................................76
17.1 Piggyback Registration Rights...................................76
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17.2 Demand Registration Rights......................................77
17.3 Registration Procedures.........................................78
17.4 Underwriting Agreement..........................................78
17.5 Availability of Rule 144........................................78
17.6 Registration Rights Indemnification.............................79
18. GENERAL..................................................................83
18.1 Press Releases..................................................83
18.2 Cooperation.....................................................84
18.3 Successors and Assigns; Third Party Beneficiaries...............84
18.4 Entire Agreement................................................84
18.5 Counterparts....................................................85
18.6 Brokers and Agents..............................................85
18.7 Expenses........................................................85
18.8 Notices.........................................................86
18.9 Governing Law...................................................87
18.10 Exercise of Rights and Remedies................................87
18.11 Time...........................................................87
18.12 Reformation and Severability...................................87
18.13 Remedies Cumulative............................................88
18.14 Captions.......................................................88
18.15 Amendments and Waivers.........................................88
18.16 Incorporation by Reference.....................................88
18.17 Defined Terms..................................................88
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI - A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI - B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March [____], 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a
Delaware corporation ("VPI"), FRS ACQUISITION CORP., a Delaware corporation
("NEWCO"), FIRST RESORT SOFTWARE, INC., a Colorado corporation (the "COMPANY"),
and Thomas A. Leddy, Evan H. Gull and Daniel Patrick Curry (the "STOCKHOLDERS").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, Brindley & Brindley Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
Hotel Corporation of the Pacific, Inc., a Hawaii corporation, Houston and
O'Leary Company, a Colorado corporation, Jupiter Property Management at
Park City, Inc., a Utah corporation, Maui Condominium & Home Realty, Inc.,
a Hawaii corporation, The Maury
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People, Inc., a Massachusetts corporation, Howey Acquisition, Inc., a
Florida corporation, Realty Consultants, Inc., a Florida corporation,
Resort Property Management, Inc., a Utah corporation, Telluride Resort
Accommodations, Inc., a Colorado corporation, Trupp-Hodnett Enterprises,
Inc., a Georgia corporation, THE Management Company, a Georgia corporation,
and Whistler Chalets Limited, a British Columbia corporation, and their
respective stockholders in order to acquire additional businesses (the
COMPANY, together with each of the entities with which VPI has entered into
the Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in effect
shall be the Certificate of Incorporation of the Surviving Corporation
until changed as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of the laws of the state in which the Surviving
Corporation is located and of the Certificate of Incorporation and Bylaws
of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or
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capacities, and effective upon the Effective Time of the Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of the Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of the Surviving Corporation, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the COMPANY shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
NEWCO shall be merged with and into the COMPANY, and the COMPANY, as the
Surviving Corporation, shall be fully vested therewith. At the Effective Time of
the Merger, the separate existence of NEWCO shall cease and, in accordance
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with the terms of this Agreement, the Surviving Corporation shall possess all of
the rights, privileges, immunities and franchises, of a public, as well as of a
private, nature, and all property, real, personal and mixed, and all debts due
on whatever account, including subscriptions to shares, and all Taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to NEWCO and the COMPANY
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectively the property of the Surviving Corporation as they were
of NEWCO and the COMPANY; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the states of incorporation
vested in NEWCO and the COMPANY, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all of the
liabilities and obligations of NEWCO and the COMPANY and any claim existing, or
action or proceeding pending, by or against NEWCO or the COMPANY may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in their place. Neither the rights of creditors nor any liens
upon the property of NEWCO or the COMPANY shall be impaired by the Merger, and
all debts, liabilities and duties of NEWCO and the COMPANY shall attach to the
Surviving Corporation, and may be enforced against such Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) VPI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
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(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and (2) the right to receive
the amount of cash, subject to adjustment pursuant to Section 3.3 hereof,
set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Merger, VPI shall have no
class of capital stock (including preferred stock) issued and outstanding other
than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
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3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of the COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of the COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by the COMPANY or the STOCKHOLDERS, shall
result in a corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3.
Notwithstanding anything set forth above, VPI acknowledges (i) that the
COMPANY has established a reserve in the amount of $125,000 on its balance sheet
relating to contingent liabilites and (ii) that this reserve shall be deemed to
have not been established (i.e., shall be ignored and not counted) when
conducting the above-referenced balance sheet tests, including positive net
working capital, positive net worth and fully funded customer deposits.
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4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Washington, D.C. 20036. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares, the delivery of a certified check or checks or wire
transfer(s) in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to
in Section 3 hereof shall occur and (z) the closing with respect to the IPO
shall be completed. The taking of the actions described in the preceding clauses
(x), (y) and (z) shall constitute the closing of the transactions hereunder (the
"Closing"), and the date on which the actions described in the preceding clauses
(x), (y) and (z) occur shall be referred to as the "Closing
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Date." Except as provided in Sections 8 and 9 hereof with respect to actions to
be taken on the Closing Date, during the period from the Pre-Closing Date to the
Closing Date this Agreement may only be terminated by a party if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Closing
Date has not occurred within 15 business days of the Pre-Closing Date. Time is
of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDERS agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually incurs liability under
the 1933 Act, the 1934 Act or any other federal or state securities laws as a
result of a breach of a representation or warranty by the COMPANY or the
STOCKHOLDERS, the representations and warranties set forth herein shall survive
until the expiration of any applicable limitations period, which shall be deemed
to be the Expiration Date for such purposes. For purposes of this Section 5, the
term "COMPANY" shall mean and refer to the COMPANY and all of its Subsidiaries,
if any.
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5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDERS, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have
not been made available to VPI, and all of such minutes are correct and complete
in all material respects. Except as set forth on Schedule 5.1, the most recent
minutes of the COMPANY, which are dated no earlier than ten business days prior
to the date hereof, affirm and ratify all prior acts of the COMPANY, and of its
officers and directors on behalf of the COMPANY.
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued
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and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently
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own, of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity nor is the COMPANY, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's (i) audited Balance Sheet, if any, as of December 31,
1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii) audited
Statement of Operations, if any, for the period ended December 31, 1997
(December 31, 1997 being hereinafter referred to as the "Balance Sheet Date")
and unaudited Statement of Operations, if any, for the period ended December 31,
1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for
the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash
Flows, if any, for the period ended on the Balance Sheet Date. Except as set
forth on Schedule 5.9, such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
5.9 and, with respect to unaudited COMPANY Financial Statements, except for the
requirement of footnote disclosures). Except as set forth on Schedule 5.9, such
Balance Sheets as of December 31, 1997 and 1996 present fairly the financial
position of such COMPANY as of the dates
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indicated thereon, and such Statements of Operations, Statements of Changes in
Stockholders' Equity and Statements of Cash Flows present fairly the results of
operations for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of
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the Balance Sheet Date, including any such amounts which are not reflected in
the balance sheet as of the Balance Sheet Date, and including receivables from
and advances to employees and the STOCKHOLDERS. The COMPANY shall also provide
to VPI (x) an accurate list of all receivables obtained subsequent to the
Balance Sheet Date up to the Pre-Closing Date and (y) an aging of all accounts
and notes receivable showing amounts due in 30 day aging categories (the "A/R
Aging Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed
by the COMPANY to VPI in a writing accompanying the A/R Aging Reports, the
accounts, notes and other receivables shown on Schedule 5.11 and on the A/R
Aging Reports are and shall be collectible in the amounts shown, net of reserves
reflected in the balance sheet as of the Balance Sheet Date with respect to
accounts receivable as of the Balance Sheet Date, and net of reserves reflected
in the books and records of the COMPANY (consistent with the methods used for
the balance sheet) with respect to accounts receivable of the COMPANY after the
Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES.
(a) The COMPANY holds all licenses, franchises, permits and other
governmental authorizations that are necessary for the operation of the business
of the COMPANY as now conducted, and the COMPANY has delivered to VPI an
accurate list and summary description (which is set forth on Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
including permits, titles, licenses, franchises and certificates held by the
COMPANY (it being understood and agreed that a list of all environmental permits
and other environmental approvals is set forth on Schedule 5.13). The licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 are valid, and the COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
and is not in violation of any
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of the foregoing, except for inadvertent, immaterial noncompliance with such
requirements, standards, criteria and conditions (provided that any such
noncompliance shall be deemed a breach of this Section 5.12 for purposes of
Section 11 hereof). Except as specifically provided on Schedule 5.12, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the COMPANY by, any such licenses, franchises, permits or government
authorizations.
(b) Except as provided on Schedule 5.12, the COMPANY is the exclusive owner
of all right, title and interest in and to all Intellectual Property rights that
are in any material respect used or proposed to be used in the business of the
COMPANY as now conducted, or is licensed to use such Intellectual Property, and
has delivered to VPI an accurate list and summary description of all such
Intellectual Property owned or licensed by the COMPANY (which is set forth on
Schedule 5.12).
(c) Schedule 5.12 sets forth as of the date hereof all Intellectual
Property owned by the COMPANY. All issued patents, registered trademarks, trade
names, service marks and copyright registrations listed in Schedule 5.12 are
valid, enforceable and subsisting. To the knowledge of the COMPANY, as of the
date hereof, there has not been and there is not any material unauthorized use,
infringement or misappropriation of any of the Intellectual Property owned by
the COMPANY by any third party, employee or former employee of the COMPANY. The
COMPANY has the exclusive right to file, prosecute and maintain all applications
and registrations with respect to the Intellectual Property owned by the
COMPANY.
(d) Schedule 5.12 sets forth as of the date hereof a list of all licenses
and other agreements with third parties under which the COMPANY has been granted
rights to the use, reproduction, distribution, manufacture, and sale or
licensing of items embodying the Intellectual Property rights of such third
parties.
(e) Schedule 5.12 sets forth as of the date hereof a list of all licenses
and agreements under which the COMPANY has granted rights under Intellectual
Property to third parties. All
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such rights granted have been and are nonexclusive.
(f) As of the date hereof, no claims with respect to the Intellectual
Property rights owned or licensed by the COMPANY have been asserted against the
COMPANY or, to the knowledge of the COMPANY are threatened by any Person against
the COMPANY, nor does the COMPANY know of any valid grounds for any bona fide
claims against the use by the COMPANY of any Intellectual Property owned or
licensed by the COMPANY.
(g) No Intellectual Property owned or licensed by the COMPANY is subject to
any court order restricting in any manner the use or licensing thereof by the
COMPANY. The COMPANY has not entered into any agreement granting any third party
the right to bring infringement actions with respect to, or otherwise to enforce
rights with respect to, any Intellectual Property rights owned by the COMPANY.
(h) Each of the computer programs and databases and their associated system
and user documentation (collectively, the "Software Products") owned by the
COMPANY, licensed to any third party and set forth on Schedule 5.12 hereto
conforms in all material respects to the functional and operational
specifications set forth in the respective user manuals and other documentation
for such Software Products. The COMPANY owns and has possession of all such
technical documentation (including the source code, system documentation,
statements of principles of operation and schematics) for each of the Software
Products as may be necessary and sufficient for the continued effective use,
further development and maintenance of the same.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including
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petroleum and petroleum products (as such terms are defined in any applicable
Environmental Law); (ii) the COMPANY has obtained and adhered to all permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes and Hazardous Substances, a list of all of which permits
and approvals is set forth on Schedule 5.13, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no
on-site or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) the COMPANY has no contingent liability in connection with any release of
any Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of the COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
the COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by the COMPANY with a value in
excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of the COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANY shall indicate on Schedule 5.14 those assets listed thereon that are
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currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than the COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of the COMPANY, the STOCKHOLDERS and, to the
knowledge of the COMPANY or the STOCKHOLDERS, the other parties (and their
successors) thereto in accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct
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copies of such agreements to VPI. The COMPANY has complied with all material
commitments and obligations pertaining to it, and is not in default under any
contracts or agreements listed on Schedule 5.16 and no notice of default under
any such contract or agreement has been received. The COMPANY has also indicated
on Schedule 5.16 a summary description of all pending plans or projects
involving the opening of new operations, expansion of existing operations, and
the acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY
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as lessee (which copies are attached to Schedule 5.17), and an indication as to
which such properties, if any, are currently owned, or were formerly owned, by
STOCKHOLDERS or business or personal affiliates of the COMPANY or STOCKHOLDERS.
Except as set forth on Schedule 5.17, all of such leases included on Schedule
5.17 are in full force and effect and, assuming due execution and delivery
thereof by the parties thereto other than the COMPANY, the STOCKHOLDERS and
their respective affiliates, constitute valid and binding agreements of the
COMPANY, the STOCKHOLDERS and, to the knowledge of the COMPANY or the
STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY has
ever been canceled by the insurer and the COMPANY has never been unable to
obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the
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compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the best of the COMPANY's knowledge, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered
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thereby as of the Balance Sheet Date. Except for the employee benefit plans, if
any, described on Schedule 5.20, the COMPANY does not sponsor, maintain or
contribute to any plan program, fund or arrangement that constitutes an
"employee pension benefit plan" (within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) nor has
the COMPANY any obligation to contribute to or accrue or pay any benefits under
any deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation
arrangement). The COMPANY has not sponsored, maintained or contributed to any
employee pension benefit plan other than the plans, agreements, arrangements and
trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
COMPANY's employees.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental
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agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audit reports, Forms 5500, summary plan
descriptions or Tax Returns) have been timely filed or distributed, and copies
thereof for the three most recent plan years are included as part of Schedule
5.21 hereof. No plan listed on Schedule 5.20, nor the COMPANY, nor any
STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the COMPANY has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDERS further
represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
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contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the COMPANY and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations, and is not in
violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local and
other Tax returns, reports, declarations or Tax return filing extension requests
("Tax Returns") for all fiscal periods ended on or before the Balance Sheet
Date. All such Tax Returns have set forth all material items required to be set
forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the
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COMPANY and its employees are not aware of any proposed examinations) or claims
against the COMPANY (including liens against the COMPANY's assets) for federal,
state, local and other Taxes (including penalties and interest) for any period
or periods prior to and including the Balance Sheet Date and no notice of any
claim for Taxes, whether pending or threatened, has been received. Except as set
forth on Schedule 5.23, neither the COMPANY nor the STOCKHOLDERS have entered
into an agreement or waiver or have been requested to enter into an agreement or
waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or
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partnership, as a result of any purchase of assets or other business acquisition
transaction (other than a merger in which the COMPANY or such person or entity
was the surviving corporation or a consolidation) and (ii) has not indemnified
any other person or entity or otherwise agreed to pay on behalf of any other
person or entity any Taxes arising from or which may be asserted on the basis of
any Tax treatment adopted with respect to all or any aspect of such business
acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
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5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of the COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.24, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect, and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.24, none of the
Material Documents prohibits the use or publication by the COMPANY, VPI or NEWCO
of the name of any other party to such Material Document, and none of the
Material Documents prohibits or restricts the COMPANY from freely providing
services to any other customer or potential customer of the COMPANY, VPI, NEWCO
or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
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(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of
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the COMPANY or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI
an accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the
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COMPANY, enforceable against the COMPANY in accordance with its terms except as
may be limited by (i) bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally or (ii) the discretionary power of a court exercising equity
jurisdiction. The individual signing this Agreement on behalf of the COMPANY has
the legal power, authority and capacity to bind the COMPANY to the terms of this
Agreement.
5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
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at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
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6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANY actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI
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Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the Merger, and
all required approvals of the shareholders and board of directors of VPI and
NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
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6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this
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Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated
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hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
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6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to
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be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by VPI and NEWCO for Taxes have been so
deposited, withheld or collected, and such deposit, withholding or collection
has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
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(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the
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STOCKHOLDERS set forth in the letter of representations (referenced in the tax
opinion letter to be delivered pursuant to Section 8.4 hereof) are true and
correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI,
NEWCO, the STOCKHOLDERS and the COMPANY shall treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
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(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
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(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
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(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business; (viii) merge or consolidate or agree to merge or
consolidate with or into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between the COMPANY and any STOCKHOLDER not reflecting fair market terms, except
such existing agreements as are set forth on Schedule 9.7. Such termination
agreements are listed on Schedule 7.6 and copies thereof are attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-
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occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of the COMPANY or the
STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect
at or prior to the Pre-Closing and (ii) any material failure of any STOCKHOLDER
or the COMPANY to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by such person hereunder. VPI and NEWCO shall give
prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of VPI or NEWCO contained herein to be untrue or
inaccurate in any material respect at or prior to the Pre-Closing and (ii) any
material failure of VPI or NEWCO to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.7 that is not accompanied by a
proposed amendment or supplement to a schedule pursuant to Section 7.8 shall not
be deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and
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provided further, that no amendment or supplement to a schedule prepared by VPI
or NEWCO that constitutes or reflects an event or occurrence that would have a
Material Adverse Effect may be made unless a majority of the Founding Companies
consent to such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto
shall be deemed to be the schedules as amended or supplemented pursuant to this
Section 7.8. In the event that one of the Other Founding Companies seeks to
amend or supplement a schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, VPI shall give the COMPANY notice promptly after it has knowledge
thereof. If VPI and a majority of the Founding Companies consent to such
amendment or supplement, but the COMPANY does not give its consent, the COMPANY
may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event
that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours following receipt of
notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested and so requested in the
notice). The
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provisions of this Section 7.8 shall be contained in the Other Agreements
executed in connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with VPI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The COMPANY and the STOCKHOLDERS agree promptly to
advise VPI if, at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the COMPANY or the STOCKHOLDERS becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. VPI will give the COMPANY and the
STOCKHOLDERS an opportunity and a reasonable amount of time to review and
comment on a substantially final draft of the Registration Statement prior to
filing, and with respect to all amendments thereto, VPI will give the COMPANY
and STOCKHOLDERS an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the STOCKHOLDERS, as
of the effective date of the Registration Statement the COMPANY represents and
warrants as to such information with respect to itself, and each STOCKHOLDER
represents and warrants, as to such information with respect to the COMPANY and
himself or herself, that the Registration Statement will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and that the STOCKHOLDERS
and the COMPANY have had the opportunity to review and approve such information.
If, prior to the 25th day after the date of the final prospectus of VPI utilized
in connection with the IPO, the COMPANY
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or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to VPI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of VPI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Pre-Closing Date and on the Closing
Date, contained in this Agreement (including the Schedules and Annexes hereto)
shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 21, 1998, unless the Closing Date shall have occurred on or before April
21, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANY for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
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8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
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before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
Charter Documents and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDERS against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANY and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
not reflecting fair market terms shall have been canceled effective prior to or
as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of the COMPANY, and certificates of insurance to that effect
shall have been delivered to VPI. VPI shall reimburse the COMPANY for the
incremental cost of having VPI so named as an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had incurred prior
to the Pre-Closing Date provided that such indebtedness or obligations are
related to the business of the COMPANY as being conducted at the Pre-Closing
Date.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all separate
Tax Returns of any Acquired Party for all taxable periods that end on or before
the Closing Date. All such Tax Returns shall have set forth all material items
required to be set forth therein and shall have been prepared in compliance with
applicable laws and shall be true, correct and complete in all material
respects. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in
excess of all amounts already paid with respect thereto or properly accrued or
reserved with respect thereto on the COMPANY Financial Statements and books and
records) required to be shown by such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns of,
or that include, any Acquired Party for all taxable periods ending after the
Closing Date. VPI shall pay or cause to be paid all Tax liabilities (in excess
of amounts already paid with respect thereto or properly accrued or reserved
with respect thereto on the VPI Financial Statements and books and records)
required to be shown by such Tax Returns to be due.
(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the COMPANY,
as defined in Section 1563 of the Code, to, provide to each of the other parties
hereto such cooperation
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and information as any of them reasonably may request in filing any Tax Return,
amended Tax Return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by taxing authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Agreement shall bear all costs of filing
such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and each STOCKHOLDER shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury Regulations
promulgated under the Code, and treat the transaction as an exchange pursuant to
which gain is not recognized under Section 351(a) of the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate [NAME] to
serve as a director of VPI effective as of the Closing Date. Representatives of
the Founding Companies shall constitute a majority of the directors of VPI
immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, except as may be required by ERISA or
other applicable law; provided, however, that any new health insurance plan
shall provide for coverage for preexisting
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conditions for employees of the COMPANY who were covered by the COMPANY's health
insurance plan immediately prior to the Closing Date or as otherwise required by
law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
10.8 LICENSE OF SOURCE CODE. In the event that VPI elects (a) to increase
customer support and maintenance prices for COMPANY services that are made
available to COMPANY customers that are not Affiliates of VPI ("Nonaffiliated
Customers"), (b) to reduce customer support and maintenance services of the
COMPANY to Nonaffiliated Customers or (c) to restrict sale of or access to new
software product or functionality developed by the COMPANY or VPI which would be
useful to Nonaffiliated Customers in their individual non-aggregated operations
and which has been developed to be used by property management companies on a
stand-alone basis, any two of the STOCKHOLDERS (or their designated successors)
shall have the right to disagree with such price increase, service reduction or
sale or access restriction and request that the source code of (i) all software
of the COMPANY then utilized by such Nonaffiliated Customers or (ii) such
specific software product or functionality referenced in clause (c) above (as
applicable, the "Software") be licensed by the COMPANY to a third party in order
for such third party to service all such Nonaffiliated Customers. Written notice
(the "Disagreement Notice") of a disagreement with such intended price increase,
service reduction or sale or access restriction by any two of the STOCKHOLDERS
must be given to VPI within 15 days after such STOCKHOLDERS receive actual
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notice of such price increase, service reduction or sale or access restriction.
Thereafter, a committee (the "Resolution Committee") consisting of (i) the Chief
Executive Officer of VPI (or, at the Chief Executive Officer's election, the
Chief Operating Officer of VPI), (ii) one of the STOCKHOLDERS (as designated by
the STOCKHOLDERS) and (iii) a director of VPI mutually agreed upon by the two
individuals of the Resolution Committee appointed pursuant to clauses (i) and
(ii) of this sentence, shall be convened for the purpose of resolving the
disagreement between the STOCKHOLDERS and VPI regarding such price increase,
service reduction or sale or access restriction. If the disagreement is not
resolved to the satisfaction of the Resolution Committee within 30 days after
receipt by VPI of the Disagreement Notice, the STOCKHOLDERS shall have the right
for 90 days thereafter to negotiate a proposed agreement (a "Proposed
Agreement") with any third party for the license of the Software by VPI to such
third party for the purpose of servicing the Nonaffiliated Customers, provided,
however, that the STOCKHOLDERS shall be required in good faith to seek the best
commercially reasonable terms obtainable for VPI. After receipt of the Proposed
Agreement by VPI, VPI shall have 30 days to determine that it will not implement
the price increase, service reduction or sale or access restriction referred to
in the first sentence of this Section 10.8, in which case the COMPANY shall not
enter into the Proposed Agreement. If VPI does not give written notice to the
STOCKHOLDER who is a member of the Resolution Committee of VPI's determination
that it will not implement such price increase, service reduction or sale or
access restriction, the COMPANY shall enter into the Proposed Agreement. Unless
otherwise agreed by VPI and a majority of the STOCKHOLDERS, the procedure set
forth in this Section 10.8 shall be used to resolve any disagreement between VPI
and the STOCKHOLDERS regarding Software pricing, customer service, sales and
access, provided, however, that VPI and a majority of the STOCKHOLDERS may
resolve any such disagreement by mutual agreement at any time.
11. INDEMNIFICATION
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The STOCKHOLDERS, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, NEWCO and the COMPANY (as the Surviving Corporation) at all
times, from and after the date of this Agreement until the Expiration Date, from
and against all losses, claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by VPI, NEWCO and the COMPANY (as the Surviving Corporation) as a
result of or arising from (i) any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the Schedules or
certificates delivered in connection herewith, (ii) any breach of any agreement
on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
COMPANY or the STOCKHOLDERS, and provided to VPI or its counsel by the COMPANY
or the STOCKHOLDERS, contained in the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact relating solely to the COMPANY or the STOCKHOLDERS required to be
stated therein or necessary to make the statements therein not misleading, or
(iv) the matters described on Schedule 11.1(iv) (relating to specifically
identified matters such as ongoing claims and/or litigation), which Schedule
shall be prepared by VPI, provided, however, (A) that in the case of any
indemnity arising pursuant to clause (iii) such indemnity shall not inure to the
benefit of VPI, NEWCO, the COMPANY or the Surviving Corporation to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to VPI counsel and to
VPI for inclusion in the final prospectus, and such information was
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not so included or properly delivered, and (B) that no STOCKHOLDER shall be
liable for any indemnification obligation pursuant to this Section 11.1 to the
extent attributable to a breach of any representation, warranty or agreement
made herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that VPI or NEWCO has claims against the STOCKHOLDERS under Section 11.1
hereof by reason of such liabilities); (iv) any liability under the 1933 Act,
the 1934 Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to VPI, NEWCO or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the
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Indemnified Party shall, as a condition precedent to a claim with respect
thereto being made against any party obligated to provide indemnification
pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"),
give the Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall state the nature and the basis of
such claim and a reasonable estimate of the amount thereof. The Indemnifying
Party shall have the right to defend and settle (subject to the consent of the
Indemnified Party, as hereinafter provided), at its own expense and by its own
counsel, any such matter so long as the Indemnifying Party pursues the same in
good faith and diligently, provided that the Indemnifying Party shall not settle
any criminal proceeding without the written consent of the Indemnified Party. If
the Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel.
Further, absent a conflict, the Indemnified Party may select counsel and have
such counsel participate in such matter at the sole cost of the Indemnified
Party. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested in writing by the
Indemnifying Party, in which event the Indemnified Party
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shall be reimbursed by the Indemnifying Party for reasonable additional legal
expenses and out-of-pocket expenses. If the Indemnifying Party desires to accept
a final and complete settlement of any such Third Person claim in which no
admission of wrongdoing is required of the Indemnified Party and the Indemnified
Party refuses to consent to such settlement, then the Indemnifying Party's
liability under this Section with respect to such Third Person claim shall be
limited to the amount so offered in settlement by said Third Person. If the
Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, conditioned or delayed. All settlements hereunder shall
effect a complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDERS until
such time as, and solely to the extent
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that, the aggregate of all claims which such persons may have against the
STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash paid to the
STOCKHOLDERS and (ii) the value of the VPI Stock delivered to the STOCKHOLDERS
(the "Indemnification Threshold"), provided, however, that VPI, NEWCO, the
Surviving Corporation and the other persons or entities indemnified pursuant to
Section 11.1 may assert and shall be indemnified for any claim under Section
11.l(iv) at any time, regardless of whether the aggregate of all claims which
such persons may have against the STOCKHOLDERS exceeds the Indemnification
Threshold, it being understood that the amount of any such claim under Section
11.1(iv) shall not be counted towards the Indemnification Threshold. The
STOCKHOLDERS shall not assert any claim for indemnification hereunder against
VPI or NEWCO until such time as, and solely to the extent that, the aggregate of
all claims which the STOCKHOLDERS may have against VPI and NEWCO shall exceed
$50,000, provided, however, that the STOCKHOLDERS and the other persons or
entities indemnified pursuant to Section 11.2 may assert and shall be
indemnified for any claim under Section 11.2(v) at any time, regardless of
whether the aggregate of all claims which such persons may have against any of
VPI and NEWCO exceeds $50,000, it being understood that the amount of any such
claim under Section 11.2(v) shall not be counted towards such $50,000 amount. No
person shall be entitled to indemnification under this Section 11 if and to the
extent that: (a) such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement; or (b) such person
receives a tax benefit as a result of the claim or loss for which
indemnification is sought (i.e., the amount of such claim or loss for which
indemnification is provided hereunder shall be reduced by the amount of such tax
benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI
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Stock, or a combination thereof, at the STOCKHOLDER's election. For purposes of
calculating the value of the VPI Stock received or delivered by a STOCKHOLDER
(for purposes of determining the Indemnification Threshold, the limitation on
indemnity set forth in the second preceding sentence and the amount of any
indemnity paid), VPI Stock shall be valued at its initial public offering price
as set forth in the Registration Statement. Any indemnification payment made by
the STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction
in the consideration received by the STOCKHOLDERS pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the
COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
June 30, 1998, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement
to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein (including but not
limited to the condition that the aggregate value of the cash and the
number of shares of VPI Stock to be received by the STOCKHOLDERS is not
less than the Minimum Value set forth on Annex III), which breach or
default has a Material Adverse Effect, and the curing of such default shall
not have been made on or before the Closing Date;
(iv) pursuant to Section 7.8 hereof; or
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(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDERS pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDERS shall reimburse VPI for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement in
the event that this Agreement is terminated by VPI pursuant to Section
12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor,
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or as a sales representative, in any noncommercial property management,
rental or sales business or hotel management business in direct competition
with VPI or any of its subsidiaries, within 100 miles of the locations in
which VPI or the COMPANY, or any of their subsidiaries, conduct a
noncommercial property management, rental or sales business or hotel
management business (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
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(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting the customers or employees from
such new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other
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subsidiaries), or similar activities, or business in locations the operation of
which, under such circumstances, does not violate clause (i) of Section 13.1,
and in any event such new business, activities or location are not in violation
of this Section 13 or of such STOCKHOLDER's obligations under this Section 13,
if any, such STOCKHOLDER shall not be chargeable with a violation of this
Section 13 if VPI (including VPI's subsidiaries) shall thereafter enter the
same, similar or a competitive (i) business, (ii) course of activities, or (iii)
location, as applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
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13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide
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VPI with the opportunity within such two-day period to contest such disclosure,
or (iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party. In the event of a breach or threatened breach by any of the STOCKHOLDERS
of the provisions of this Section, VPI shall be entitled to an injunction
restraining such STOCKHOLDERS from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting VPI
from pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated by
this Agreement are not consummated, STOCKHOLDERS shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI or NEWCO, (ii) disclosure is required
by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI and NEWCO shall, unless otherwise required by law or such order, give two
days' prior written notice thereof to the COMPANY and the STOCKHOLDERS and
provide the COMPANY and the STOCKHOLDERS with the opportunity within such
two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against
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the disclosing party. VPI will disclose confidential information relating to the
COMPANY to the Other Founding Companies only if such companies have agreed, in
advance, to treat such information as confidential. In the event of a breach or
threatened breach by VPI or NEWCO of the provisions of this Section, the COMPANY
and the STOCKHOLDERS shall be entitled to an injunction restraining VPI and
NEWCO from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting the COMPANY and the
STOCKHOLDERS from pursuing any other available remedy for as such breach or
threatened breach, including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the
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STOCKHOLDERS pursuant to Section 3.1. The certificates evidencing the VPI Stock
delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement shall bear
a legend substantially in the form set forth below and containing such other
information as VPI may deem necessary or appropriate: THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED,
APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE
EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date].
UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
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16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by such STOCKHOLDERS pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANY,
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and any plans for additional acquisitions and the like. The STOCKHOLDERS have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the
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STOCKHOLDERS and the stockholders of the other Founding Companies who
receive shares of VPI Stock pursuant to the Other Agreements being referred to
herein as the "Founding Stockholders"), and thereafter, if a further reduction
is required, by reducing the number of shares to be sold by the Founding
Stockholders on a pro rata basis based on the number of shares proposed to be
registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such
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registration unless VPI is no longer proceeding diligently to effect such
registration (in which case the delay contemplated by this sentence would not be
applicable); provided that VPI shall provide the Founding Stockholders the right
to participate in such public offering pursuant to, and subject to, Section 17.1
hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
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17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
VPI will reimburse such seller and each such director, officer, underwriter and
controlling Person for any expenses (including but not limited to reasonable
attorneys' fees) reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
VPI shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to VPI by such seller expressly for use in the preparation thereof, and provided
further that VPI shall not be liable to any Person
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who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the 1933 Act, in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are
included in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or
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expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any underwriter, VPI or
any such director, officer or controlling Person and shall survive the transfer
of such securities by such seller. In no event shall the liability of any
selling holder of Registrable Securities under this Section 17.6(b) be greater
in amount than the dollar amount of the proceeds received by such holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall,
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without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to
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above shall be deemed to include, subject to the limitations set forth in
Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to
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consummate the transactions contemplated hereby and by the Other Agreements.
VPI, the COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue
any press release or otherwise make any public announcement (including
communications with trade publications and other media), or disclose information
to any third party (except those agents or representatives of a party directly
involved in the transactions contemplated hereby and except as required by law)
concerning VPI, the Founding Companies or the transactions contemplated hereby
or by the Other Agreements without the prior approval of VPI, the COMPANY and
the STOCKHOLDERS.
18.2 COOPERATION. The COMPANY, the STOCKHOLDERS, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon
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execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Arthur Andersen, LLP (including such fees and expenses in connection with the
audit of the COMPANY's financial statements), Akin, Gump, Strauss, Hauer & Feld,
L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANY and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, VPI shall reimburse
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the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the
closing of the IPO up to $50,000. In addition, each STOCKHOLDER shall pay all
sales, use, transfer, real property transfer, recording, gains, stock transfer
and other similar taxes and fees ("Transfer Taxes") imposed in connection with
the Merger, other than Transfer Taxes, if any, imposed by the State of Delaware.
Each STOCKHOLDER shall file all necessary documentation and Tax Returns with
respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that
he or she, and not the COMPANY or VPI, shall pay all taxes due upon receipt of
the consideration payable pursuant to Section 3 hereof, and shall assume all tax
risks and liabilities of such STOCKHOLDER in connection with the transactions
contemplated hereby; provided, however, that the foregoing shall not in any way
prejudice the ability of the STOCKHOLDERS and the COMPANY to rely upon the
opinions contained in the tax opinion letter referenced in Annex VI.
The COMPANY agrees that it will provide 20 hours of consultation to VPI's
accountants without compensation to familiarize them with its software in order
that VPI or its designee can perform financial audits more efficiently for the
COMPANY and the Other Founding Companies. For consulting services beyond such 20
hours provided by the COMPANY, VPI agrees to compensate the COMPANY, from the
proceeds of the IPO, at the COMPANY's customary rate.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
9 East 53rd Street
New York, New York 10022
Facsimile no.: (212) 688-8209
Attention: Leonard A. Potter
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with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Facsimile no.: (202) 887-4288
Attention: Bruce S. Mendelsohn
(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
First Resort Software, Inc.
300A Aspen Airport Business Center
Aspen, Colorado 81611
Facsimile no.: (970) 920-3732
Attention: Tom Leddy
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent
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possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Merger and each future holder of such
VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
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"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
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"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"Intellectual Property" means computer programs and databases and their
associated system and user documentation; copyrights, copyright applications (if
any) and copyright registrations (if any), patents and patent applications;
trademarks, service marks and trade names, including registrations (if any) and
applications for registration (if any) therefor; trade secrets and proprietary
rights.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such
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employment agreement of the STOCKHOLDER subject to the Noncompetition Period,
one (1) year following the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
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"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
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"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
FRS ACQUISITION CORP.
By:/s/ Leonard Potter
----------------------------------
Leonard Potter
Vice President
FIRST RESORT SOFTWARE, INC.
By:/s/ Thomas A. Leddy
----------------------------------
Name: Thomas A. Leddy
--------------------------
Title: President
--------------------------
STOCKHOLDERS:
/s/ Thomas A. Leddy
- ----------------------------------
Thomas A. Leddy
/s/ Evan H. Gull
- ----------------------------------
Evan H. Gull
/s/ Daniel Patrick Curry
- ----------------------------------
Daniel Patrick Curry
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VACATION PROPERTIES INTERNATIONAL, INC.
The undersigned, Leonard A. Potter, Vice President of Vacation Properties
International, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is:
Vacation Properties International, Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed in the
Office of the Secretary of State of the State of Delaware on September 11, 1997.
THIRD: This Amended and Restated Certificate of Incorporation was duly adopted
in accordance with the provisions of Sections 242 and 245 of the Delaware
General Corporation Law, the Board of Directors having duly adopted resolutions
setting forth and declaring advisable this Amended and Restated Certificate of
Incorporation, and in lieu of a meeting of the stockholders, written consent to
this Amended and Restated Certificate of Incorporation having been given by the
holders of a majority of the outstanding stock of the Corporation in accordance
with Section 228 of the General Corporation Law of the State of Delaware.
FOURTH: This Amended and Restated Certificate of Incorporation is being filed
pursuant to Sections 242 and 245 of the Delaware General Corporation Law in
order to restate the Certificate of Incorporation of the Corporation as amended
to date, and also to amend further the Certificate of Incorporation to (i)
increase the authorized capital stock of the Corporation, (ii) authorize the
issuance of preferred stock and restricted voting common stock, and (iii) to
provide terms for the election of the Board of Directors of the Corporation.
FIFTH: The Certificate of Incorporation of the Corporation is hereby amended and
restated in its entirety as follows:
FIRST: The name of the corporation is Vacation Properties International,
Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805.
The name of its registered agent at such address is The Corporation Service
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 60,000,000 shares of stock, of
which 10,000,000 shares, designated as preferred stock, shall have a par value
of One Cent ($.01) per share (the "Preferred Stock"), and 50,000,000
<PAGE>
shares, designated as common stock, shall have a par value of One Cent ($.01)
per share (the "Common Stock"). 3,134,666 of such shares of Common Stock shall
be designated as Restricted Voting Common Stock (the "Restricted Voting Common
Stock").
A statement of the powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, in respect of each class of stock of the
Corporation is as follows:
Preferred Stock. The Preferred Stock may be issued from time to time by the
Board of Directors as shares of one or more classes or series. Subject to the
provisions of this Certificate of Incorporation and the limitations prescribed
by law, the Board of Directors is expressly authorized by adopting resolutions
to issue the shares, fix the number of shares and change the number of shares
constituting any series, and to provide for or change the voting powers,
designations, preferences and relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof, including dividend
rights (and whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), a redemption price or prices,
conversion rights and liquidation preferences of the shares constituting any
class or series of the Preferred Stock, without any further action or vote by
the stockholders.
Common Stock. 1. Dividends. Subject to the preferred rights of the holders of
shares of any class or series of Preferred Stock as provided by the Board of
Directors with respect to any such class or series of Preferred Stock, the
holders of the Common Stock (including Restricted Voting Common Stock) shall be
entitled to receive, as and when declared by the Board of Directors out of the
funds of the Corporation legally available therefor, such dividends (payable in
cash, stock or otherwise) as the Board of Directors may from time to time
determine, payable to stockholders of record on such dates, not exceeding 60
days preceding the dividend payment dates, as shall be fixed for such purpose by
the Board of Directors in advance of payment of each particular dividend. All
dividends on Common Stock shall be paid pari passu with dividends on Restricted
Voting Common Stock.
2. Liquidation. In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the distribution or
payment to the holders of shares of any class or series of Preferred Stock as
provided by the Board of Directors with respect to any such class or series of
Preferred Stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among and paid to the holders
of Common Stock and Restricted Voting Common Stock ratably in proportion to the
number of shares of Common Stock and Restricted Voting Common Stock held by them
respectively.
3. Voting Rights. Except as otherwise required by law, each holder of
shares of Common Stock shall be entitled to one vote for each share of Common
Stock standing in such holder's name on the books of the Corporation. Except as
otherwise required by law, each holder of shares of Restricted Voting Common
Stock shall be entitled to one-half of a vote for each share of Restricted
Voting Common Stock standing in such holder's name on the books of the
Corporation. The holders of shares of Restricted Voting Common Stock shall have
no right to vote separately as a class except as specifically required by the
General Corporation Law of Delaware.
4. Conversion of the Restricted Voting Common Stock. Each share of
Restricted Voting Common Stock will automatically convert into Common Stock on a
share for share basis (a) in the event of a disposition of such share of
Restricted Voting Common Stock by the holder thereof (other than a disposition
which is a distribution by a holder to its partners or beneficial owners or a
transfer to a related party of such holder (as defined in Section 267, 707, 318,
and/or 4946 of the Internal
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Revenue Code of 1986), (b) in the event any person acquires beneficial ownership
of 15% or more of the outstanding shares of Common Stock of the Corporation, (c)
in the event any person offers to acquire 15% or more of the outstanding shares
of Common Stock of the Corporation, or (d) in the event a majority of the
aggregate number of votes which may be voted by the holders of outstanding
shares of Common Stock and Restricted Voting Common Stock entitled to vote
approve such conversion. After December 31, 2000, the Corporation may elect to
convert any outstanding shares of Restricted Voting Common Stock into shares of
Common Stock in the event 80% or more of the outstanding shares of Restricted
Voting Common Stock has been converted into shares of Common Stock.
FIFTH: 1. Board of Directors. There shall be one class of directors of the
Corporation. The directors shall be elected to hold office until the next annual
meeting of the stockholders and until their successors have been duly elected
and qualified. At each annual meeting of stockholders at which a quorum is
present, the persons receiving a plurality of the votes cast shall be directors.
No director may be removed from office by a vote of the stockholders at any time
except for cause. Election of directors need not be by written ballot unless the
Bylaws of the Corporation so provide.
2. Vacancies. Any vacancy on the Board of Directors resulting from death,
retirement, resignation, disqualification or removal from office or other cause,
as well as any vacancy resulting from an increase in the number of directors
which occurs between annual meetings of the stockholders at which directors are
elected, shall be filled only by a majority vote of the remaining directors then
in office, though less than a quorum, except that those vacancies resulting from
removal from office by a vote of the stockholders may be filled by a vote of the
stockholders at the same meeting at which such removal occurs. The directors
chosen to fill vacancies shall hold office for a term expiring at the end of the
next annual meeting of stockholders and until their successors have been duly
elected and qualified. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of one or more classes
or series of Preferred Stock shall have the right, voting separately as a class
or series, to elect directors, the election, term of office, filling of
vacancies, removal and other features of such directorships shall be governed by
the terms of the resolution or resolutions adopted by the Board of Directors
pursuant to ARTICLE FOURTH applicable thereto, and each director so elected
shall not be subject to the provisions of this ARTICLE FIFTH unless otherwise
provided therein.
3. Power to Make, Alter and Repeal Bylaws. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, alter and repeal the Bylaws of the Corporation.
4. Amendment and Repeal of Article Five. Notwithstanding any provision of
this Certificate of Incorporation and of the Bylaws, and notwithstanding the
fact that a lesser percentage may be specified by Delaware law, unless such
action has been approved by a majority vote of the full Board of Directors, the
affirmative vote of 66 2/3 percent of the Corporation's shareholders who would
be entitled to vote thereon, voting together as a single class, shall be
required to amend or repeal any provision of this ARTICLE FIFTH or to adopt any
provision inconsistent with this ARTICLE FIFTH. In the event such action has
been previously approved by a majority vote of the full Board of Directors, the
affirmative vote of a majority of the outstanding stock entitled to vote thereon
shall be sufficient to amend or repeal any provision of this ARTICLE FIFTH or
adopt any provision inconsistent with this ARTICLE FIFTH.
3
<PAGE>
SIXTH: The Corporation reserves the right to amend, alter, change or repeal
any provision in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute.
SEVENTH: No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derived an improper personal benefit.
EIGHTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as amended
from time to time, indemnify all persons whom it may indemnify pursuant thereto.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Certificate of Incorporation on behalf of the Corporation and does verify and
affirm, under penalty of perjury, that this Amended and Restated Certificate of
Incorporation is the act and deed of the Corporation and that the facts stated
herein are true as of this 10 day of March, 1998.
Vacation Properties International, Inc.
By:/s/ Leonard A. Potter
------------------------------------
Leonard A. Potter
Vice President
5
EXHIBIT 3.2
VACATION PROPERTIES INTERNATIONAL, INC.
---oo0oo---
BYLAWS
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ARTICLE I
OFFICES
-------
Section 1.01. Registered Office. The registered office of Vacation
Properties International, Inc. (hereinafter referred to as the "Corporation")
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.02. Additional Offices. The Corporation may also have offices at
such other places, both within and outside the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.01. Time and Place. All meetings of stockholders for the election
of Directors shall be held at such time and place, either within or outside the
State of Delaware, as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting or in a duly executed waiver
of notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place either within or outside the State of Delaware as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice of the meeting.
Section 2.02. Annual Meeting. Annual meetings of stockholders shall be held
for the
<PAGE>
purpose of electing a Board of Directors and transacting such other business as
may properly be brought before the meeting.
Section 2.03. Notice of Annual Meeting. Written notice of the annual
meeting, stating the place, date and time of such annual meeting, shall be given
to each stockholder entitled to vote at such meeting not less than ten (10)
(unless a longer period is required by law) nor more than sixty (60) days prior
to the meeting.
Section 2.04. Special Meeting. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or, if the Chairman is not present (or, if there is none), by the President
and shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors, or at the request in writing of the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at such meeting. Such request shall
state the purpose or purposes of the proposed meeting. The person calling such
meeting shall cause notice of the meeting to be given in accordance with the
provisions of Section 2.05 of this Article II and of Article V.
Section 2.05. Notice of Special Meeting. Written notice of a special
meeting, stating the place, date and time of such special meeting and the
purpose or purposes for which the meeting is called, shall be delivered either
personally or mailed to his or her last address to each stockholder not less
than ten (10) (unless a longer period is required by law) nor more than sixty
(60) days prior to the meeting.
2
<PAGE>
Section 2.06. List of Stockholders. The officer in charge of the stock
ledger of the Corporation or the transfer agent shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting, at
a place within the city where the meeting is to be held. Such place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the time and place of the meeting
during the whole time of the meeting and may be inspected by any stockholder who
is present.
Section 2.07. Presiding Officer. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or if the Chairman is not present (or
if there is none), by the President, or, if the President is not present, by a
Vice President, or, if a Vice President is not present, by such person who may
have been chosen by the Board of Directors, or, if none of such persons is
present, by a Chairman to be chosen by the stockholders owning a majority of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote at the meeting and who are present in person or represented by proxy.
The Secretary of the Corporation, or, if the Secretary is not present, an
Assistant Secretary, or, if an Assistant Secretary is not present, such person
as may be chosen by the Board of Directors, shall act as secretary of meetings
of stockholders, or, if none of such persons is present, the stockholders owning
a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy shall choose any person present to act as secretary of the
meeting.
3
<PAGE>
Section 2.08. Quorum and Adjournments. The holders of a majority of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote at stockholders meetings, present in person or represented by proxy,
shall be necessary to, and shall constitute a quorum for, the transaction of
business at all meetings of the stockholders, except as otherwise provided by
statute or by the Certificate of Incorporation. The stockholders present or in
person or represented by proxy at a duly organized meeting may continue to do
business until final adjournment of such meeting whether on the same day or on a
later day, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum. If a meeting cannot be organized because a quorum has not
attended, or even if a quorum shall be present or represented at any meeting of
the stockholders, the stockholders entitled to vote at such meeting present in
person or represented by proxy may adjourn the meeting from time to time;
provided, however, that if the holders of any class of stock of the Corporation
are entitled to vote separately as a class upon any matter at such meeting, any
adjournment of the meeting in respect of action of such class upon such matter
shall be determined by the holders of a majority of the shares of such class
present in person or represented by proxy and entitled to vote at such meeting,
until a quorum shall be present or represented. Notice of the adjourned meeting
need not be given if the time and place of the adjourned meeting are announced
at the meeting at which the adjournment is taken. At any adjourned meeting at
which a quorum is present in person or represented by proxy of any class of
stock entitled to vote separately as a class, as the case may be, any business
may be transacted which might have been transacted at the meeting as originally
called. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at such meeting.
4
<PAGE>
Section 2.09. Voting.
(a) At any meeting of stockholders, every stockholder having the right
to vote shall be entitled to vote in person or by proxy, but no such proxy shall
be voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period. Except as otherwise provided by law or the
Certificate of Incorporation, each stockholder of record shall be entitled to
one (1) vote for each share of capital stock registered in his or her name on
the books of the Corporation.
(b) At a meeting at which a quorum is present, all elections of
Directors shall be determined by a plurality vote, and, except as otherwise
provided by law or the Certificate of Incorporation, all other matters shall be
determined by a vote of a majority of the shares present in person or
represented by proxy and entitled to vote on such other matters.
Section 2.10. Inspectors. When required by law or directed by the presiding
officer or upon the demand of any stockholder entitled to vote, but not
otherwise, the polls shall be opened and closed, the proxies and ballots shall
be received and taken in charge, and all questions touching the qualification of
voters, the validity of proxies and the acceptance or rejection of votes shall
be decided at any meeting of the stockholders by two or more inspectors who may
be appointed by the Board of Directors before the meeting, or if not so
appointed, shall be appointed by the presiding officer at the meeting. If any
person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.
Section 2.11. Consent. Unless otherwise provided in the Certificate of
Incorporation, any action required or permitted by law or the Certificate of
Incorporation to be taken at any meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a
5
<PAGE>
written consent, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote on such action were present or represented by proxy
and voted. Such written consent shall be filed with the minutes of meetings of
stockholders. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not so consented in writing.
ARTICLE III
DIRECTORS
---------
Section 3.01. Number and Tenure. There shall be such number of Directors,
no fewer than one (1), as shall from time to time be fixed by the Board of
Directors at the annual meeting or at any special meeting called for such
purpose. The Directors shall be elected at the annual meeting of the
stockholders, except for initial Directors named in the Certificate of
Incorporation or elected by the incorporator, and except as provided in Section
3.02 of this Article, and each Director elected shall hold office until his
successor is elected and shall qualify or until their earlier resignation or
removal. Directors need not be stockholders.
Section 3.02. Vacancies. If any vacancies occur on the Board of Directors,
or if any new Directorships are created, they shall be filled by a majority of
the Directors then in office, though less than a quorum, or by a sole remaining
Director. Each Director so chosen shall hold office until the next annual
election of Directors and until his or her successor is duly elected and shall
qualify. If there are no Directors in office, any officer or stockholder may
call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or these Bylaws, at which meeting such vacancies
shall be filled.
6
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Section 3.03. Resignation. Any Director may resign at any time by giving
written notice to the Chairman of the Board, the President or the Secretary of
the Corporation, or, in the absence of all of the foregoing, by notice to any
other Director or officer of the Corporation. Unless otherwise specified in such
written notice, a resignation shall take effect upon delivery to the designated
Director or officer. It shall not be necessary for a resignation to be accepted
before it becomes effective.
Section 3.04. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or outside the State of Delaware.
Section 3.05. Annual Meeting. Unless otherwise agreed by the newly elected
Directors, the annual meeting of each newly elected Board of Directors shall be
held immediately following the annual meeting of stockholders, and no notice of
such meeting to either incumbent or newly elected Directors shall be necessary.
Section 3.06. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice, at such time and place as may from time to time be
determined by the Board of Directors. A copy of every resolution fixing or
changing the time or place of regular meetings shall be mailed to every Director
at least five days before the first meeting held pursuant thereto.
Section 3.07. Special Meetings. Special Meetings of the Board of Directors
may be called by the Chairman of the Board or the President on at least (1)
day's actual notice to each Director, if such Special Meeting is to be conducted
by means of conference telephone or similar communications equipment in
accordance with Section 3.11, and otherwise, upon two (2) days'
7
<PAGE>
actual notice if such notice is delivered personally or sent by telegram.
Special Meetings shall be called by the Chairman of the Board or the President
in like manner and on like notice on the written request of one-half or more of
the Directors then in office. The purpose of a Special Meeting of the Board of
Directors need not be stated in the notice of such meeting. Any and all business
other than an amendment of these Bylaws may be transacted at any special
meeting, and an amendment of these Bylaws may be acted upon if the notice of the
meeting shall have stated that the amendment of these Bylaws is one of the
purposes of the meeting. At any meeting at which every Director shall be
present, even though without any notice, any business may be transacted,
including the amendment of these Bylaws.
Section 3.08. Quorum and Adjournments. Unless otherwise provided by the
Certificate of Incorporation, at all meetings of the Board of Directors,
one-half of the total number of Directors shall constitute a quorum for the
transaction of business; provided, however, that when the Board of Directors
consists of one (1) Director, then one (1) Director shall constitute a quorum.
If a quorum is not present at any meeting of the Board of Directors, the
Directors present may adjourn the meeting, from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
Section 3.09. Presiding Officer. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board of Directors, if any, or if the
Chairman is not present (or if there is none), by the President, or, if the
President is not present, by such person as the Board of Directors may appoint
for the purpose of presiding at the meeting from which the President is absent.
8
<PAGE>
Section 3.10. Action by Consent. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee. Such consent shall have the same force and effect as the unanimous
vote of the Board of Directors.
Section 3.11. Telephone Meetings. Members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 3.12. Compensation. The Board of Directors, by the affirmative vote
of a majority of the Directors then in office and irrespective of the personal
interest of any Director, shall have authority to establish reasonable
compensation for Directors for their services as such and may, in addition,
authorize reimbursement of any reasonable expenses incurred by Directors in
connection with their duties.
ARTICLE IV
COMMITTEES
----------
Section 4.01. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
(1) or more committees, each committee to consist of one (1) or more Directors
of the Corporation. The Board of Directors
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<PAGE>
may designate one (1) or more persons who are not Directors as additional
members of any committee, but such persons shall be nonvoting members of such
committee. The Board of Directors may designate one (1) or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members of the committee present at any
meeting and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers that may require it; but no such committee shall have power or authority
to amend the Certificate of Incorporation, adopt an agreement of merger or
consolidation, recommend to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
elect or remove officers or Directors, or amend these Bylaws of the Corporation;
and, unless the resolution or the Certificate of Incorporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 4.02. Minutes of Committee Meetings. Unless otherwise provided in
the resolution of the Board of Directors establishing such committee, each
committee shall keep minutes of action taken by it and file the same with the
Secretary of the Corporation.
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Section 4.03. Quorum. A majority of the number of Directors constituting
any committee shall constitute a quorum for the transaction of business, and the
affirmative vote of such Directors present at the meeting shall be required for
any action of the committee; provided, however, that when a committee of one (1)
member is authorized under the provisions of Section 4.01 of this Article, such
one (1) member shall constitute a quorum.
Section 4.04. Vacancies, Changes and Discharge. The Board of Directors
shall have the power at any time to fill vacancies in, to change the membership
of and to discharge any committee.
Section 4.05. Compensation. The Board of Directors, by the affirmative vote
of a majority of the Directors then in office and irrespective of the personal
interest of any Director, shall have authority to establish reasonable
compensation for committee members for their services as such and may, in
addition, authorize reimbursement of any reasonable expenses incurred by
committee members in connection with their duties.
ARTICLE V
NOTICES
-------
Section 5.01. Form and Delivery.
(a) Whenever, under the provisions of law, the Certificate of
Incorporation or these Bylaws, notice is required to be given to any
stockholder, it shall not be construed to mean personal notice unless otherwise
specifically provided, but such notice may be given in writing, by mail,
telecopy, telegram or messenger addressed to such stockholder, at his or her
address as it appears on the records of the Corporation. If mailed, such notice
shall be deemed to be delivered
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when deposited in the United States mail, with postage prepaid.
(b) Whenever, under the provisions of law, the Certificate of
Incorporation, or these Bylaws, notice is required to be given to any Director,
it shall not be construed to mean personal notice unless otherwise specifically
provided, but such notice may be given in writing, by mail, telecopy, telegram
or messenger addressed to such Director at the usual place of residence or
business of such Director as in the discretion of the person giving such notice
will be likely to be received most expeditiously by such Director. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail, with postage prepaid.
Section 5.02. Waiver. Whenever any notice is required to be given under the
provisions of law, the Certificate of Incorporation or these Bylaws, a written
waiver of notice, signed by the person or persons entitled to said notice,
whether before or after the time for the meeting stated in such notice, shall be
deemed equivalent to such notice.
ARTICLE VI
OFFICERS
--------
Section 6.01. Designations. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President and a Secretary. The Board of
Directors may also choose a Chairman of the Board, one (1) or more Vice
Presidents, a Treasurer, one (1) or more Assistant Secretaries and one (1) or
more Assistant Treasurers and other officers and agents as it shall deem
necessary or appropriate. Any officer of the Corporation shall have the
authority to affix the seal of the Corporation and to attest the affixing of the
seal by his or her signature. All officers and agents of the Corporation shall
exercise such powers and perform such duties as shall from time to time be
determined by the Board of Directors.
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Section 6.02. Term of Office and Removal. The Board of Directors at its
annual meeting after each annual meeting of stockholders or at a special meeting
called for that purpose shall choose officers and agents, if any, in accordance
with the provisions of Section 6.01. Each officer of the Corporation shall hold
office until his or her successor is elected and shall qualify. Any officer or
agent elected or appointed by the Board of Directors may be removed, with or
without cause, at any time by the affirmative vote of a majority of the
Directors then in office. Any vacancy occurring in any office of the Corporation
may be filled for the unexpired portion of the term by the Board of Directors.
Section 6.03. Compensation. The salaries of all officers and agents, if
any, of the Corporation shall be fixed from time to time by the Board of
Directors, and no officer or agent shall be prevented from receiving such salary
by reason of the fact that he or she is also a Director of the Corporation.
Section 6.04. Chairman of the Board and the President. The Chairman of the
Board shall be the chief executive officer of the Corporation. If there is no
Chairman of the Board, the President shall be the chief executive officer of the
Corporation. The duties of the Chairman of the Board, and of the President at
the direction of the Chairman of the Board, shall be the following:
(i) Subject to the direction of the Board of Directors, to have
general charge of the business, affairs and property of the Corporation and
general supervision over its other officers and agents and, in general, to
perform all duties incident to the office of Chairman of the Board (or
President, as the case may be) and to see that all orders and resolutions
of the Board of Directors are carried into effect.
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(ii) Unless otherwise prescribed by the Board of Directors, to
have full power and authority on behalf of the Corporation to attend, act
and vote at any meeting of security holders of other Corporations in which
the Corporation may hold securities. At such meeting the Chairman of the
Board (or the President, as the case may be) shall possess and may exercise
any and all rights and powers incident to the ownership of such securities
that the Corporation might have possessed and exercised if it had been
present. The Board of Directors may from time to time confer like powers
upon any other person or persons.
(iii) To preside over meetings of the stockholders and of the
Board of Directors, to call special meetings of stockholders, to be an
ex-officio member of all committees of the Board of Directors, and to have
such other duties as may from time to time be prescribed by the Board of
Directors.
Section 6.05. The Vice President. The Vice President, if any (or in the
event there be more than one (1), the Vice Presidents in the order designated,
or in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the President and shall
generally assist the President and perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors.
Section 6.06. The Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for any committees of the Board of Directors, if requested
by such committee. The Secretary shall give, or cause to be given, notice of all
meetings of stockholders and special meetings of the Board of Directors, and
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shall perform such other duties as may from time to time be prescribed by the
Board of Directors or the President, under whose supervision he or she shall
act. The Secretary shall have custody of the seal of the Corporation, and the
Secretary, or any Assistant Secretary, shall have authority to affix the same to
any instrument requiring it, and, when so affixed, the seal may be attested by
the signature of the Secretary or any such Assistant Secretary.
Section 6.07. The Assistant Secretary. The Assistant Secretary, if any (or
in the event there be more than one (1), the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors.
Section 6.08. The Treasurer. The Treasurer, if any, shall have the custody
of the corporate funds and other valuable effects, including securities, and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may from time to time be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at regular meetings of the board, or
whenever they may require it, an account of all of his or her transactions as
Treasurer and of the financial condition of the Corporation.
Section 6.09. The Assistant Treasurer. The Assistant Treasurer, if any, (or
in the event there be more than one (1), the Assistant Treasurers in the order
designated, or in the absence of
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any designation, in the order of their election), shall, in the absence of the
Treasurer or in the event of the Treasurer's inability or refusal to act,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as may from time to time be
prescribed by the Board of Directors.
Section 6.10. Transfer of Authority. In case of the absence of any officer
or for any other reason that the Board of Directors deems sufficient, the Board
of Directors may transfer the powers or duties of that officer to any other
officer or to any Director or employee of the Corporation, provided a majority
of the full Board of Directors concurs.
Section 6.11. Giving of Bond by Officers. All officers of the Corporation,
if required to do so by the Board of Directors, shall furnish bonds to the
Corporation for the faithful performance of their duties, in such penalties and
with such conditions and security as the Board shall require.
ARTICLE VII
STOCK CERTIFICATES
------------------
Section 7.01. Form and Signatures. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by or in the name of
the Corporation, by the Chairman of the Board, the President or a Vice President
and the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Corporation, certifying the number and class (and series, if
any) of shares owned by him or her, and bearing the seal of the Corporation.
Such seal and any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may
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be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
Section 7.02. Registration of Transfer. Upon surrender to the Corporation
or any transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or its transfer
agent to issue a new certificate to the person entitled thereto, to cancel the
old certificate and to record the transaction upon its books.
Section 7.03. Registered Stockholders. Except as otherwise provided by law,
the Corporation shall be entitled to recognize the exclusive right of a person
who is registered on its books as the owner of shares of its capital stock to
receive dividends or other distributions, to vote as such owner, and to hold
liable for calls and assessments a person who is registered on its books as the
owner of shares of its capital stock. The Corporation shall not be bound to
recognize any equitable, legal or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
Section 7.04. Issuance of Certificates. No certificate shall be issued for
any share until (i) consideration for such share in the form of cash, services
rendered, personal or real property, leases of real property or a combination
thereof in an amount not less than the par value or stated capital of such share
has been received by the Corporation and (ii) the Corporation has received a
binding obligation of the subscriber or purchaser to pay the balance of the
subscription or purchase price.
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Section 7.05. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate to be issued in place of any certificate
previously issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his or her legal representative, to
advertise the same in such manner as it shall require, and to give the
Corporation a bond in such sum, or other security in such form as it may direct,
as indemnity against any claim that may be made against the Corporation on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 7.06. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
ARTICLE VIII
INDEMNIFICATION
---------------
Section 8.01. Directors, Officers, Employees or Agents.
(a) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other
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enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner that he or she reasonably believed to be in or not opposed
to the best interests of the Corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his or her conduct
was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
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(c) To the extent that a Director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Article VIII, or in defense of any claim, issue or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the Director, officer, employee or agent is proper in the circumstances because
he or she has met the applicable standard of conduct set forth in subsections
(a) and (b) of this Article VIII. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of Directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion or (3) by the
stockholders.
(e) Expenses incurred by an officer or Director in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such Director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation as authorized in this Article. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by
these Bylaws shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his or her official capacity and as to
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action in another capacity while holding such office.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
(h) The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under this Article.
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 9.01. Fiscal Year. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 9.02. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Delaware." The seal or any facsimile thereof may be, but need not be,
unless required by law, impressed or affixed to any instrument executed by an
officer of the Corporation.
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Section 9.03. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the corporation and/or other persons as the Board of Directors from
time to time shall designate.
Checks, drafts, bills of exchange, acceptance notes, obligations and orders
for the payment of money made payable to the Corporation may be endorsed for
deposit to the credit of the Corporation with a duly authorized depository by
the Treasurer and/or such other officers or persons as the Board of Directors
from time to time may designate.
Section 9.04. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized to do so, any officer or agent of the Corporation may
effect loans and advances for the Corporation from any bank, trust company or
other institution or from any firm, corporation or individual, and for such
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, and any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
Section 9.05. Contracts. Except as otherwise provided in these Bylaws or as
otherwise directed by the Board of Directors, the President or any Vice
President shall be authorized to execute and deliver, in the name and on behalf
of the Corporation, all agreements, bonds, contracts, deeds, mortgages and other
instruments, either for the Corporation's own account or in a fiduciary or other
capacity, and the seal of the Corporation, if appropriate, shall be affixed
22
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thereto by any of such officers or the Secretary or an Assistant Secretary. The
Board of Directors, the President or any Vice President designated by the Board
of Directors may authorize any other officer, employee or agent to execute and
deliver, in the name and on behalf of the Corporation, agreements, bonds,
contracts, deeds, mortgages and other instruments, either for the Corporation's
own account or in a fiduciary or other capacity and, if appropriate, to affix
the seal of the Corporation thereto. The grant of such authority by the Board or
any such officer may be general or confined to specific instances.
ARTICLE X
AMENDMENTS
----------
Section 10.01. These Bylaws may be altered, amended or repealed or new
Bylaws may be adopted by the stockholders or by the Board of Directors, to the
extent that such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such proposed alteration, amendment, repeal or
adoption of new Bylaws be contained in the notice of such special meeting.
23
VACATION PROPERTIES INTERNATIONAL, INC.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the 1998 Long-Term Incentive Plan (the "Plan")
of Vacation Properties International, Inc., a Delaware corporation (the
"Company"), is to advance the interests of the Company and its stockholders by
providing a means to attract, retain and reward executive officers, employee
directors, other key employees, non-employee and advisory directors and
consultants of and service providers to the Company and its subsidiaries and to
enable such persons to acquire or increase a proprietary interest in the
Company, thereby promoting a closer identity of interests between such persons
and the Company's stockholders.
2. DEFINITIONS. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock,
Non-employee Directors' Deferred Shares, Stock granted as a bonus or in lieu of
other awards, Dividend Equivalents and Other Stock-Based Awards are set forth in
Sections 6 and 8 of the Plan. Such awards, together with any other right or
interest granted to a Participant under the Plan, are termed "Awards." For
purposes of the Plan, the following additional terms shall be defined as set
forth below:
(a) "Award Agreement" means any written agreement, contract, notice or
other instrument or document evidencing an Award.
(b) "Beneficiary" shall mean the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.
(e) "Committee" means a committee, as described in Section 3(a)
hereof, designated by the Board to administer the Plan.
(f) "Eligible Non-Employee Director" means any non-employee or
advisory director of the Board who is not an employee of the Company on any date
on which a nonqualified Option is to be granted under Section 8 or on which fees
are to be paid under Section 8.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act shall
be deemed to include rules thereunder and successor provisions and rules
thereto.
<PAGE>
(h) "Fair Market Value" means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, provided, however, that: (i) if the Stock is listed on a
national securities exchange or quoted in an interdealer quotation system, the
Fair Market Value of such Stock on a given date shall be based upon the last
sales price or, if unavailable, the average of the closing bid and asked prices
per share of the Stock on such date (or, if there was no trading or quotation in
the Stock on such date, on the next preceding date on which there was trading or
quotation) as reported in the WALL STREET JOURNAL (or other reporting service
approved by the Committee); or (ii) the "Fair Market Value" of Stock subject to
Options granted effective upon commencement of the Initial Public Offering shall
be the Initial Public Offering price of the shares so issued and sold in the
Initial Public Offering, as set forth in the first final prospectus used in such
offering (the provisions of clause (i) notwithstanding); or (iii) the "Fair
Market Value" of Stock prior to the date of the Initial Public Offering as
determined by the Board of Directors.
(i) "Initial Public Offering" shall mean an initial public offering of
shares of Stock in a firm commitment underwriting registered with the Securities
and Exchange Commission in compliance with the provisions of the Securities Act
of 1933, as amended.
(j) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(k) "Participant" means a person who has been granted an Award under
the Plan.
(l) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(m) "Stock" means the Common Stock, $.01 par value, of the Company and
such other securities as may be substituted for Stock or such other securities
pursuant to Section 4.
3. ADMINISTRATION
(a) Authority of the Committee. The Plan shall be administered by the
Committee, which shall hold meetings at such times as may be necessary for the
proper administration of the Plan. The Committee shall keep minutes of its
meetings. A quorum shall consist of not fewer than two members of the Committee
and a majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by a majority of all of the members
of the Committee shall be as fully effective as if made by a majority vote at a
meeting duly called and held. Prior to the date of an Initial Public Offering,
the Committee shall consist of at least two (2) directors of the Company and may
consist of the entire Board. From and after the date of an Initial Public
Offering, the Committee shall consist of at least two (2) directors of the
Company and may consist of the entire Board; provided, however, that (A) if the
Committee consists of less than the entire Board, each member shall be a
"non-employee director"
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within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and
(B) to the extent necessary for any Option or Award intended to qualify as
performance-based compensation under Section 162(m) of the Code to so qualify,
each member of the Committee, whether or not it consists of the entire Board,
shall be an "outside director" within the meaning of Section 162(m) of the Code.
The Committee shall have the power from time to time:
(i) to select persons to whom Awards may be granted;
(ii) to determine the type or types of Awards to be granted to each
such person;
(iii) to determine the number of Awards to be granted, the number of
shares of Stock to which an Award will relate, the terms and conditions of
any Award granted under the Plan (including, but not limited to, any
exercise price, grant price or purchase price, any restriction or
condition, any schedule for lapse of restrictions or conditions relating to
transferability or forfeiture, vesting, exercisability or settlement of an
Award, and waivers or accelerations thereof, performance conditions
relating to an Award (including performance conditions relating to Awards
not intended to be governed by Section 7(f) and waivers and modifications
thereof), based in each case on such considerations as the Committee shall
determine), and all other matters to be determined in connection with an
Award;
(iv) to determine whether, to what extent and under what circumstances
an Award may be settled, or the exercise price of an Award may be paid, in
cash, Stock, other Awards, or other property, or an Award may be cancelled,
forfeited, or surrendered;
(v) to determine whether, to what extent and under what circumstances
cash, Stock, other Awards or other property payable with respect to an
Award will be deferred either automatically, at the election of the
Committee or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(vii) to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement or other instrument
hereunder; and
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(ix) to make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary or
advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. Unless authority is
specifically reserved to the Board under the terms of the Plan, the Company's
Certificate of Incorporation or Bylaws, or applicable law, the Committee shall
have sole discretion in exercising authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive and binding on all
persons, including the Company, subsidiaries of the Company, Participants, any
person claiming any rights under the Plan from or through any Participant and
stockholders, except to the extent the Committee may subsequently modify, or
take further action not consistent with, its prior action. If not specified in
the Plan, the time at which the Committee must or may make any determination
shall be determined by the Committee, and any such determination may thereafter
by modified by the Committee (subject to Section 9(e)). The express grant of any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Company or any subsidiary
of the Company the authority, subject to such terms as the Committee shall
determine, to perform administrative functions and, with respect to Participants
not subject to Section 16 of the Exchange Act, to perform such other functions
as the Committee may determine, to the extent permitted under Rule 16b-3, if
applicable, and other applicable law.
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
its behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination or
interpretation.
4. STOCK SUBJECT TO PLAN.
(a) Amount of Stock Reserved. The total amount of Stock that may be
subject to outstanding awards, determined immediately after the grant of any
Award, shall not exceed the greater of x,xxx,xxx shares of Stock or xx% of the
total number of shares of Stock outstanding at the time of such grant.
Notwithstanding the foregoing, the number of shares that may be delivered upon
the exercise of ISOs shall not exceed xxx,xxx, subject in each case to
adjustment as provided in Section 4(c); and the number of shares that may be
delivered as Restricted Stock and Deferred Stock (other than pursuant to an
Award granted under Section 7(f)) shall not in the aggregate exceed xxx,xxx,
provided, however, that shares subject to ISOs, Restricted Stock, or Deferred
Stock Awards shall not be deemed delivered if such Awards are forfeited, expire
or otherwise terminate without delivery of shares to the Participant; and
further provided, that if an
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Option granted to an Eligible Non-Employee Director expires for any reason
without having been exercised in full, the shares of Stock subject to the
unexercised portion of such Option will again be available for issuance under
the Plan. If an Award valued by reference to Stock may only be settled in cash,
the number of shares to which such Award relates shall be deemed to be Stock
subject to such Award for purposes of this Section 4(a). Any shares of Stock
delivered pursuant to an Award may consist, in whole or in part, of authorized
and unissued shares, treasury shares or shares acquired in the market for a
Participant's Account.
(b) Annual Per-Participant Limitations. During any calendar year, no
Participant may be granted Awards that may be settled by delivery of more than
100,000 shares of Stock, subject to adjustment as provided in Section 4(c). In
addition, with respect to Awards that may be settled in cash (in whole or in
part), no Participant may be paid during any calendar year cash amounts relating
to such Awards that exceed the greater of the Fair Market Value of the number of
shares of Stock set forth in the preceding sentence at the date of grant or the
date of settlement of Award. This provision sets forth two separate limitations,
so that Awards that may be settled solely by delivery of Stock will not operate
to reduce the amount of cash-only Awards, and vice versa; nevertheless, Awards
that may be settled in Stock or cash must not exceed either limitation.
(c) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Stock or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or exchange of Stock or other
securities, liquidation, dissolution, or other similar corporate transaction or
event, affects the Stock such that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of Participants under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and kind of shares of Stock reserved and available for
Awards under Section 4(a), including shares reserved for the ISOs and Restricted
and Deferred Stock, (ii) the number and kind of shares of Stock specified in the
Annual Per-Participant Limitations under Section 4(b), (iii) the number and kind
of shares of outstanding Restricted Stock or other outstanding Award in
connection with which shares have been issued, (iv) the number and kind of
shares that may be issued in respect of other outstanding Awards and (v) the
exercise price, grant price or purchase price relating to any Award (or, if
deemed appropriate, the Committee may make provision for a cash payment with
respect to any outstanding Award). In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the Company or
any subsidiary or the financial statements of the Company or any subsidiary, or
in response to changes in applicable laws, regulations, or accounting
principles. The foregoing notwithstanding, no adjustments shall be authorized
under this Section 4(c) with respect to ISOs or SARs in tandem therewith to the
extent that such authority would cause the Plan to fail to comply with Section
422(b)(1) of the Code, and no such adjustment shall be authorized with respect
to Options, SARs or other Awards subject to Section 7(f) to the extent that such
authority would cause such Awards to fail to qualify as "qualified
performance-based compensation" under Section 162(m)(4)(C) of the Code.
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5. ELIGIBILITY FOR ALL AWARDS OTHER THAN THOSE GRANTED TO ELIGIBLE
NON-EMPLOYEE DIRECTORS. Executive officers and other key employees of the
Company and its subsidiaries, including any director or officer who is also such
an employee, and persons who provide consulting or other services to the Company
deemed by the Committee to be of substantial value to the Company, are eligible
to be granted Awards under the Plan. In addition, a person who has been offered
employment by the Company or its subsidiaries is eligible to be granted an Award
under the Plan, provided that such Award shall be cancelled if such person fails
to commence such employment, and no payment of value may be made in connection
with such Award until such person has commenced such employment. The foregoing
notwithstanding, no member of the Committee shall be eligible to be granted
Awards under the Plan except as provided in Section 8.
6. SPECIFIC TERMS OF AWARDS OTHER THAN THOSE GRANTED TO ELIGIBLE
NON-EMPLOYEE DIRECTORS.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service of the Participant. Except as provided in Sections 6(f), 6(h), or 7(a),
or to the extent required to comply with requirements of the Delaware General
Corporation Law that lawful consideration be paid for Stock, only services may
be required as consideration for the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options (including
"reload" options automatically granted to offset specified exercises of Options)
on the following terms and conditions ("Options"):
(i) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee; provided, however,
that, except as provided in Section 7(a), such exercise price shall be not
less than the Fair Market Value of a share on the date of grant of such
Option.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part, the
methods by which such exercise price may be paid or deemed to be paid, the
form of such payment, including, without limitation, cash, Stock, other
Awards or awards granted under other Company plans or other property
(including notes or other contractual obligations of Participants to make
payment on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law), and the methods
by which Stock will be delivered or deemed to be delivered to Participants.
(iii) ISOS. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the Code, including
but not
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limited to the requirement that no ISO shall be granted more than ten years
after the effective date of the Plan. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs shall be interpreted,
amended, or altered, nor shall any discretion or authority granted under
the Plan be exercised, so as to disqualify either the Plan or any ISO under
Section 422 of the Code, unless requested by the affected Participant.
(iv) Termination of Employment. Unless otherwise determined by the
Committee, upon termination of a Participant's employment with the Company
and its subsidiaries, such Participant may exercise any Options during the
three-month period following such termination of employment, but only to
the extent such Option was exercisable immediately prior to such
termination of employment. Notwithstanding the foregoing, if the Committee
determines that such termination is for cause, all Options held by the
Participant shall terminate as of the termination of employment.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SARs on the following terms and conditions ("SARs"):
(i) Right to Payment. An SAR shall confer on the Participant to whom
it is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one share of Stock on the date of exercise (or, if
the Committee shall so determine in the case of any such right other than
one related to an ISO, the Fair Market Value of one share at any time
during a specified period before or after the date of exercise), over (B)
the grant price of the SAR as determined by the Committee as of the date of
grant of the SAR, which, except as provided in Section 7(a), shall be not
less than the Fair Market Value of one share of Stock on the date of grant.
(ii) Other Terms. The Committee shall determine the time or times at
which an SAR may be exercised in whole or in part, the method of exercise,
method of settlement, form of consideration payable in settlement, method
by which Stock will be delivered or deemed to be delivered to Participants,
whether or not an SAR shall be in tandem with any other Award, and any
other terms and conditions of any SAR. Limited SARs that may only be
exercised upon the occurrence of a Change in Control may be granted on such
terms, not inconsistent with this Section 6(c), as the Committee may
determine. Limited SARs may be either freestanding or in tandem with other
Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock on the following terms and conditions ("Restricted Stock"):
(i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in
combination at such times,
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under such circumstances, in such installments, or otherwise, as the
Committee may determine. Except to the extent restricted under the terms of
the Plan and any Award Agreement relating to the Restricted Stock, a
Participant granted Restricted Stock shall have all of the rights of a
stockholder including, without limitation, the right to vote Restricted
Stock or the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service (as determined under criteria
established by the Committee) during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided, however, that the
Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole or in part
in the event of termination resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, such certificates may bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted
Stock, the Company may retain physical possession of the certificate, and
the Participant shall have delivered a stock power to the Company, endorsed
in blank, relating to the Restricted Stock.
(iv) Dividends. Dividends paid on Restricted Stock shall be either
paid at the dividend payment date in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such dividends, or
the payment of such dividends shall be deferred and/or the amount or value
thereof automatically reinvested in additional Restricted Stock, other
Awards, or other investment vehicles, as the Committee shall determine or
permit the Participant to elect. Stock distributed in connection with a
Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock with respect to which such Stock or
other property has been distributed, unless otherwise determined by the
Committee.
(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock subject to the following terms and conditions ("Deferred Stock"):
(i) Award and Restrictions. Delivery of Stock will occur upon
expiration of the deferral period specified for an Award of Deferred Stock
by the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such
restrictions as the Committee may impose, if any, which restrictions may
lapse at the expiration of the deferral period or at
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earlier specified times, separately or in combination, in installments or
otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service (as determined under criteria
established by the Committee) during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in the
Award Agreement evidencing the Deferred Stock), all Deferred Stock that is
at that time subject to such forfeiture conditions shall be forfeited;
provided, however, that the Committee may provide, by rule or regulation or
in any Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock will be
waived in whole or in part in the event of termination resulting from
specified causes.
(f) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee
is authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall be subject to such other
terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents entitling the Participant to receive cash, Stock, other
Awards or other property equal in value to dividends paid with respect to a
specified number of shares of Stock ("Dividend Equivalents"). Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award. The Committee may provide that Dividend Equivalents shall be paid
or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock and factors that may influence the
value of Stock, as deemed by the Committee to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries ("Other Stock Based Awards"). The
Committee shall determine the terms and conditions of such Awards. Stock issued
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may be granted
pursuant to this Section 6(h).
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7. CERTAIN PROVISIONS APPLICABLE TO AWARDS OTHER THAN THOSE GRANTED TO
ELIGIBLE NON-EMPLOYEE DIRECTORS.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with or in substitution for any other
Award granted under the Plan or any award granted under any other plan of the
Company, any subsidiary or any business entity to be acquired by the Company or
a subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Awards granted in addition to or in tandem with other
Awards or awards may be granted either as of the same time as or a different
time from the grant of such other Awards or awards.
(b) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event shall
the term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a
subsidiary upon the grant, exercise or settlement of an Award may be made in
such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single payment
or transfer, in installments or on a deferred basis. Such payments may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments denominated
in Stock.
(d) Loan Provisions. With the consent of the Committee, and subject at
all times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee or arrange for a loan
or loans to a Participant with respect to the exercise of any Option or other
payment in connection with any Award, including the payment by a Participant of
any or all federal, state or local income or other taxes due in connection with
any Award. Subject to such limitations, the Committee shall have full authority
to decide whether to make a loan or loans hereunder and to determine the amount,
terms and provisions of any such loan or loans, including the interest rate to
be charged in respect of any such loan or loans, whether the loan or loans are
to be with or without recourse against the borrower, the terms on which the loan
is to be repaid and conditions, if any, under which the loan or loans may be
forgiven.
(e) Performance-Based Awards. The Committee may, in its discretion,
designate any Award the exercisability or settlement of which is subject to the
achievement of performance conditions as a performance-based Award subject to
this Section 7(e), in order to qualify such Award as "qualified
performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder. The performance objectives for an Award subject to this
Section 7(e) shall consist of one or more business criteria and a targeted level
or levels of performance with respect to such criteria, as specified by the
Committee but subject to this
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Section 7(e). Performance objectives shall be objective and shall otherwise meet
the requirements of Section 162(m)(4)(C) of the Code. Business criteria used by
the Committee in establishing performance objectives for Awards subject to this
Section 7(e) shall be selected exclusively from among the following:
(1) Annual return on capital;
(2) Annual earnings per share;
(3) Annual cash flow provided by operations;
(4) Changes in annual revenues; and/or
(5) Strategic business criteria, consisting of one or more objectives
based on meeting specified revenue, market penetration, geographic business
expansion goals, cost targets, and goals relating to acquisitions or
divestitures.
The levels of performance required with respect to such business criteria may be
expressed in absolute or relative levels. Achievement of performance objectives
with respect to such Awards shall be measured over a period of not less than one
year nor more than five years, as the Committee may specify. Performance
objectives may differ for such Awards to different Participants. The Committee
shall specify the weighting to be given to each performance objective for
purposes of determining the final amount payable with respect to any such Award.
The Committee may, in its discretion, reduce the amount of a payout otherwise to
be made in connection with an Award subject to this Section 7(e), but may not
exercise discretion to increase such amount, and the Committee may consider
other performance criteria in exercising such discretion. All determinations by
the Committee as to the achievement of performance objectives shall be in
writing. The Committee may not delegate any responsibility with respect to an
Award subject to this Section 7(e).
(f) Acceleration Upon a Change of Control. Pursuant to the terms of an
individual Award Agreement, the Committee, may in its sole discretion, grant
Awards which provide for adjustment (as determined by the Committee, in its sole
discretion) in the event of a "change of control" (as such term may be defined
by the Committee, in its sole discretion).
8. NON-EMPLOYEE DIRECTORS OPTIONS AND DEFERRED SHARES.
(a) Eligibility. Each director who is an Eligible Non-Employee
Director on any date on which an Option is to be granted under Section 8(b) or
on which fees are to be paid which could be received in the form of Stock or
deferred in the form of Deferred Shares under Section 8(c), will be granted a
nonqualified Option under Section 8(b) or may elect to receive fees in the form
of shares of Stock or defer fees in the form of Deferred Shares under Section
8(c).
(b) Options. An Option to purchase xx,xxx shares of Stock will be
automatically granted, (i) at the commencement of the Initial Public Offering,
to each person who is serving as
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an Eligible Non-Employee Director at that time or who becomes an Eligible
Non-Employee Director of the Company at that time, and thereafter (ii) at the
effective date of initial election to the Board, to each person so elected or
appointed who is eligible under Section 8(a) at that date. In addition, an
Option to purchase x,xxx share of stocks, will be automatically granted, at the
close of business of each annual meeting of stockholders of the Company, to each
director who is an Eligible Non-Employer Director at the close of business of
such annual meeting. Notwithstanding the foregoing, any person who was
automatically granted an Option to purchase xx,xxx shares of stock at the
effective date of initial election or appointment to the Board shall not be
automatically granted an Option to purchase x,xxx shares of stock at the first
annual meeting of stockholders following such initial election if such annual
meeting takes place within three months of the effective date of such person's
initial election to the Board.
(i) Exercise Price. The exercise price per share of Stock purchasable
upon exercise of an Option will be equal to 100% of the Fair Market Value
of a share of Stock on the date of grant of the Option.
(ii) Option Expiration. Options granted under this Section 8(b) will
expire at the earlier of (i) 10 years after the date of grant or (ii) one
year after the date the Participant ceases to serve as an Eligible
Non-Employee Director of the Company for any reason.
(iii) Exercisability. Each Option granted under this Section 8(b) may
be exercised commencing immediately upon its grant.
(iv) Method of Exercise. A Participant may exercise an Option, in
whole or in part, at such time as it is exercisable and prior to its
expiration, by giving written notice of exercise to the Secretary of the
Company, specifying the Option to be exercised and the number of shares of
Stock to be purchased, and paying in full the exercise price in cash
(including by check) or by surrender of shares of Stock already owned by
the Participant (except for shares of Stock acquired from the Company by
exercise of an option less than six months before the date of surrender)
having a Fair Market Value at the time of exercise equal to the exercise
price, or by a combination of cash and shares of Stock.
(c) Receipt of Stock or Deferred Shares in Lieu of Fees. Each Eligible
Non-Employee Director of the Company may elect to be paid fees, in his or her
capacity as an Eligible Non-Employee Director (including annual retainer fees
for service on the Board, fees for service on a Board committee, fees for
service as chairman of a Board committee, and any other fees paid to directors)
in the form of shares of Stock or Deferred Shares in lieu of cash payment of
such fees at the date any such fee is otherwise payable. If so elected, payment
of fees in the form of shares of Stock or Deferred Shares shall be made in
accordance with this Section 8(c).
(i) Elections. Each Eligible Non-Employee Director who elects to be
paid fees for a given calendar year in the form of shares of Stock or to
defer such payment of fees in the form of Deferred Shares for such year
must file an irrevocable written election with the Secretary of the Company
no later than December 31 of the year preceding such calendar year;
PROVIDED, that any newly elected or appointed Eligible Non-Employee
Director may file an election for any year not later than 30 days after the
date such person first became an Eligible Non-Employee Director, and an
Eligible Non-Employee Director may file an
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election for the year in which the Plan becomes effective not later than 30
days after the date of effectiveness. An election by an Eligible
Non-Employee Director shall be deemed to be continuing and therefore
applicable to subsequent Plan years unless the Eligible Non-Employee
Director revokes or changes such election by filing a new election form by
the due date for such form specified in this Section 8(c)(i). The election
must specify the following: (a) a percentage of fees to be received in the
form of shares of Stock or deferred in the form of Deferred Shares under
the Plan; and (b) in the case of a deferral, the period or periods during
which settlement of Deferred Shares will be deferred (subject to such
limitations as may be specified by counsel to the Company).
(ii) Payment of Fees in the Form of Shares of Stock. At any date on
which fees are payable to an Eligible Non-Employee Director who has elected
to receive such fees in the form of shares of Stock, the Company will issue
to such Eligible Non-Employee Director, or to a designated third party for
the account of such Eligible Non-Employee Director, a number of shares of
Stock having an aggregate Fair Market Value at that date equal to the fees,
or as nearly as possible equal to the fees (but in no event greater than
the fees), that would have been payable at such date but for the Eligible
Non-Employee Director 's election to receive shares of Stock in lieu
thereof. If the shares of Stock are to be credited to an account maintained
by the Eligible Non-Employee Director and to the extent reasonably
practicable without requiring the actual issuance of fractional shares of
Stock, the Company shall cause fractional shares of Stock to be credited to
the Eligible Non-Employee Director 's account. If fractional shares of
Stock are not so credited, any part of the Eligible Non-Employee Director
's fees not paid in the form of whole shares of Stock will be payable in
cash to the Eligible Non-Employee Director (either paid separately or
included in a subsequent payment of fees, including a subsequent payment of
fees subject to an election under this Section 8(c)).
(iii) Deferral of Fees in the Form of Deferred Shares. The Company
will establish a deferral account for each Eligible Non-Employee Director
who elects to defer fees in the form of Deferred Shares under this Section
8(c). At any date on which fees are payable to an Eligible Non-Employee
Director who has elected to defer fees in the form of Deferred Shares, the
Company will credit such Eligible Non-Employee Director 's deferral account
with a number of Deferred Shares equal to the number of shares of Stock
having an aggregate Fair Market Value at that date equal to the fees that
otherwise would have been payable at such date but for the Eligible
Non-Employee Director 's election to defer receipt of such fees in the form
of Deferred Shares. The amount of Deferred Shares so credited shall include
fractional shares of Stock calculated to at least three decimal places.
(iv) Crediting of Dividend Equivalents. Whenever dividends are paid or
distributions made with respect to shares of Stock, an Eligible
Non-Employee Director to whom Deferred Shares are then credited in a
deferral account shall be entitled to receive, as dividend equivalents, an
amount equal in value to the amount of the dividend paid or property
distributed on a single share of Stock multiplied by the number of Deferred
Shares (including any fractional Deferred Share) credited to his or her
deferral account as of the record date for such dividend or distribution.
Such dividend equivalents shall be credited to the Eligible Non-Employee
Director's
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deferral account as a number of Deferred Shares determined by dividing the
aggregate value of such dividend equivalents by the Fair Market Value of a
share of Stock at the payment date of the dividend or distribution.
(v) Settlement of Deferred Shares. The Company will settle the
Eligible Non-Employee Director 's deferral account by delivering to the
Eligible Non-Employee Director (or his or her beneficiary) a number of
shares of Stock equal to the number of whole Deferred Shares then credited
to his or her deferral account (or a specified portion in the event of any
partial settlement), together with cash in lieu of any fractional share of
Stock remaining at a time that less than one whole Deferred Share is
credited to such deferral account. Such settlement shall be made at the
time or times specified in the Eligible Non-Employee Director's election
filed in accordance with Section 8(c)(i); provided, however, that a
Eligible Non-Employee Director may further defer settlement of Deferred
Shares if counsel to the Company determines that such further deferral
likely would be effective under applicable federal income tax laws and
regulations.
(vi) Nonforfeitability. The interest of each Eligible Non-Employee
Director in any fees paid in the form of shares of Stock or Deferred Shares
(and any deferral account relating thereto) at all times will be
nonforfeitable.
9. GENERAL PROVISIONS.
(a) Compliance With Laws and Obligations. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other federal or
state securities law, any requirement under any listing agreement between the
Company and any national securities exchange or automated quotation system or
any other law, regulation or contractual obligation of the Company until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be applicable under such laws, regulations and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.
(b) Limitations on Transferability. Awards and other rights under the
Plan will not be transferable by a Participant except by will or the laws of
descent and distribution or to a Beneficiary in the event of the Participant's
death, and, if exercisable, shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal representative.
Notwithstanding the foregoing, the Committee may, in its discretion, authorize
all or a portion of the Award (other than an ISO) to be granted to a Participant
to be on terms which permit transfer by such Participant to (i) the spouse,
children or grandchildren of such Participant ("Immediate Family Members"), (ii)
a trust or trusts for exclusive benefit of such Immediate Family Members, or
(iii) a partnership in which such Immediate Family Members are the only
partners, provided that (x) there may be no consideration for any such transfer,
(y) the Award agreement pursuant to which such Awards are granted must be
approved by the Committee and must expressly provide for transferability in a
manner consistent with this Section, and (z) subsequent transfers of
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transferred Awards shall be prohibited except those occurring by laws of descent
and distribution. Following transfer, any such Awards shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of the Plan, the term Participant shall be
deemed to refer to the transferee. The events of termination of employment set
forth in Section 6 hereof shall continue to be applied with respect to the
original Participant, following which the options shall be exercisable by the
transferee only to the extent and for the periods specified in Section 6. Awards
and other rights under the Plan may not be pledged, mortgaged, hypothecated or
otherwise encumbered, and shall not be subject to the claims of creditors.
(c) No Right to Continued Employment or Service or to Continue as an
Eligible Non-Employee Director. Neither the Plan nor any action taken hereunder
shall be construed as giving any employee or other person or any Eligible
Non-Employee Director the right to be retained in the employ or service of the
Company or any of its subsidiaries or as an Eligible Non-Employee Director, nor
shall it interfere in any way with the right of the Company or any of its
subsidiaries to terminate any employee's employment or other person's service at
any time.
(d) Taxes. The Company and any subsidiary is authorized to withhold
from any Award granted or to be settled, any delivery of Stock in connection
with an Award, any other payment relating to an Award or any payroll or other
payment to a Participant amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and
to take such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other property and to make
cash payments in respect thereof in satisfaction of a Participant's tax
obligations.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to grant
Awards under the Plan without the consent of stockholders or Participants,
except that any such action shall be subject to the approval of the Company's
stockholders at or before the next annual meeting of stockholders for which the
record date is after such Board action if such stockholder approval is required
by any federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to stockholders for approval; provided, however, that,
without the consent of an affected Participant, no such action may materially
impair the rights of such Participant under any Award theretofore granted to
him. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate, any Award theretofore granted and any Award
Agreement relating thereto; provided, however, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under such Award.
(f) No Rights to Awards; No Stockholder Rights. No Participant or
employee shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Participants and employees
(other than as set forth herein with respect
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<PAGE>
to Eligible Non-Employee Directors). No Award shall confer on any Participant
any of the rights of a stockholder of the Company unless and until Stock is duly
issued or transferred and delivered to the Participant in accordance with the
terms of the Award or, in the case of an Option, the Option is duly exercised.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor of
the Company; provided, however, that the Committee may authorize the creation of
trusts or make other arrangements to meet the Company's obligations under the
Plan to deliver cash, Stock, other Awards, or other property pursuant to any
Award, which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other compensatory arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
(i) No fractional shares. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of the
Company that employee Options, SARs and other Awards designated as Awards
subject to Section 7(e) shall constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m). Accordingly, if any
provision of the Plan or any Award Agreement relating to such an Award does not
comply or is inconsistent with the requirements of Code Section 162(m), such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements, and no provision shall be deemed to confer upon
the Committee or any other person discretion to increase the amount of
compensation otherwise payable in connection with any such Award upon attainment
of the performance objectives.
(k) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of [Delaware], without
giving effect to principles of conflicts of laws, and applicable federal law.
(l) Effective Date; Plan Termination. The Plan shall become effective
as of the date of its adoption by the Board, subject to stockholder approval
prior to the commencement of the Initial Public Offering, and shall continue in
effect until terminated by the Board.
EMPLOYMENT AGREEMENT
(Luis Alonso)
This Employment Agreement (the "Agreement"), by and among (i) Vacation
Properties International, Inc., a Delaware corporation ("VPI"), (ii) Collection
of Fine Properties, Inc., a Colorado corporation and a wholly-owned subsidiary
of VPI (the "Company") and (iii) Luis Alonso ("Employee"), is hereby entered
into as of this [___] day of [________], 1998, and shall be effective as of the
date of the consummation of the initial public offering of the common stock of
VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property management and rental services and
hotel management services.
B. Employee has served as the President of the Company and of Ten Mile Holdings,
Ltd., a Colorado corporation and wholly-owned subsidiary of VPI ("Ten Mile"), as
an employee at will, prior to the date hereof.
C. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby extends an agreement to employ and hereby
employs Employee as President of the Company and as President of Ten Mile, for
the fixed term set forth in Section 5 hereof, subject to the terms hereof. As
such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a President of such companies and will report
directly to the Board of Directors of the Company (the "Board"). Employee hereby
accepts this employment upon the terms and conditions herein contained and,
subject to paragraph 1(c) and paragraph 3 hereof, agrees to devote Employee's
working time, attention, and efforts to promote and further the business of the
Company, in a manner consistent with past practice.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity
<PAGE>
interferes with Employee's duties and responsibilities hereunder. The foregoing
limitations shall not be construed as prohibiting Employee from making personal
investments or participating in other activities in a manner consistent with
past practices (provided such practices comply with paragraph 3 hereof), in such
form or manner as will neither require Employee's services in the operation or
affairs of the companies or enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $48,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of six (6) months immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
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(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management or rental
business or hotel management business in direct competition with the
Company or VPI or any subsidiary of either the Company or VPI, within
100 miles of the locations in which the Company or VPI or any of the
Company's or VPI's subsidiaries conducts any noncommercial property
management or rental business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing noncommercial
property management or rental services or hotel management services to
property owners and/or renters in direct competition with the Company
or VPI or any subsidiary of the Company or VPI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management or rental business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit (A) Employee from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter; (B) Employee, if and to
the extent he as of the date hereof owns and operates certain businesses (other
than the businesses of the Company or VPI) engaged in, without limitation,
development of condominium and other property, ownership of real property,
ownership of hospitality facilities, real estate brokerage, ownership of rental
properties and general contractor construction, from continuing to own and
operate such businesses; or (C) Employee, if and to the extent he or she manages
properties outside of Summit County, Colorado, owned and controlled by Employee
from continuing to manage such properties.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy,
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<PAGE>
Employee agrees that the foregoing covenant may be enforced by VPI or the
Company in the event of breach by him or her, by injunctions and restraining
orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) from the date hereof through the
Noncompetition Period. For example, if, during the Noncompetition Period, the
Company or VPI (including VPI's other subsidiaries) establishes new locations
for its current activities or business in addition to the locations currently
established therefor, then Employee will be precluded from soliciting customers
or employees from such new location(s) and from directly competing within 100
miles of such new location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
paragraph 3(a), and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3
4. PLACE OF PERFORMANCE.
Employee shall not be required to relocate as a condition for continued
employment hereunder.
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5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for eighteen (18) months, and, unless terminated sooner as herein provided,
shall continue thereafter on a year-to-year basis on the same terms and
conditions contained herein in effect as of the time of renewal (such initial
eighteen month period and any extensions thereof being referred to herein as the
"Term"). This Agreement and Employee's employment may be terminated in any one
of the following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall not receive any severance
compensation under Section 5(d) hereof or otherwise.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for "good cause", which shall be
defined as: (1) Employee's willful, material, and irreparable breach of this
Agreement; (2) Employee's failure to adequately perform, continuing for ten (10)
days after receipt of written notice stating the alleged failure with reasonable
specificity and the need to cure, any of Employee's material duties and
responsibilities hereunder, and Employee's failure to cure within such ten (10)
day period; (3) Employee's willful dishonesty, fraud, or misconduct which
adversely affects the operations or reputation of the Company or VPI; (4)
Employee's conviction in a court of competent jurisdiction of a felony or any
misdemeanor other than a minor traffic violation; or (5) chronic alcohol abuse
or illegal drug use by Employee, provided that in the case of any termination
pursuant to clauses (1) or (2), such termination must be approved by at least
two-thirds of the members of the Board of Directors of VPI. In the event of a
termination for good cause, as enumerated above, Employee shall not receive any
severance compensation under Section 5(d) hereof or otherwise.
(d) Without Good Cause. Employee may only be terminated without "good
cause" (as defined in paragraph 5(c) above) by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of VPI. Should Employee be terminated by the Company
without good cause during the Term, Employee shall be entitled to
5
<PAGE>
continue to receive from the Company, as severance compensation, the base salary
at the rate then in effect for whatever time period is remaining under the Term
of this Agreement or for six (6) months, whichever period is longer. Should
Employee be terminated by the Company without good cause at any time during the
Term, Employee shall be entitled to waive Employee's right to receive severance
compensation (by a written waiver delivered to the Company on the effective date
of termination), and, in such case, the non-competition provisions of paragraph
3 shall not be valid or enforceable.
(e) By Employee. (i) At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment, effective thirty (30) days after written notice is
provided to the Company. If Employee resigns or otherwise terminates Employee's
employment without good reason, Employee shall receive no severance
compensation. (ii) If Employee's resignation or other termination by Employee is
for good reason (defined as the Company's failure to pay Employee on a timely
basis the amounts to which he or she is entitled under this Agreement or as a
result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
be valid or enforceable if Employee's resignation or termination occurs pursuant
to this paragraph 5(e)(ii).
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined in Section 12(e) hereof) of VPI or the Company during
the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms; except that the Employee's
obligations under paragraph 3 shall not survive, as otherwise provided for
herein, in the event of termination (i) by the Company without good cause
pursuant to paragraph 5(d) hereof, provided Employee waives any right to
severance compensation in accordance with the terms of such paragraph 5(d); (ii)
by Employee for good reason pursuant to paragraph 5(e)(ii) hereof; or (iii) on a
change in control pursuant to paragraphs 5(f) and 12 hereof, provided Employee
waives any right to severance compensation in accordance with the terms of
paragraph 12(c) hereof.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their
6
<PAGE>
discretion and control. Likewise, all correspondence, reports, records, charts,
advertising materials and other similar data pertaining to the business,
activities or future plans of the Company or VPI which is collected by Employee
shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or VPI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by VPI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or VPI shall pay all reasonable
attorneys' fees and expenses of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not
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limited to attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any noncompetition agreement, invention
or secrecy agreement between Employee and such third party which was in
existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without good cause
during the Term; however, under such circumstances, the amount of the severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall all apply for a period of six (6) months from
the effective date of termination. Employee shall have the right to waive
Employee's right to receive the severance compensation payable under this
paragraph 12(c) (by a written waiver delivered to the Company on or before the
effective date of the termination), in which case the noncompetition provisions
of paragraph 3 shall not apply.
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(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of VPI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
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(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
To Employee: Luis Alonso
c/o Collection of Fine Properties, Inc.
319 North Main Street
Breckenridge, Colorado 80424
Marked: "Personal and Confidential"
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
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15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in New York, New York in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Colorado.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Collection of Fine Properties, Inc.
Ten Mile Holdings, Ltd.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
/s/ Luis Alonso
------------------------------------
Luis Alonso, Individually
EMPLOYMENT AGREEMENT
(Douglas R. Brindley)
This Employment Agreement (the "Agreement"), by and among (i) Vacation
Properties International, Inc., a Delaware corporation ("VPI"), (ii) Brindley &
Brindley Realty & Development, Inc., and B&B On the Beach, Inc., each a North
Carolina corporation and a wholly-owned subsidiary of VPI (collectively, the
"Company"), and (iii) Douglas R. Brindley ("Employee"), is hereby entered into
as of this [___] day of [________], 1998, and shall be effective as of the date
of the consummation of the initial public offering of the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property management, rental and sales
services and hotel management services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President of the Company. As
such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a President of the Company and will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's full working time, attention,
and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $84,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
the Company or VPI or any subsidiary of either the Company or VPI,
within 100 miles of the locations in which the Company or VPI or
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<PAGE>
any of the Company's or VPI's subsidiaries conducts any noncommercial
property management, rental or sales business or hotel management
business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof),
within the Territory for the purpose of providing noncommercial
property management, rental or sales services or hotel management
services to property owners and/or renters in direct competition with
the Company or VPI or any subsidiary of the Company or VPI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by VPI or the Company in the event of breach
by him or her, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) from the date hereof through the
Noncompetition Period.
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<PAGE>
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or other
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he or she may be requested by the Board
or VPI to relocate from Employee's present residence to another geographic
location in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement or as part of a promotion or other
increase in duties and responsibilities. In such event, if Employee agrees to
relocate, the Company will pay all reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, by way of example, but are not limited to, reasonable expenses
related to pre-move visits to search for a new residence, investigate schools or
for other purposes; reasonable temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any unreimbursed relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board or
VPI to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 5(c).
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<PAGE>
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall have no right to any severance
compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's failure to adequately perform, continuing for ten (10) days after
receipt of written notice stating the alleged failure with reasonable
specificity and the need to cure, any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or
misconduct which adversely affects the operations or reputation of the Company
or VPI; (4) Employee's conviction in a court of competent jurisdiction of a
felony or any misdemeanor other than a minor traffic violation; or (5) chronic
alcohol abuse or illegal drug use by Employee, provided that in the case of any
termination pursuant to clauses (1) or (2), such termination must be approved by
at least two-thirds of the members of the Board of Directors of VPI. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is approved by
at least two-thirds of the members of the Board of Directors of VPI. Should
Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one
5
<PAGE>
(1) year, whichever period is longer. Any termination without good cause by the
Company shall operate to shorten the Noncompetition Period to one (1) year
immediately following the date of such termination. Further, should Employee be
terminated by the Company without good cause at any time during or after the
Term, Employee shall be entitled to waive Employee's right to receive severance
compensation (by a written waiver delivered to the Company on the effective date
of termination), and, in such case, the non-competition provisions of paragraph
3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as the Company's failure to pay Employee on
a timely basis the amounts to which he or she is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated as a result of such a breach by
the Company.
(f) Change in Control of VP or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or VPI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
6
<PAGE>
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or VPI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by VPI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or VPI shall pay all reasonable
attorneys' fees and expenses of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
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11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall all apply for a period of two (2) years from the
effective date of termination. Employee shall have the right to waive Employee's
right to receive the severance compensation payable under this paragraph 12(c)
(by a written waiver delivered to the Company on or before the effective date of
the termination), in which case the noncompetition provisions of paragraph 3
shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
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<PAGE>
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of VPI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
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(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
To Employee: Douglas S. Brindley
102 Old Duck Road
Duck, North Carolina 27949
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
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16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Tennessee.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Brindley & Brindley Realty and Development, Inc.
B&B On the Beach, Inc.
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
/s/ Douglas R. Brindley
-------------------------------
Douglas R. Brindley, Individually
12
EMPLOYMENT AGREEMENT
(Paul T. Dobson)
This Employment Agreement (the "Agreement"), by and among Vacation
Properties International, Inc., a Delaware corporation ("VPI"), Maui Condominium
& Home Realty, Inc., a Hawaii corporation and a wholly-owned subsidiary of VPI
(the "Company"), and Paul T. Dobson ("Employee"), is hereby entered into as of
this [___] day of [________], 1998, and shall be effective as of the date of the
consummation of the initial public offering of the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property management and rental services and
hotel management services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Vice President and Secretary
of the Company. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of a Vice President and Secretary
of the Company and will report directly to the Board of Directors of the Company
(the "Board"). Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to paragraph 1(c) hereof, agrees to
devote Employee's full working time, attention, and efforts to promote and
further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $50,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management or rental
business or hotel management business in direct competition with the
Company or VPI or any subsidiary of either
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the Company or VPI, within 100 miles of the locations in which the
Company or VPI or any of the Company's or VPI's subsidiaries conducts
any noncommercial property management or rental business or hotel
management business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing noncommercial
property management or rental services or hotel management services to
property owners and/or renters in direct competition with the Company
or VPI or any subsidiary of the Company or VPI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management or rental business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by VPI or the Company in the event of breach
by him or her, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) throughout the Noncompetition Period. For
example, if, during the Noncompetition Period, the Company or VPI (including
VPI's other subsidiaries)
3
<PAGE>
establishes new locations for its current activities or business in addition to
the locations currently established therefor, then Employee will be precluded
from soliciting customers or employees from such new locations and from directly
competing within 100 miles of such new locations through the Noncompetition
Period.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or other
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he or she may be requested by the Board
or VPI to relocate from Employee's present residence to another geographic
location in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement or as part of a promotion or other
increase in duties and responsibilities. In such event, if Employee agrees to
relocate, the Company will pay all reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, by way of example, but are not limited to, reasonable expenses
related to pre-move visits to search for a new residence, investigate schools or
for other purposes; reasonable temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any unreimbursed relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation
4
<PAGE>
with minimal disruption to the business affairs of the Company and the personal
life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board or
VPI to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall have no right to any severance
compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's failure to adequately perform, continuing for ten (10) days after
receipt of written notice stating the alleged failure with reasonable
specificity and the need to cure, any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or
misconduct which adversely affects the operations or reputation of the Company
or VPI; (4) Employee's conviction in a court of competent jurisdiction of a
felony or any misdemeanor other than a minor traffic violation; or (5) chronic
alcohol abuse or illegal drug use by Employee, provided that in the case of any
termination pursuant to clauses (1) or (2), such termination must be approved by
at least two-thirds of the members of the Board of Directors of VPI. In the
event of a
5
<PAGE>
termination for good cause, as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is approved by
at least two-thirds of the members of the Board of Directors of VPI. Should
Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever period is longer. Any
termination without good cause by the Company shall operate to shorten the
Noncompetition Period to one (1) year immediately following the date of such
termination. Further, should Employee be terminated by the Company without good
cause at any time during or after the Term, Employee shall be entitled to waive
Employee's right to receive severance compensation (by a written waiver
delivered to the Company on the effective date of termination), and, in such
case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as the Company's failure to pay Employee on
a timely basis the amounts to which he or she is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated as a result of such a breach by
the Company.
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
6
<PAGE>
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or VPI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or VPI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by VPI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or VPI shall pay all reasonable
attorneys' fees and expenses of such separate counsel.
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10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph
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5(d) will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall all apply for a period of two (2) years from the
effective date of termination. Employee shall have the right to waive Employee's
right to receive the severance compensation payable under this paragraph 12(c)
(by a written waiver delivered to the Company on or before the effective date of
the termination), in which case the noncompetition provisions of paragraph 3
shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction
9
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which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially
Owned by at least 75% of the holders of outstanding voting securities
of VPI immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing holders
not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
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To Employee: Paul T. Dobson
c/o Maui Condominium & Home Realty, Inc.
2511 South Kihei Road
P.O. Box 1840
Kihei, Hawaii 96753
Marked: "Personal and Confidential"
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Tennessee.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Maui Condominium & Home Realty, Inc.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
/s/ Paul T. Dobson
-------------------------------
Paul T. Dobson, Individually
12
EMPLOYMENT AGREEMENT
(Sharon Benson Doucette)
This Employment Agreement (the "Agreement"), by and among Vacation
Properties International, Inc., a Delaware corporation ("VPI"), The Maury
People, Inc., a Massachusetts corporation and a wholly-owned subsidiary of VPI
(the "Company"), and Sharon Benson Doucette ("Employee"), is hereby entered into
as of this [___] day of [________], 1998, and shall be effective as of the date
of the consummation of the initial public offering of the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property rental and sales services.
B. Employee has served as the President of the Company, as an employee at will,
prior to the date hereof.
C. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby extends an agreement to employ and hereby
employs Employee as President of the Company for the fixed term as set forth in
Section 5 hereof and subject to the terms hereof. As such, Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of a
President of the Company, consistent with past practice of Employee, and will
report directly to the Board of Directors of the Company (the "Board"). Employee
hereby accepts this employment upon the terms and conditions herein contained
and, subject to paragraph 1(c) hereof, agrees to devote Employee's full working
time, attention, and efforts to promote and further the business of the Company,
consistent with past practice of Employee.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be
<PAGE>
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require Employee's services in the operation or
affairs of the companies or enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $75,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly. In addition, for any
sales of properties during the Term for which Employee personally acts as
listing and/or selling real estate broker, as applicable, Employee shall receive
a commission equal to 60% of the portion of the gross commission due to the
Company for which she is personally responsible on such sales of property for
which Employee personally acted as listing and/or selling real estate broker, as
applicable, during any year within the Term, until such gross commissions
retained by the Company total $75,000 in any such year; thereafter Employee
shall receive a commission equal to 65% of the portion of such gross commissions
retained by the Company for which she is personally responsible, until such
gross commissions retained by the Company total $100,000 in any such year; and
thereafter Employee, shall receive a commission equal to 70% of the portion of
such gross commission retained by the Company for which she is personally
responsible in any such year.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) An amount of vacation time consistent with past practice
of Employee, provided, however, that any such vacation, paid or unpaid,
shall be consistent with adequate performance of all duties and
obligations of Employee, including as set forth in Section 1 and
Section 5(c) hereof, and provided further, that in the event Employee's
vacation time or any vacation by Employee causes or contributes to
failure by Employee to adequately perform such duties, it shall
constitute "Good Cause" for termination pursuant to Section 5(c).
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<PAGE>
(iv) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
the Company or VPI or any subsidiary of either the Company or VPI, (A)
within 100 miles of the locations in which the Company or VPI or any of
the Company's or VPI's subsidiaries (except the Company as long as the
Company is located on Nantucket Island) conducts a noncommercial
property management, rental or sales business or hotel management
business or (B) within the geographic boundary of Nantucket Island as
long as the Company is located on Nantucket Island (the geographic
areas set forth in the foregoing clauses (A) and (B) are collectively
herein referred to as the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing noncommercial
property management, rental or sales services or hotel management
services to property owners and/or renters in direct competition with
the Company or VPI or any subsidiary of the Company or VPI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
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<PAGE>
Notwithstanding anything in this Section 3 to the contrary, the
foregoing covenant shall not be deemed to prohibit Employee from (A) acquiring
as an investment not more than two percent (2%) of the capital stock of a
competing business whose stock is traded on a national securities exchange or
over-the-counter, or (B) engaging in business as a real estate broker other than
as an employee of the Company while employed by the Company, in any location
other than Nantucket Island after termination of Employee's employment with the
Company.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by VPI or the Company in the event of breach
by him or her, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) throughout the Noncompetition Period. For
example, if, during the Noncompetition Period, the Company or VPI (including
VPI's other subsidiaries) establishes new locations for its current activities
or business in addition to the locations currently established therefor, then
Employee will be precluded from soliciting customers or employees from such new
locations and from directly competing within 100 miles of such new locations
through the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or other
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3.
4
<PAGE>
4. PLACE OF PERFORMANCE.
(a) Employee understands that he or she may be requested by the Board
or VPI to relocate from Employee's present residence to another geographic
location in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement or as part of a promotion or other
increase in duties and responsibilities. In such event, if Employee agrees to
relocate, the Company will pay all reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, by way of example, but are not limited to, reasonable expenses
related to pre-move visits to search for a new residence, investigate schools or
for other purposes; reasonable temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any unreimbursed relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board or
VPI to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by
5
<PAGE>
the Company who is reasonably acceptable to Employee or Employee's doctor and
such doctor shall have concurred in the conclusion of Employee's doctor. In the
event this Agreement is terminated as a result of Employee's disability,
Employee shall have no right to any severance compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's failure to perform, continuing for ten (10) days after receipt of
written notice stating the alleged failure with reasonable specificity and the
need to cure, any of Employee's material duties and responsibilities hereunder;
(3) Employee's willful dishonesty, fraud, or misconduct which adversely affects
the operations or reputation of the Company or VPI; (4) Employee's conviction in
a court of competent jurisdiction of a felony or any misdemeanor other than a
minor traffic violation; or (5) chronic alcohol abuse or illegal drug use by
Employee, provided that in the case of any termination pursuant to clauses (1),
(2) or (4), such termination must be approved by at least two-thirds of the
members of the Board of Directors of VPI. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is approved by
at least two-thirds of the members of the Board of Directors of VPI. Should
Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever period is longer. Any
termination without good cause by the Company shall operate to shorten the
Noncompetition Period to one (1) year immediately following the date of such
termination. Further, should Employee be terminated by the Company without good
cause at any time during or after the Term, Employee shall be entitled to waive
Employee's right to receive severance compensation (by a written waiver
delivered to the Company on the effective date of termination), and, in such
case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as the Company's failure to pay Employee on
a timely basis the amounts to which he or she is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated as a result of such a breach by
the Company.
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
6
<PAGE>
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or VPI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys'
7
<PAGE>
fees), judgments, fines and amounts paid in settlement, as actually and
reasonably incurred by Employee in connection therewith. In the event that both
Employee and the Company are made a party to the same third-party action,
complaint, suit or proceeding, the Company or VPI agrees to engage competent
legal representation, and Employee agrees to use the same representation,
provided that if counsel selected by VPI shall have a conflict of interest that
prevents such counsel from representing Employee, Employee may engage separate
counsel and the Company or VPI shall pay all reasonable attorneys' fees and
expenses of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount
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calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum
payment and the noncompetition provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall all apply for a period of two (2) years from the
effective date of termination. Employee shall have the right to waive Employee's
right to receive the severance compensation payable under this paragraph 12(c)
(by a written waiver delivered to the Company on or before the effective date of
the termination), in which case the noncompetition provisions of paragraph 3
shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
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(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of VPI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
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To Employee: Sharon Benson Doucette
c/o The Maury People, Inc.
35 Main Street
Nantucket Island, MA 02554
Marked: "Personal and Confidential
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the Commonwealth of Massachusetts.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
The Maury People, Inc.
By:
------------------------------------------------
Name:
-----------------------------------------------
Title:
---------------------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
------------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
/s/ Sharon Benson Doucette
--------------------------------------------------
Sharon Benson Doucette, Individually
EMPLOYMENT AGREEMENT
(Evan H. Gull)
This Employment Agreement (the "Agreement"), by and among Vacation
Properties International, Inc., a Delaware corporation ("VPI"), First Resort
Software, Inc., a Colorado corporation and a wholly-owned subsidiary of VPI (the
"Company"), and Evan H. Gull ("Employee"), is hereby entered into as of this
[___] day of [________], 1998, and shall be effective as of the date of the
consummation of the initial public offering of the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property management, rental and sales
services and hotel management services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Vice President of
Development of the Company. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a Vice President of
Development of the Company and will report directly to the Board of Directors of
the Company (the "Board"). Employee hereby accepts this employment upon the
terms and conditions herein contained and, subject to paragraph 1(c) hereof,
agrees to devote Employee's full working time, attention, and efforts to promote
and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $50,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
the Company or VPI or any subsidiary of
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<PAGE>
either the Company or VPI, within 100 miles of the locations in which
the Company or VPI or any of the Company's or VPI's subsidiaries
conducts any noncommercial property management, rental or sales
business or hotel management business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing noncommercial
property management, rental or sales services or hotel management
services to property owners and/or renters in direct competition with
the Company or VPI or any subsidiary of the Company or VPI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by VPI or the Company in the event of breach
by him or her, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) throughout the Noncompetition Period. For
example, if, during the Noncompetition Period, the Company or VPI (including
VPI's other subsidiaries)
3
<PAGE>
establishes new locations for its current activities or business in addition to
the locations currently established therefor, then Employee will be precluded
from soliciting customers or employees from such new locations and from directly
competing within 100 miles of such new locations through the Noncompetition
Period.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or other
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he or she may be requested by the Board
or VPI to relocate from Employee's present residence to another geographic
location in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement or as part of a promotion or other
increase in duties and responsibilities. In such event, if Employee agrees to
relocate, the Company will pay all reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, by way of example, but are not limited to, reasonable expenses
related to pre-move visits to search for a new residence, investigate schools or
for other purposes; reasonable temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any unreimbursed relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation
4
<PAGE>
with minimal disruption to the business affairs of the Company and the personal
life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board or
VPI to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall have no right to any severance
compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's failure to adequately perform, continuing for ten (10) days after
receipt of written notice stating the alleged failure with reasonable
specificity and the need to cure, any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or
misconduct which adversely affects the operations or reputation of the Company
or VPI; (4) Employee's conviction in a court of competent jurisdiction of a
felony or any misdemeanor other than a minor traffic violation; or (5) chronic
alcohol abuse or illegal drug use by Employee, provided that in the case of any
termination pursuant to clauses (1) or (2), such termination must be approved by
at least two-thirds of the members of the Board of Directors of VPI. In the
event of a
5
<PAGE>
termination for good cause, as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is approved by
at least two-thirds of the members of the Board of Directors of VPI. Should
Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever period is longer. Any
termination without good cause by the Company shall operate to shorten the
Noncompetition Period to one (1) year immediately following the date of such
termination. Further, should Employee be terminated by the Company without good
cause at any time during or after the Term, Employee shall be entitled to waive
Employee's right to receive severance compensation (by a written waiver
delivered to the Company on the effective date of termination), and, in such
case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as the Company's failure to pay Employee on
a timely basis the amounts to which he or she is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated as a result of such a breach by
the Company.
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
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<PAGE>
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or VPI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or VPI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by VPI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or VPI shall pay all reasonable
attorneys' fees and expenses of such separate counsel.
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10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term;
8
<PAGE>
however, under such circumstances, the amount of the severance payment due to
Employee shall be double the amount calculated under the terms of paragraph 5(d)
and shall be payable in a lump-sum payment and the noncompetition provisions of
paragraph 3 shall all apply for a period of two (2) years from the effective
date of termination. Employee shall have the right to waive Employee's right to
receive the severance compensation payable under this paragraph 12(c) (by a
written waiver delivered to the Company on or before the effective date of the
termination), in which case the noncompetition provisions of paragraph 3 shall
not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities
9
<PAGE>
of the surviving entity outstanding immediately after such transaction
being Beneficially Owned by at least 75% of the holders of outstanding
voting securities of VPI immediately prior to the transaction, with the
voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
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<PAGE>
To Employee: Evan H. Gull
c/o First Resort Software, Inc.
300A Aspen Airport Business Center
Aspen, Colorado 81611
Marked: "Personal and Confidential"
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Tennessee.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
First Resort Software, Inc.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
/s/ Evan H. Gull
----------------------------------------
Evan H. Gull, Individually
12
EMPLOYMENT AGREEMENT
(Heidi O'Leary Houston)
This Employment Agreement (the "Agreement"), by and among Vacation
Properties International, Inc., a Delaware corporation ("VPI"), Houston and
O'Leary Company, a Colorado corporation and a wholly-owned subsidiary of VPI
(the "Company"), and Heidi O'Leary Houston ("Employee"), is hereby entered into
as of this [___] day of [________], 1998, and shall be effective as of the date
of the consummation of the initial public offering of the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property management, rental and sales
services and hotel management services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President of the Company to
perform the duties described herein at the Company's offices in Aspen, Colorado.
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a President of the Company and will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's full working time, attention,
and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments or engaging in community
affairs in such form or manner as will neither require Employee's services in
the operation or affairs of the
<PAGE>
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $150,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly. Such base salary shall
not be decreased during the Term hereof or prior to any termination pursuant to
the terms of Section 5 hereof.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the performance and other criteria under
which Employee and other officers and key employees of the Company will be
eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred under the circumstances by
Employee in the performance of Employee's services pursuant to this
Agreement and consistent with past practice. All reimbursable expenses
shall be appropriately documented in reasonable detail by Employee upon
submission of any request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy.
(iii) Six weeks' paid vacation time, provided, however, that
any such vacation, paid or unpaid, shall be consistent with adequate
performance of all duties and obligations of Employee, including as set
forth in paragraph 1 hereof, and provided further, that nothing
contained in this paragraph 2(c)(iii) shall be construed as a
limitation of any rights of termination for good cause pursuant to and
in accordance with paragraph 5(c)(2) hereof.
(iv) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time (e.g., any pension or
profit sharing plans if and to the extent adopted by the Company, if
Employee meets all eligibility requirements thereof and consistent with
the terms thereof).
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<PAGE>
(v) The Company shall provide the Employee with a new
automobile selected by the Employee to be leased by the Company and
replaced by a new automobile selected by Employee every two years and
the Company shall pay all expenses associated with such automobiles
(e.g., gas, parking, repair costs, licensing and insurance), in an
amount as budgeted and consistent with past practices, up to a maximum
total payment of $15,000 per year for all such payments and expenses.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
the Company or VPI or any subsidiary of either the Company or VPI,
within 100 miles of the locations in which the Company or VPI or any of
the Company's or VPI's subsidiaries conducts any noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing noncommercial
property management, rental or sales services or hotel management
services to property owners and/or renters in direct competition with
the Company or VPI or any subsidiary of the Company or VPI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
3
<PAGE>
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from (A) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter (B) engaging in
noncommercial property management, rental or sales business or hotel management
business only with respect to her primary personal residence or any real
property in which she has a noncontrolling interest such that she is unable to
direct management, retail or sales business or hotel management business
relating to such real property to the Company or VPI or (C) directly or
indirectly (e.g., personally or through a partnership or limited liability
company) investing in any real property or, in the event that Employee is no
longer employed by the Company, from acting as a real estate broker in any
location other than Aspen, Colorado and the 25-mile area around Aspen, Colorado,
or with respect to any real property in which Employee has invested.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by VPI or the Company in the event of breach
by him or her, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) throughout the Noncompetition Period. For
example, if, during the Noncompetition Period, the Company or VPI (including
VPI's other subsidiaries) establishes new locations for its current activities
or business in addition to the locations currently established therefor, then
Employee will be precluded from soliciting customers or employees from such new
locations and from directly competing within 100 miles of such new locations
through the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that
Employee shall enter into a business or pursue other activities not in
competition with the Company or VPI (including VPI's other subsidiaries), or
similar activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 3, and in any event
such new business, activities or location are not in violation of this paragraph
3 or of Employee's obligations under this paragraph 3, if any, Employee shall
not be chargeable with a violation of this paragraph 3 if the Company or VPI
(including VPI's other subsidiaries) shall thereafter enter the same, similar or
a competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) Provided that the Company and VPI have complied with and performed
all obligations hereunder in all material respects, all of the covenants in this
paragraph 3 shall be construed as an agreement independent of any other
provision in this Agreement, and the existence of any claim or cause of action
of Employee against the Company or VPI (including the subsidiaries thereof),
whether
4
<PAGE>
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by VPI or the Company of such covenants. It is specifically agreed
that the Noncompetition Period, during which the agreements and covenants of
Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which a court of competent
jurisdiction or other arbitrator or mediator has determined that Employee is in
violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
If Employee is requested by the Board or VPI to relocate and Employee
refuses, such refusal shall not constitute "good cause" for termination of this
Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided that
a doctor selected by the Company and reasonably acceptable to Employee certifies
that Employee is unable to resume Employee's full-time duties at the conclusion
of such thirty (30) day notice period. Also, in addition to any rights under
Section 5(e) below, Employee may terminate Employee's employment hereunder if
his or her health should become impaired to an extent that makes the continued
performance of Employee's duties hereunder hazardous to Employee's physical or
mental health or life, provided that Employee shall have furnished the Company
with a written statement from a qualified doctor to such effect and provided,
further, that, at the Company's request made within thirty (30) days of the date
of such written statement, Employee shall submit to an examination by a doctor
selected by the Company who is reasonably acceptable to Employee or Employee's
doctor and such doctor shall have concurred in the conclusion of Employee's
doctor. In the event this Agreement is terminated as a result of Employee's
disability, Employee shall have no right to any severance compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be
limited to: (1) Employee's willful, material, and irreparable breach of this
Agreement; (2) Employee's failure to adequately perform, continuing for ten (10)
days after receipt of written notice stating the alleged failure with reasonable
specificity and the need to cure, any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful
5
<PAGE>
dishonesty, fraud, or misconduct which adversely affects the operations or
reputation of the Company or VPI; (4) Employee's conviction in a court of
competent jurisdiction of a felony or any misdemeanor other than a minor traffic
violation; or (5) chronic alcohol abuse or illegal drug use by Employee,
provided that in the case of any termination pursuant to clauses (1) or (2),
such termination first must be approved by at least two-thirds of the members of
the Board of Directors of VPI. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is first
approved by at least two-thirds of the members of the Board of Directors of VPI.
Should Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever period is longer. Any
termination without good cause by the Company shall operate to shorten the
Noncompetition Period to one (1) year immediately following the date of such
termination. Further, should Employee be terminated by the Company without good
cause at any time, Employee shall be entitled to waive Employee's right to
receive severance compensation (by a written waiver delivered to the Company
within ten (10) calendar days of the effective date of termination), and, in
such case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as (i) the Company's failure to pay
Employee on a timely basis the amounts to which he or she is entitled under this
Agreement or (ii) any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated by Employee for good reason as a
result of such a breach by the Company.
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
6
<PAGE>
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or VPI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the Term or within one (1) year
thereafter, and which are directly related to the business or activities of the
Company or VPI and which Employee conceives as a result of Employee's employment
by the Company. Employee hereby assigns and agrees to assign all of Employee's
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or VPI agrees to
engage competent legal representation to defend the Company and Employee, and
Employee agrees to use the same representation, provided that if counsel
selected by VPI shall have a conflict of interest that prevents such counsel
from representing Employee, Employee may engage separate counsel and the Company
or VPI shall pay all reasonable attorneys' fees and expenses of such separate
counsel.
7
<PAGE>
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to reasonable attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company based upon or arising out of any
noncompetition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform all of the Company's
and/or VPI's obligations under this Agreement in the same manner and to the same
extent that the Company and/or VPI is hereby required to perform, then such
Change in Control shall be deemed to be a termination of this Agreement by the
Company without cause during the Term and the applicable portions of paragraph
5(d) will apply; however, under such circumstances, the amount of the severance
payment due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the severance
payment due to Employee shall be
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double the amount calculated under the terms of paragraph 5(d) and shall be
payable in a lump-sum payment and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on or before the effective date of the
termination), in which case the noncompetition provisions of paragraph 3 shall
not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of VPI immediately prior to the
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transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMMISSIONS.
The parties agree that Employee has in the past, and may in the future,
directly or indirectly (e.g., personally or through a partnership, corporation,
limited liability company or otherwise, such entity being referred to as an
"Employee Entity") invest in real property. The parties further agree that (1)
the Company shall, upon request, on not more than two occasions in any calendar
year (or more frequently with the express written consent of VPI, which consent
shall not be unreasonably withheld by VPI after its consideration of all the
facts and circumstances of each case with respect to which such consent is
sought, including the past practice of the Employee and the Company, the
frequency of such requests and the impact on the Company and VPI of granting or
not granting such consent) waive any rights to any brokerage commission to which
the Company would otherwise be entitled in connection with such purchase (an
"Employee Entity Purchase") and (2) Employee shall be permitted to use such
waiver of such commission by the Company in order to receive (personally, and
not as an employee of the Company) an interest in any real property acquired
pursuant to an Employee Entity Purchase; provided that (a) all cash or other
consideration received or to be received by Employee as a result of any such
waiver of such commission by the Company shall not be retained by Employee and
must be fully invested by Employee in such real property or Employee Entity in
connection with the subsequent sale of any Employee Entity Property and (c)
Employee shall be responsible for any taxes (income or otherwise) payable by the
Employee or the Company that arise in connection with the waiver of a commission
with respect to which the Employee receives a personal benefit as described
herein.
14. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
To Employee: Heidi O'Leary Houston
c/o Houston and O'Leary Company
620 East Hyman Avenue
Aspen, Colorado 81611
Marked: "Personal and Confidential"
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Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held by a court or other authority of competent jurisdiction to be
invalid or inoperative. The paragraph headings herein are for reference purposes
only and are not intended in any way to describe, interpret, define or limit the
extent or intent of the Agreement or of any part hereof.
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Aspen, Colorado in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
18 GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Colorado.
19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Houston and O'Leary Company
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
/s/ Heidi O'Leary Houston
----------------------------------------
Heidi O'Leary Houston, Individually
12
EMPLOYMENT AGREEMENT
(Daniel L. Meehan)
This Employment Agreement (the "Agreement"), by and among Vacation
Properties International, Inc., a Delaware corporation ("VPI"), Resort Property
Management, Inc., a Utah corporation and a wholly-owned subsidiary of VPI (the
"Company"), and Daniel L. Meehan ("Employee"), is hereby entered into as of this
[___] day of [________], 1998, and shall be effective as of the date of the
consummation of the initial public offering of the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property management and rental services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President of the Company. As
such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a President of the Company and will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's full working time, attention,
and efforts to promote and further the business of the Company.
(b) If, at any time during the Term (as defined) hereof, the General
Manager of the Company ceases to perform his or her duties as General Manager
for any reason, then Employee shall become the General Manager of the Company
and assume all the obligations, responsibilities and duties, and receive the
compensation and benefits of such previous General Manager for the remaining
period of such previous General Manager's term of employment.
(c) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
<PAGE>
(d) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $0 (zero)
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly, so long as Employee is
acting as President; provided, however, that if and when Employee becomes the
General Manager of the Company pursuant to Section 1(b) hereof, then Employee
shall receive the compensation and benefits of such previous General Manager for
the period of assumption.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly,
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<PAGE>
for himself or herself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
the Company or VPI or any subsidiary of either the Company or VPI,
within 100 miles of the locations in which the Company or VPI or any of
the Company's or VPI's subsidiaries conducts any noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing noncommercial
property management, rental or sales services or hotel management
services to property owners and/or renters in direct competition with
the Company or VPI or any subsidiary of the Company or VPI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from (A) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter or (B) engaging in the
hotel management business in any location other than in Park City, Utah, and the
25-mile area around Park City, Utah.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by VPI or the Company in the event of breach
by him or her, by injunctions and restraining orders.
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<PAGE>
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) throughout the Noncompetition Period. For
example, if, during the Noncompetition Period, the Company or VPI (including
VPI's other subsidiaries) establishes new locations for its current activities
or business in addition to the locations currently established therefor, then
Employee will be precluded from soliciting customers or employees from such new
locations and from directly competing within 100 miles of such new locations
through the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or other
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he or she may be requested by the Board
or VPI to relocate from Employee's present residence to another geographic
location in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement or as part of a promotion or other
increase in duties and responsibilities. In such event, if Employee agrees to
relocate, the Company will pay all reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, by way of example, but are not limited to, reasonable expenses
related to pre-move visits to search for a new residence, investigate schools or
for other
4
<PAGE>
purposes; reasonable temporary lodging and living costs prior to moving into a
new permanent residence; duplicate home carrying costs; all closing costs on the
sale of Employee's present residence and on the purchase of a comparable
residence in the new location; and added income taxes that Employee may incur if
any unreimbursed relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use Employee's best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of the Company and the personal
life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board or
VPI to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall have no right to any severance
compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's failure to adequately perform, continuing for ten (10) days after
receipt of written notice stating the alleged failure with reasonable
specificity and the need to cure, any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful
5
<PAGE>
dishonesty, fraud, or misconduct which adversely affects the operations or
reputation of the Company or VPI; (4) Employee's conviction in a court of
competent jurisdiction of a felony or any misdemeanor other than a minor traffic
violation; or (5) chronic alcohol abuse or illegal drug use by Employee,
provided that in the case of any termination pursuant to clauses (1) or (2),
such termination must be approved by at least two-thirds of the members of the
Board of Directors of VPI. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is approved by
at least two-thirds of the members of the Board of Directors of VPI. Should
Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever period is longer. Any
termination without good cause by the Company shall operate to shorten the
Noncompetition Period to one (1) year immediately following the date of such
termination. Further, should Employee be terminated by the Company without good
cause at any time during or after the Term, Employee shall be entitled to waive
Employee's right to receive severance compensation (by a written waiver
delivered to the Company on the effective date of termination), and, in such
case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as the Company's failure to pay Employee on
a timely basis the amounts to which he or she is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated as a result of such a breach by
the Company.
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
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<PAGE>
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or VPI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or VPI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by VPI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or VPI shall pay all reasonable
attorneys' fees and expenses of such separate counsel.
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<PAGE>
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the severance
payment due to Employee shall be
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double the amount calculated under the terms of paragraph 5(d) and shall be
payable in a lump-sum payment and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on or before the effective date of the
termination), in which case the noncompetition provisions of paragraph 3 shall
not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of VPI immediately prior to the
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<PAGE>
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
To Employee: Daniel L. Meehan
c/o Resort Property Management, Inc.
750 Kearns Boulevard
P.O. Box 3808
Park City, Utah 84060
Marked: "Personal and Confidential"
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Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Tennessee.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Resort Property Management, Inc.
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
/s/ Daniel L. Meehan
-------------------------------------------------------
Daniel L. Meehan, Individually
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the "Agreement"), by and among (i)
Vacation Properties International, Inc., a Delaware corporation ("VPI"), (ii)
Whistler Chalets Limited (the "Company"), a British Columbia corporation and a
wholly-owned subsidiary of Whistler Chalet Holding Corp. ("Whistler Holding"), a
Canadian corporation and a subsidiary of VPI, (iii) Whistler Blackcomb Central
Reservations, Inc., a British Columbia corporation (the "Management Company"),
and (iv) J. Patrick McCurdy (or such other person as shall be appointed to such
position by Management Company, if acceptable to and consented to in writing by
the Company, "Manager"), is hereby entered into as of this [___] day of
[________], 1998, and shall be effective as of the date of the consummation of
the initial public offering of the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing residential property management, rental and sales services
and hotel management services.
B. Management Company is retained hereunder by the Company in a confidential
relationship wherein Management Company and Manager, in the course of providing
management services to the Company, has and will continue to become familiar
with and aware of information as to the Company's and VPI's customers, specific
manner of doing business, including the processes, techniques and trade secrets
utilized by the Company and VPI, and future plans with respect thereto, all of
which has been and will be established and maintained at great expense to the
Company and VPI; this information is a trade secret and constitutes the valuable
good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. MANAGEMEMENT SERVICES AND DUTIES.
(a) The Company hereby retains Management Company to provide Manager to
perform the services and duties of a President of the Company. As such, Manager
shall have responsibilities, duties and authority reasonably accorded to and
expected of a President of the Company and will report directly to the Board of
Directors of the Company (the "Board"). Management Company and Manager hereby
accept such obligations upon the terms and conditions herein contained and,
subject to paragraph 1(c) hereof, Manager agrees to devote Manager's full
working time, attention, and efforts to promote and further the business of the
Company.
(b) Manager shall faithfully adhere to, execute and fulfill all
policies established by the Company.
<PAGE>
(c) Neither Management Company nor Manager shall, during the term of
their respective provision of services hereunder, be engaged in any other
business activity pursued for gain, profit or other pecuniary advantage if such
activity interferes with their duties and responsibilities hereunder. The
foregoing limitations shall not be construed as prohibiting Manager from making
personal investments in such form or manner as will neither require Manager's
services in the operation or affairs of the companies or enterprises in which
such investments are made nor violate the terms of paragraph 3 hereof.
2. FEES.
For all services rendered by Management Company and Manager, the
Company shall compensate Management Company as follows:
(a) Base Management Fee. The base management fee to Management Company
shall be Canadian $60,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less frequently than
monthly.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Management Company
will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Management
Company shall be entitled to receive additional benefits and compensation from
the Company in such form and to such extent as specified below:
(i) Company shall reimburse Management Company for payment of
all premiums for coverage for Manager under health, hospitalization,
disability, dental, life and other insurance plans, such benefits
provided indirectly to Manager under this clause shall be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement to Management Company for all necessary and
customary business travel and other out-of-pocket expenses reasonably
incurred by Management Company and/or Manager in the performance of
Management Company and Manager's services pursuant to this Agreement,
plus additional reimbursements to Management Company of up to Canadian
$15,000 of expenses incurred by Manager at his discretion. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Management Company and/or Manager, as the case may be, upon
submission of any request for reimbursement, and in a format, time and
manner consistent with the Company's expense reporting policy.
(iii) The Company shall reimburse Management Company for the
provision of such executive perquisites as may be available to or
deemed appropriate for Manager by the Board.
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<PAGE>
3. NON-COMPETITION.
(a) Neither Management Company nor Manager shall, during the period of
their performance of services with the Company, and for a period of two (2)
years immediately following the termination of (x) in the case of Management
Company, Management Company's services or (y) in the case of any Manager, such
Manager's services under this Agreement (the "Noncompetition Period"), for any
reason whatsoever, directly or indirectly, for himself or herself or on behalf
of or in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any residential property management, rental or sales
business or hotel management business in direct competition with the
Company or VPI or any subsidiary of either the Company or VPI, within
100 miles of the locations in which the Company or VPI or any of the
Company's or VPI's subsidiaries conducts any residential property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Manager shall be permitted to call
upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing residential property
management, rental or sales services or hotel management services to
property owners and/or renters in direct competition with the Company
or VPI or any subsidiary of the Company or VPI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Management Company's or Manager's own behalf or on behalf of any
competitor in the residential property management, rental or sales
business or hotel management business, which candidate, to Manager's
actual knowledge after due inquiry, was called upon by the Company or
VPI (including the respective subsidiaries thereof) or for which, to
Manager's actual knowledge after due inquiry, the Company or VPI (or
any subsidiary thereof) made an acquisition analysis, for the purpose
of acquiring such entity, unless the Company or VPI (or any subsidiary
thereof) has expressly declined to pursue such acquisition candidate or
at least one (1) year has elapsed since the Company or VPI (or any
subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Management Company or Manager from acquiring as an investment not
more than two percent (2%) of the capital
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<PAGE>
stock of a competing business whose stock is traded on a national securities
exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Management Company and
Manager each agree that the foregoing covenant may be enforced by VPI or the
Company in the event of breach by either of them, by injunctions and restraining
orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Management Company and Manager
in light of the activities and business of the Company or VPI (including VPI's
other subsidiaries) on the date of the execution of this Agreement and the
current plans of the Company or VPI (including VPI's other subsidiaries); but it
is also the intent of the Company, VPI, Management Company and Manager that such
covenants be construed and enforced in accordance with the changing locations of
the Company and VPI (including VPI's other subsidiaries) throughout the
Noncompetition Period. For example, if, during the Noncompetition Period, the
Company or VPI (including VPI's other subsidiaries) establishes new locations
for its current activities or business in addition to the locations currently
established therefor, then Management Company and Manager will be precluded from
soliciting customers or employees from such new locations and from directly
competing within 100 miles of such new locations through the Noncompetition
Period.
It is further agreed by the parties hereto that, in the event that
Management Company or Manager, as the case may be, shall cease to be retained
hereunder, and shall enter into a business or pursue other activities not in
competition with the Company or VPI (including VPI's other subsidiaries), or
similar activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 3, and in any event
such new business, activities or location are not in violation of this paragraph
3 or of Management Company's or Manager's obligations, as the case may be, under
this paragraph 3, if any, Management Company or Manager, as the case may be,
shall not be chargeable with a violation of this paragraph 3 if the Company or
VPI (including VPI's other subsidiaries) shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Management Company and/or Manager
against the Company or VPI (including the subsidiaries thereof), whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by VPI or the Company of such covenants. It is specifically agreed
that the Noncompetition Period, during which the agreements and covenants of
Management Company and Manager made in this paragraph 3
4
<PAGE>
shall be effective, shall be computed by excluding from such computation any
time during which a court of competent jurisdiction or other arbitrator or
mediator has determined that Management Company or Manager, as the case may be,
is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
Manager shall not be required to relocate for performance of services
hereunder.
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Management Company's services may be terminated in any one of the
following ways:
(a) Death. The death of Manager shall immediately terminate this
Agreement with no severance compensation due to Manager's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Manager shall have been absent from Manager's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Management Company's obligations hereunder
provided Manager is unable to resume Manager's full-time duties at the
conclusion of such thirty (30) day notice period. Also, Management Company may
terminate Management Company's and Manager's obligations hereunder if Manager's
health should become impaired to an extent that makes the continued performance
of Manager's duties hereunder hazardous to Manager's physical or mental health
or life, provided that Management Company shall have furnished the Company with
a written statement from a qualified doctor to such effect and provided,
further, that, at the Company's request made within thirty (30) days of the date
of such written statement, Manager shall submit to an examination by a doctor
selected by the Company who is reasonably acceptable to Manager or Manager's
doctor and such doctor shall have concurred in the conclusion of Manager's
doctor. In the event this Agreement is terminated as a result of Manager's
disability, neither Management Company nor Manager shall have any right to any
severance compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Management Company for good cause, which
shall be: (1) Management Company's or Manager's willful, material, and
irreparable breach of this Agreement; (2) Management Company's or Manager's
failure to adequately perform, continuing for ten (10) days after receipt of
written notice stating the alleged failure with reasonable specificity and the
need to cure, any of Management Company's or Manager's material duties and
responsibilities hereunder; (3) Management Company's or Manager's willful
dishonesty, fraud, or misconduct which adversely affects the operations or
reputation of the Company or VPI; (4) Management Company's or Manager's
conviction in a court of competent jurisdiction of a felony or any misdemeanor
other than a minor traffic violation; or (5) chronic alcohol
5
<PAGE>
abuse or illegal drug use by Manager, provided that in the case of any
termination pursuant to clauses (1) or (2), such termination must be approved by
at least two-thirds of the members of the Board of Directors of VPI. In the
event of a termination for good cause, as enumerated above, neither Management
Company nor Manager shall have any right to any severance compensation.
(d) Without Good Cause. Management Company and Manager may only be
terminated without good cause by the Company during the Term hereof if such
termination is approved by at least two-thirds of the members of the Board of
Directors of VPI. Should Management Company and Manager be terminated by the
Company without good cause during the Term, Management Company shall be entitled
to continue to receive from the Company the base management fee at the rate then
in effect for whatever time period is remaining under the Term of this Agreement
or for one (1) year, whichever period is longer. Any termination without good
cause by the Company shall operate to shorten the Noncompetition Period to one
(1) year immediately following the date of such termination. Further, should
Management Company and Manager be terminated by the Company without good cause
at any time during or after the Term, Management Company shall be entitled to
waive Management Company's right to receive severance compensation (by a written
waiver delivered to the Company on the effective date of termination), and, in
such case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Management Company. At any time after the commencement of
services, Management Company may, without "good reason" (as defined below),
terminate this Agreement and Management Company's and Manager's obligations
without good reason, effective thirty (30) days after written notice is provided
to the Company. If Management Company resigns or otherwise terminates Management
Company's and Manager's obligations without good reason, Management Company
shall receive no severance compensation. If Management Company's termination is
for good reason (defined as the Company's failure to pay Management Company on a
timely basis the amounts to which it is entitled under this Agreement or as a
result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Management Company may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Management Company and Manager to enforce their rights hereunder in
addition to any severance compensation to which Management Company may be
entitled to hereunder, as calculated pursuant to Section 5(d) hereof. Further,
none of the provisions of paragraph 3 hereof shall apply in the event this
Agreement is terminated as a result of such a breach by the Company.
(f) Change in Control of VPI, the Company, Management Company or
Whistler Holding. In the event of a "Change in Control" (as defined below) of
VPI, the Company, Management Company or Whistler Holding during the Term, refer
to paragraphs 12 & 13 below.
(g) No Severance Compensation Directly to Manager. Severance
compensation, if any, is to be paid only to Management Company, and Manager
shall have no right to receive any severance compensation in any event.
Upon termination of this Agreement for any reason provided above,
Management Company shall be entitled to receive all compensation earned and all
benefits and reimbursements due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
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<PAGE>
payable to Management Company only to the extent and in the manner expressly
provided above or in paragraph 12 hereof. All other rights and obligations of
VPI, the Company, Management Company and Manager under this Agreement shall
cease as of the effective date of termination, except that the Company's
obligations under paragraph 9 hereof and Management Company's and Manager's
obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive such
termination in accordance with their terms.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Management Company and/or Manager by or on behalf of the Company, VPI or their
representatives, vendors or customers which pertain to the business of the
Company or VPI shall be and remain the property of the Company or VPI, as the
case may be, and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
the Company or VPI which is collected by Management Company and/or Manager shall
be delivered promptly to the Company without request by it upon termination of
Management Company's and Manager's services hereunder.
7. INVENTIONS.
Management Company and/or Manager shall disclose promptly to VPI and
the Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Management Company and/or Manager, solely or jointly with
another, during the Term or within one (1) year thereafter, and which are
directly related to the business or activities of the Company or VPI and which
Management Company and/or Manager conceives as a result of Manager's
relationship with the Company. Management Company and Manager hereby assign and
agree to assign all of Management Company's and/or Manager's interests therein
to the Company or its nominee. Whenever requested to do so by the Company,
Management Company and/or Manager, as the case may be, shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Management Company and Manager agree that they will not, during or
after the Term of this Agreement with the Company, disclose the specific terms
of the Company's or VPI's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or VPI, whether in existence or proposed, to any person,
firm, partnership, corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Management Company or Manager is made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than
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<PAGE>
an action by the Company or VPI against Management Company or Manager), by
reason of the fact that Management Company or Manager is or was performing
services under this Agreement, then the Company shall indemnify Management
Company or Manager, as the case may be, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Management Company or Manager in connection
therewith. In the event that Management Company or Manager and the Company are
made a party to the same third-party action, complaint, suit or proceeding, the
Company or VPI agrees to engage competent legal representation, and Management
Company and/or Manager, as the case may be, agree(s) to use the same
representation, provided that if counsel selected by VPI shall have a conflict
of interest that prevents such counsel from representing Management Company or
Manager, Management Company or Manager may engage separate counsel and the
Company or VPI shall pay all reasonable attorneys' fees and expenses of such
separate counsel.
10. NO PRIOR AGREEMENTS.
Management Company and Manager hereby represent and warrant to the
Company that the execution of this Agreement by Management Company and Manager
and their being retained by the Company and the performance of their duties
hereunder will not violate or be a breach of any agreement with a former
employer, client or any other person or entity. Further, Management Company and
Manager each agrees to indemnify the Company for any claim, including but not
limited to attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any noncompetition agreement, invention
or secrecy agreement between Management Company or Manager and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Management Company and Manager each understands that they have been
selected for provision of management services by the Company on the basis of
Manager's personal qualifications, experience and skills. Neither Management
Company nor Manager, therefore, shall assign all or any portion of their
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL OF COMPANY AND/OR VPI.
(a) Unless Management Company and/or Manager elect to terminate this
Agreement pursuant to (c) below, Management Company and/or Manager understand
and acknowledge that the Company and/or VPI may be merged or consolidated with
or into another entity and that such entity shall automatically succeed to the
rights and obligations of the Company and/or VPI hereunder or that the Company
and/or VPI may undergo another type of Change in Control. In the event such a
merger or consolidation or other Change in Control is initiated prior to the end
of the Term, then the provisions of this paragraph 12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Management Company and/or Manager have not received written
notice at least five (5) business days
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<PAGE>
prior to the anticipated closing date of the transaction giving rise to the
Change in Control from the successor to all or a substantial portion of the
Company's and/or VPI's business and/or assets that such successor is willing as
of the closing to assume and agree to perform the Company's and/or VPI's
obligations under this Agreement in the same manner and to the same extent that
the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Manager shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Management Company and/or
Manager may elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Term; however, under such circumstances, the
amount of the severance payment due to Manager shall be double the amount
calculated under the terms of paragraph 5(d) and shall be payable in a lump-sum
payment and the noncompetition provisions of paragraph 3 shall all apply for a
period of two (2) years from the effective date of termination. Manager shall
have the right to waive Manager's right to receive the severance compensation
payable under this paragraph 12(c) (by a written waiver delivered to the Company
on or before the effective date of the termination), in which case the
noncompetition provisions of paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Manager must be paid in
full by the Company at or prior to such closing. Further, Manager will be given
sufficient time and opportunity to elect whether to exercise all or any of
Manager's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Manager may convert the options to shares of VPI Common Stock at
or prior to the closing of the transaction giving rise to the Change in Control,
if Manager so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public
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<PAGE>
offering, constitute the Board of Directors of VPI (the "Original
Directors"); (B) the individuals who thereafter are elected to the
Board of Directors of VPI and whose election, or nomination for
election, to the Board of Directors of VPI was approved by a vote of at
least two-thirds (2/3) of the Original Directors then still in office
(such directors becoming "Additional Original Directors" immediately
following their election); and (C) the individuals who are elected to
the Board of Directors of VPI and whose election, or nomination for
election, to the Board of Directors of VPI was approved by a vote of at
least two-thirds (2/3) of the Original Directors and Additional
Original Directors then still in office (such directors also becoming
"Additional Original Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of VPI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Management Company and Manager must be notified in writing by the
Company at any time that the Company anticipates that a Change in Control may
take place.
13. CHANGE IN CONTROL OF MANAGEMENT COMPANY AND/OR WHISTLER HOLDING.
In any Management Company Change in Control situation, Company may
elect to terminate this Agreement by providing written notice to the Management
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(c) will apply as though the Management Company had
terminated the Agreement with good cause during the Term.
(a) A "Management Company Change in Control" shall be deemed to have
occurred if any of the following shall have occurred unless the transaction or
event shall have been approved by at least two-thirds (2/3) of the Board of
Directors of VPI:
(i) any person or entity, other than Whistler Holding or an
employee benefit plan of Whistler Holding, acquires directly or
indirectly the Beneficial Ownership (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of any voting security of
the Management Company or Whistler Holding and immediately after such
acquisition such person or entity is, directly or indirectly, the
Beneficial Owner of voting securities representing 50% or more of the
total voting power of all of the then-outstanding voting securities of
the Management Company or Whistler Holding;
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<PAGE>
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of Management Company or
Whistler Holding: (A) the individuals who, as of the closing date of
VPI's initial public offering, constitute the Board of Directors of
Management Company or Whistler Holding (the "Original Whistler
Directors"); (B) the individuals who thereafter are elected to the
Board of Directors of Management Company or Whistler Holding and whose
election, or nomination for election, to the Board of Directors of
Management Company or Whistler Holding was approved by a vote of at
least two-thirds (2/3) of the Original Whistler Directors then still in
office (such directors becoming "Additional Original Whistler
Directors" immediately following their election); and (C) the
individuals who are elected to the Board of Directors of Management
Company or Whistler Holding and whose election, or nomination for
election, to the Board of Directors of Management Company or Whistler
Holding was approved by a vote of at least two-thirds (2/3) of the
Original Whistler Directors and Additional Original Whistler Directors
then still in office (such directors also becoming "Additional Original
Whistler Directors" immediately following their election);
(iii) the stockholders of Management Company or Whistler
Holding shall approve a merger, consolidation, recapitalization or
reorganization of Management Company Whistler Holding, a reverse stock
split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any
such transaction which would result in at least 75% of the total voting
power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned
by at least 75% of the holders of outstanding voting securities of
Management Company or Whistler Holding immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of Management Company or Whistler
Holding shall approve a plan of complete liquidation of Management
Company or Whistler Holding or an agreement for the sale or disposition
by Management Company or Whistler Holding of all or a substantial
portion of Management Company's or Whistler Holding's assets (i.e., 50%
or more of the total assets of Management Company or Whistler Holding).
(b) Company must be notified in writing by the Management Company at
any time that the Management Company anticipates that a Management Company
Change in Control may take place.
14. COMPLETE AGREEMENT.
This Agreement is not a promise to retain future services. This
Agreement supersedes any other agreements or understandings, written or oral,
among the Company, VPI, Management Company and Manager, and neither Management
Company nor Manager has any oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company, Management Company and
Manager and of all the terms of this
11
<PAGE>
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Agreement
may not be later modified except by a written instrument signed by a duly
authorized officer of the Company, Management Company and Manager, and no term
of this Agreement may be waived except by a written instrument signed by the
party waiving the benefit of such term.
15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
To Management Company and/or Manager:
J. Patrick McCurdy
c/o Whistler Chalets Limited
Suite 216
4368 Main Street
Whistler, British Columbia
Canada V0N 1B4
Marked: "Personal and Confidential"
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
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<PAGE>
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Management Company and/or Manager, as the case may be, was terminated without
disability or good cause, as defined in paragraphs 5(b) and 5(c) hereof,
respectively, or that the Company has otherwise materially breached this
Agreement. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be borne by
the Company.
18. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the province of British Columbia.
19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Whistler Chalets Limited
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
Whistler Blackcomb Central Reservations, Inc.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
/s/ J. Patrick McCurdy
----------------------------------------------------
J. Patrick McCurdy, Individually
14
EMPLOYMENT AGREEMENT
(Andre S. Tatibouet)
This Employment Agreement (the "Agreement"), by and among Vacation
Properties International, Inc., a Delaware corporation ("VPI"), Hotel
Corporation of the Pacific, Inc. a Hawaii corporation and a wholly-owned
subsidiary of VPI (the "Company"), and Andre S. Tatibouet ("Employee"), is
hereby entered into as of this [___] day of [________], 1998, and shall be
effective as of the date of the consummation of the initial public offering of
the common stock of VPI.
R E C I T A L S
---------------
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing condominium property management and hotel management
services.
B. Employee has served as the Chief Executive Officer of the Company, as an
employee at will, since its inception.
C. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
-------------------
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby extends an agreement to employ Employee as Chief
Executive Officer of the Company for the fixed term set forth in Section 5
hereof, subject to the terms hereof. As such, Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of a
Chief Executive Officer of the Company and will report directly to the Board of
Directors of the Company (the "Board"). Employee hereby accepts this employment
upon the terms and conditions herein contained and, subject to paragraph 1(c)
hereof, agrees to devote Employee's working time, attention, and efforts to
promote and further the business of the Company, consistent with the past
practice of Employee.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee may, during the term of his or her employment hereunder,
engage in other business activities pursued for gain, profit or other pecuniary
advantage, provided that any such activity
<PAGE>
does not interfere with Employee's duties and responsibilities hereunder and
that any such activity is also permitted under Section 3 hereof. The foregoing
limitations shall not be construed as prohibiting Employee from making
investments in such form or manner as will neither require Employee's services
in the operation or affairs of the companies or enterprises in which such
investments are made nor violate the terms of paragraph 3 hereof.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $120,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
2
<PAGE>
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any condominium property management business in the
United States or hotel management business in the State of Hawaii (with
respect to condominium property management business in the United
States or with respect to hotel management business in the State of
Hawaii, as applicable, the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing condominium property
management services, or hotel management services to property owners
and/or renters in direct competition with the Company or VPI or any
subsidiary of the Company or VPI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, with respect to
business in the Territory, in the condominium property management or
hotel management business, which candidate, to Employee's actual
knowledge after due inquiry, was called upon by the Company or VPI
(including the respective subsidiaries thereof) or for which, to
Employee's actual knowledge after due inquiry, the Company or VPI (or
any subsidiary thereof) made an acquisition analysis, for the purpose
of acquiring such entity, unless the Company or VPI (or any subsidiary
thereof) has expressly declined to pursue such acquisition candidate or
at least one (1) year has elapsed since the Company or VPI (or any
subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from (A) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter, (B) engaging in any
business, other than the business of the Company or VPI, currently owned by
Employee, including without limitation the business of AST International, L.L.C.
or Northwest Lodging, Inc., (C) engaging in the hotel management business
outside the State of Hawaii, or (D) engaging in licensing or franchising
activities through AST Brands, LLC or any other business entity, including
licensing of the name "Aston Hotels & Resorts," provided that such licensing or
franchising activities do not contravene the provisions of Section 10.8 of that
certain Agreement and Plan of Organization, dated as of March 11, 1998, by and
among VPI, the Company, Employee and the other parties thereto.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy,
3
<PAGE>
Employee agrees that the foregoing covenant may be enforced by VPI or the
Company in the event of breach by him or her, by injunctions and restraining
orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) throughout the Noncompetition Period. For
example, if, during the Noncompetition Period, the Company or VPI (including
VPI's other subsidiaries) establishes new locations for its current activities
or business in addition to the locations currently established therefor, then
Employee will be precluded from soliciting customers or employees from such new
locations and from directly competing within 100 miles of such new locations
through the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or other
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) The parties agree that Employee's residence shall be in Honolulu,
Hawaii. Employee understands that he or she may be requested by the Board or VPI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all reasonable
4
<PAGE>
relocation costs to move Employee, Employee's immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, reasonable expenses related to pre-move visits to search for
a new residence, investigate schools or for other purposes; reasonable temporary
lodging and living costs prior to moving into a new permanent residence;
duplicate home carrying costs; all closing costs on the sale of Employee's
present residence and on the purchase of a comparable residence in the new
location; and added income taxes that Employee may incur if any unreimbursed
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use
Employee's best efforts to incur only those costs which are reasonable and
necessary to effect a smooth, efficient and orderly relocation with minimal
disruption to the business affairs of the Company and the personal life of
Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board or
VPI to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall have no right to any severance
compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's failure to adequately perform, continuing for ten
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(10) days after receipt of written notice stating the alleged failure with
reasonable specificity and the need to cure, any of Employee's material duties
and responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or
misconduct which adversely affects the operations or reputation of the Company
or VPI; (4) Employee's conviction in a court of competent jurisdiction of a
felony or any misdemeanor other than a minor traffic violation; or (5) chronic
alcohol abuse or illegal drug use by Employee, provided that in the case of any
termination pursuant to clauses (1) or (2), such termination must be approved by
at least two-thirds of the members of the Board of Directors of VPI. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is approved by
at least two-thirds of the members of the Board of Directors of VPI. Should
Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever period is longer. Any
termination without good cause by the Company shall operate to shorten the
Noncompetition Period to one (1) year immediately following the date of such
termination. Further, should Employee be terminated by the Company without good
cause at any time during or after the Term, Employee shall be entitled to waive
Employee's right to receive severance compensation (by a written waiver
delivered to the Company on the effective date of termination), and, in such
case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as the Company's failure to pay Employee on
a timely basis the amounts to which he or she is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated as a result of such a breach by
the Company.
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
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Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or VPI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services for the Company
as an officer, director or employee of the Company, then the Company shall
indemnify Employee against all expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement, as actually and
reasonably incurred by Employee in connection therewith. In the event that both
Employee and the Company are made a party to the same third-party action,
complaint, suit or proceeding, the Company or VPI agrees to engage competent
legal representation, and Employee agrees to use the same representation,
provided that if counsel selected by VPI shall have a conflict of interest
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that prevents such counsel from representing Employee, Employee may engage
separate counsel and the Company or VPI shall pay all reasonable attorneys' fees
and expenses of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of
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the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though the Company had
terminated the Agreement without cause during the Term; however, under such
circumstances, the amount of the severance payment due to Employee shall be
double the amount calculated under the terms of paragraph 5(d) and shall be
payable in a lump-sum payment and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on or before the effective date of the
termination), in which case the noncompetition provisions of paragraph 3 shall
not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction
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if stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total voting
power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned
by at least 75% of the holders of outstanding voting securities of VPI
immediately prior to the transaction, with the voting power of each
such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
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To Employee: Andre S. Tatibouet
c/o Hotel Corporation of the Pacific, Inc.
ANA Kalakaua Center
2155 Kalakaua Avenue
Suite 500
Honolulu, Hawaii 96815
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Honolulu, Hawaii, in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Hawaii.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Hotel Corporation of the Pacific, Inc.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
/s/ Andre S. Tatibouet
-------------------------------
Andre S. Tatibouet, Individually
EMPLOYMENT AGREEMENT
(Hans F. Trupp)
This Employment Agreement (the "Agreement"), by and among (i) Vacation
Properties International, Inc., a Delaware corporation ("VPI"), (ii) Trupp
Hodnett Enterprises, Inc. and THE Management Company, each a Georgia corporation
and a wholly-owned subsidiary of VPI (collectively, the "Company"), and (iii)
Hans F. Trupp ("Employee"), is hereby entered into as of this [___] day of
[________], 1998, and shall be effective as of the date of the consummation of
the initial public offering of the common stock of VPI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing noncommercial property management, rental and sales
services and hotel management services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and VPI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and VPI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and VPI; this information is a
trade secret and constitutes the valuable good will of the Company and VPI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chairman of the Company. As
such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a Chairman of the Company and will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's full working time, attention,
and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $120,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less frequently than monthly. Employee hereby waives
any commissions as a real estate agent or broker that Employee may be entitled
to receive during the Term.
(b) Incentive Bonus Plan. For 1998 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be VPI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that the Company or VPI may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at least
equal to such benefits provided to VPI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or VPI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement (the "Noncompetition
Period"), for any reason whatsoever, directly or indirectly, for himself or
herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
the Company or VPI or any subsidiary of
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either the Company or VPI, within 100 miles of the locations in which
the Company or VPI or any of the Company's or VPI's subsidiaries
conducts any noncommercial property management, rental or sales
business or hotel management business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or VPI (including the respective
subsidiaries thereof) in a sales representative or managerial capacity
for the purpose or with the intent of enticing such employee away from
or out of the employ of the Company or VPI (including the respective
subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or VPI (including the respective subsidiaries thereof)
within the Territory for the purpose of providing noncommercial
property management, rental or sales services or hotel management
services to property owners and/or renters in direct competition with
the Company or VPI or any subsidiary of the Company or VPI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by the Company or VPI (including the
respective subsidiaries thereof) or for which, to Employee's actual
knowledge after due inquiry, the Company or VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring
such entity, unless the Company or VPI (or any subsidiary thereof) has
expressly declined to pursue such acquisition candidate or at least one
(1) year has elapsed since the Company or VPI (or any subsidiary
thereof) has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from (A) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter or (B) owning
noncommercial property if such property is managed by the Company.
(b) Because of the difficulty of measuring economic losses to the
Company and VPI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
VPI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by VPI or the Company in the event of breach
by him or her, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company or VPI (including VPI's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company or VPI (including VPI's other subsidiaries); but it is also
the intent of the Company, VPI and Employee that such covenants be construed and
enforced in accordance with the changing locations of the Company and VPI
(including VPI's other subsidiaries) throughout the Noncompetition Period. For
example, if, during the Noncompetition Period, the Company or VPI (including
VPI's other subsidiaries) establishes new locations for its current activities
or business in addition to the locations currently
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established therefor, then Employee will be precluded from soliciting customers
or employees from such new locations and from directly competing within 100
miles of such new locations through the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or VPI (including
VPI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or VPI (including VPI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or VPI
(including the subsidiaries thereof), whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by VPI or the
Company of such covenants. It is specifically agreed that the Noncompetition
Period, during which the agreements and covenants of Employee made in this
paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which a court of competent jurisdiction or other
arbitrator or mediator has determined that Employee is in violation of any
provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he or she may be requested by the Board
or VPI to relocate from Employee's present residence to another geographic
location in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement or as part of a promotion or other
increase in duties and responsibilities. In such event, if Employee agrees to
relocate, the Company will pay all reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, by way of example, but are not limited to, reasonable expenses
related to pre-move visits to search for a new residence, investigate schools or
for other purposes; reasonable temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any unreimbursed relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
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(b) Notwithstanding the above, if Employee is requested by the Board or
VPI to relocate and Employee refuses, such refusal shall not constitute "good
cause" for termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal (such initial three year
period and any extensions thereof being referred to herein as the "Term"). This
Agreement and Employee's employment may be terminated in any one of the
following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such one hundred twenty (120) day period, but which shall not be
effective earlier than the last day of such one hundred twenty (120) day
period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume Employee's full-time duties at the conclusion of
such thirty (30) day notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall have no right to any severance
compensation.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's failure to adequately perform, continuing for ten (10) days after
receipt of written notice stating the alleged failure with reasonable
specificity and the need to cure, any of Employee's material duties and
responsibilities hereunder; (3) Employee's willful dishonesty, fraud, or
misconduct which adversely affects the operations or reputation of the Company
or VPI; (4) Employee's conviction in a court of competent jurisdiction of a
felony or any misdemeanor other than a minor traffic violation; or (5) chronic
alcohol abuse or illegal drug use by Employee, provided that in the case of any
termination pursuant to clauses (1) or (2), such termination must be approved by
at least two-thirds of the members of the Board of Directors of VPI. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
5
<PAGE>
(d) Without Good Cause. Employee may only be terminated without good
cause by the Company during the Term hereof if such termination is approved by
at least two-thirds of the members of the Board of Directors of VPI. Should
Employee be terminated by the Company without good cause during the Term,
Employee shall be entitled to continue to receive from the Company the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever period is longer. Any
termination without good cause by the Company shall operate to shorten the
Noncompetition Period to one (1) year immediately following the date of such
termination. Further, should Employee be terminated by the Company without good
cause at any time during or after the Term, Employee shall be entitled to waive
Employee's right to receive severance compensation (by a written waiver
delivered to the Company on the effective date of termination), and, in such
case, the non-competition provisions of paragraph 3 shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined below), terminate this Agreement
and Employee's employment without good reason, effective thirty (30) days after
written notice is provided to the Company. If Employee resigns or otherwise
terminates Employee's employment without good reason, Employee shall receive no
severance compensation. If Employee's resignation or other termination by
Employee is for good reason (defined as the Company's failure to pay Employee on
a timely basis the amounts to which he or she is entitled under this Agreement
or as a result of any other material breach of this Agreement by the Company, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 16 below), the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder in addition to any severance compensation
to which Employee may be entitled to hereunder, as calculated pursuant to
Section 5(d) hereof. Further, none of the provisions of paragraph 3 hereof shall
apply in the event this Agreement is terminated as a result of such a breach by
the Company.
(f) Change in Control of VPI or the Company. In the event of a "Change
in Control" (as defined below) of VPI or the Company during the Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of VPI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, VPI or their representatives, vendors
or customers which pertain to the business of the Company or VPI shall be and
remain the property of the Company or VPI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and
6
<PAGE>
other similar data pertaining to the business, activities or future plans of the
Company or VPI which is collected by Employee shall be delivered promptly to the
Company without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to VPI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or VPI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
VPI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
VPI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or VPI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or VPI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by VPI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or VPI shall pay all reasonable
attorneys' fees and expenses of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may
7
<PAGE>
now have or may hereafter come to have against the Company based upon or arising
out of any noncompetition agreement, invention or secrecy agreement between
Employee and such third party which was in existence as of the date of this
Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company and/or VPI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company and/or VPI
hereunder or that the Company and/or VPI may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this paragraph
12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company
and/or VPI and Employee have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of the Company's and/or VPI's business and/or assets that such successor is
willing as of the closing to assume and agree to perform the Company's and/or
VPI's obligations under this Agreement in the same manner and to the same extent
that the Company and/or VPI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by the Company
without cause during the Term and the applicable portions of paragraph 5(d) will
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 5(d) and shall be payable in a lump-sum payment and the noncompetition
provisions of paragraph 3 shall all apply for a period of two (2) years from the
effective date of termination. Employee shall have the right to waive Employee's
right to receive the severance compensation payable under this paragraph 12(c)
(by a written waiver delivered to the Company on or before the effective date of
the termination), in which case the noncompetition provisions of paragraph 3
shall not apply.
8
<PAGE>
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase VPI Common Stock, including any options
with accelerated vesting under the provisions of VPI's 1998 Long-Term Incentive
Plan, such that Employee may convert the options to shares of VPI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred unless the transaction or event shall have
been approved by at least two-thirds (2/3) of the Board of Directors of VPI:
(i) any person or entity, other than VPI or an employee
benefit plan of VPI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or VPI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or VPI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of VPI: (A) the individuals
who, as of the closing date of VPI's initial public offering,
constitute the Board of Directors of VPI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of VPI and whose election, or nomination for election, to the
Board of Directors of VPI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of VPI shall approve a merger,
consolidation, recapitalization or reorganization of VPI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of VPI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of VPI shall approve a plan of complete
liquidation of VPI or an agreement for the sale or disposition by VPI
of all or a substantial portion of VPI's assets (i.e., 50% or more of
the total assets of VPI).
9
<PAGE>
(f) Employee must be notified in writing by the Company at any time
that the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, VPI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Vacation Properties International, Inc.
1355-B Lynnfield Road, Suite 245
Memphis, Tennessee 38119
Attn.: David C. Sullivan
To Employee: Hans F. Trupp
c/o Trupp Hodness Enterprises, Inc.
520 Ocean Boulevard
St. Simons Island, Georgia 31522
Marked: "Personal and Confidential"
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
10
<PAGE>
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Tennessee.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Trupp Hodnett Enterprises, Inc.
THE Management Company
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Vacation Properties International, Inc.,
a Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
---------------------------------------------
Hans F. Trupp, Individually
12
EXHIBIT 10.18
PROMISSORY NOTE
---------------
Bethesda, Maryland
January 8, 1998
FOR VALUE RECEIVED, Vacation Properties International, Inc., a
Delaware corporation ("Borrower"), unconditionally promises to pay to the order
of VPI Funding, LLC, a Delaware limited liability company ("Lender"), without
offset, at its offices at c/o Alpine Consolidated II, LLC, 2927 44th Street,
N.W., Washington, DC 20016, or at such other place as the holder of this Note
may designate in writing, on demand, the principal sum set forth below in the
last entry on the Schedule of Advances and Payments of Principal (the
"Schedule") as "Principal Amount Outstanding," with interest payable on the 1st
day of each month beginning February 2, 1998, and at maturity on the unpaid
principal of such sum until repaid in full. All payments made on this Note shall
be applied first to accrued interest and then to principal. In no event shall
the principal sum set forth below in the last entry on the Schedule as the
Principal Amount Outstanding exceed the amount set forth below in the last entry
on the Schedule as the Total Borrowings Cap. Lender and Borrower initially
intend that the principal amount available hereunder will be $1,000,000. Such
$1,000,000 amount, however, may be increased from time to time as Lender and
Borrower shall mutually agree in writing, as shall be set forth in the last
entry on the Schedule under Total Borrowings Cap. Interest on this Note with
respect to each advance made hereunder shall accrue at the rate per annum set
forth below in the entry on the Schedule as the Interest Rate for such advance.
Borrower understands and agrees that any officer or authorized
employee of Lender may make entries on the Schedule of this Note and on any
additional schedules attached hereto upon receipt of written or telephonic
instructions of any one reasonably believed by such officer or authorized
employee to be an authorized agent of Borrower. Borrower shall indemnify and
hold Lender harmless from and against any and all claims, damages, losses, costs
and expenses (including attorneys' fees) that may arise or be created by the
acceptance of instructions for making or paying advances by telephone.
The happening of any of the following events shall constitute an event
of default:
A. The failure to make when due any installment or other payment
described herein, whether of principal, interest, late charges or otherwise;
B. The dissolution or termination of existence of Borrower;
C. The inability of Borrower to pay its debts when due, the insolvency
of Borrower, the application for the appointment of a receiver or custodian for
Borrower or the property
- 1 -
<PAGE>
of Borrower, the entry of an order for relief of the filing of a petition by or
against Borrower under the provisions of any bankruptcy or insolvency law, or
any assignment for the benefit of creditors by or against Borrower;
D. The entry of a judgment against Borrower or the issuance or service
of any attachment, levy or garnishment against Borrower or the property of
Borrower;
E. The determination by Lender that a material adverse change in the
financial condition of Borrower has occurred since the date hereof, or if Lender
deems itself insecure or otherwise in good faith believes that the prospect of
payment or performance is impaired;
F. The failure of Borrower to perform any obligation to Lender
hereunder or under the terms of any other obligation of Borrower to Lender; or
G. The default by Borrower in any agreement for borrowed money,
whether owed to Lender or to a third person.
Upon the happening of any event of default, this Note shall, at the
sole option of Lender, become immediately due and payable without notice to or
demand on Borrower. In the event Borrower fails to pay any installment of
interest or otherwise fails to repay this Note within seven (7) days of its due
date, Borrower agrees to pay Lender on demand a late charge of five percent (5%)
of the overdue payment.
Borrower hereby expressly waives presentment, demand, protest and
notice of dishonor, and waives the benefit of all homestead and similar
exemptions as to this debt. If after default, this Note is placed in the hands
of an attorney for collection, Borrower agrees to pay all reasonable attorneys'
fees incurred by Lender.
Any failure or delay by Lender to exercise any right hereunder shall
not be construed as a waiver of the right to exercise the same or any other
rights at any time.
- 2 -
<PAGE>
SCHEDULE OF ADVANCES AND PAYMENTS OF PRINCIPAL
----------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL TOTAL APPROVING
INTEREST AMOUNT BORROWINGS PERSON'S
DATE ADVANCES RATE PAYMENTS OUTSTANDING CAP INITIALS
- -----------------------------------------------------------------------------------------------
<S> <C>
1/8/98 $349,000
- -----------------------------------------------------------------------------------------------
2/28/98 $300,000
- -----------------------------------------------------------------------------------------------
3/6/98 $370,000
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
The aggregate principal amount outstanding shown on the Schedule shall
be prima facie evidence of the principal amount owing and unpaid on this Note.
The failure to record the date and amount of any advance on the Schedule shall
not, however, limit or otherwise effect the obligations of Borrower under this
Note to repay the principal amount of the advance together with all interest
accruing thereon.
The provisions of this Note shall be construed and interpreted, and
all rights and obligations of the parties hereunder determined in accordance
with the laws of the State of Maryland.
- 3 -
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
and delivered as of the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.,
a Delaware corporation
By:/s/ Elan Blutinger
------------------------------
Elan Blutinger
President
ACKNOWLEDGED:
VPI FUNDING, LLC
a Delaware limited liability company
By:/s/ Elan Blutinger
---------------------------------
Elan Blutinger
Manager
CONSENT OF INDEPENDENT AUDITORS'
As Independent Public Accountants, we hereby consent to the use of our
reports for Vacation Properties International, Inc. dated March 11, 1998, Hotel
Corporation of the Pacific, Inc., dated February 6, 1998, Brindley & Brindley
Realty Development, Inc., and B & B on the Beach, Inc., dated January 30, 1998,
First Resort Software, Inc. dated January 30, 1998, Houston and O'Leary Company
dated January 30, 1998, The Maury People, Inc., dated January 30, 1998, Howey
Acquisition, Inc. dated January 30, 1998, Priscilla Murphy Realty, Inc. dated
January 30, 1998, Resort Property Management, Inc. dated January 30, 1998,
Telluride Resort Accommodations, Inc. dated January 30, 1998, and Trupp-Hodnett
Enterprises, Inc. and THE Management Company dated January 16, 1998 and all
references to our Firm included in or made a part of this Registration
Statement.
Arthur Andersen LLP
Houston, TX
March 12, 1998
CONSENT OF INDEPENDENT AUDITORS'
As independent public accountants, we hereby consent to the use of our
reports for Coastal Resorts Management Inc., and Coastal Resorts Realty, LLC
dated January 29, 1998, and Interstate Realty Company, Inc. and Sea Colony
Management, Inc. dated January 29, 1998, and all references to our Firm included
in or made part of this Registration Statement.
Arthur Andersen LLP
Washington, D.C.
March 12, 1998
CONSENT OF INDEPENDENT AUDITORS'
As independent auditor's, we hereby consent to the use of our report for
Collection of Fine Properties, Inc. dated January 23, 1998 and to all references
to our Firm included in or made part of this Registration Statement.
Morrison, Brown, Argiz and Company
Denver, Colorado
March 12, 1998
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 11, 1998
/s/ David C. Sullivan
-------------------------
David C. Sullivan
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Luis Alonso
-------------------------
Luis Alonso
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Park Brady
-------------------------
Park Brady
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Douglas R. Brindley
-------------------------
Douglas R. Brindley
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Paul T. Dobson
-------------------------
Paul T. Dobson
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Sharon Benson Doucette
--------------------------
Sharon Benson Doucette
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Joshua M. Freeman
-------------------------
Joshua M. Freeman
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Evan H. Gull
-------------------------
Evan H. Gull
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Charles O. Howey
-------------------------
Charles O. Howey
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Heidi O'Leary Houston
-------------------------
Heidi O'Leary Houston
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Daniel L. Meehan
-------------------------
Daniel L. Meehan
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ J. Patrick McCurdy
-------------------------
J. Patrick McCurdy
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Andre S. Tatibouet
-------------------------
Andre S. Tatibouet
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Hans F. Trupp
-------------------------
Hans F. Trupp
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Michael D. Rose
-------------------------
Michael D. Rose
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Elan J. Blutinger
-------------------------
Elan J. Blutinger
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ D. Fraser Bullock
-------------------------
D. Fraser Bullock
<PAGE>
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Securities Act"), I hereby consent to the use of my name and any references to
me as a person nominated to become a director of Vacation Properties
International, Inc. ("VPI") in the Prospectus constituting a part of VPI's
Registration Statement on Form S-1 to be filed with the Securities and Exchange
Commission pursuant to the Securities Act.
Dated: March 10, 1998
/s/ Leonard A. Potter
-------------------------
Leonard A. Potter
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