Schedule 14A Information
Proxy Statement Pursuant to Section 14(a)
Of the Securities Exchange Act of 1934
[X] Filed by Registrant
[ ] Filed by Party other than Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use by Commission only (as permitted by Rule 14a-6 (e)
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11 (c) or 240.14a-12
RESORTQUEST INTERNATIONAL, INC.
(Name of Registrant as Specified in its Charter)
RESORTQUEST INTERNATIONAL, INC.
(Name of Person(s) filing Proxy Statement)
Payment of Filing Fee (check appropriate box):
[X] No Fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
Filing fee is calculated and state how it was determined.): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total Fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the Filing for which the offsetting fee was
paid previously. Identify the previous Filng by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
RESORTQUEST INTERNATIONAL
[LOGO OMITTED]
David C. Sullivan
Chairman
Chief Executive Officer
April 7, 1999
Dear Shareholder,
On behalf of our entire Board of Directors, I cordially invite you to
attend our Annual Meeting of Shareholders on Thursday, May 13, 1999. At the
meeting, we will review ResortQuest's performance for fiscal year 1998 and our
expectations for the future.
A notice of the meeting and Proxy Statement follow. You will also find
enclosed your proxy voting card and the 1998 Annual Report. I would like to take
this opportunity to remind you that your vote is important. Please take a moment
now to complete, sign and date the enclosed proxy voting card and return it in
the postage-paid envelope we have provided.
I look forward to seeing you on May 13th and addressing your questions and
comments.
Sincerely,
/s/ David C. Sullivan
David C. Sullivan
530 OAK COURT DRIVE, SUITE 360, MEMPHIS, TN 38117, 901-762-0600
<PAGE>
RESORTQUEST INTERNATIONAL
[LOGO OMITTED]
John K. Lines
Senior Vice President
General Counsel and Secretary
April 7, 1999
NOTICE OF THE 1999
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of ResortQuest International, Inc. will
be held on Thursday, May 13, 1999, at 9:00 a.m., at the Embassy Suites, 1022
South Shady Grove Road, Memphis, TN 38120, to consider and take action on the
following matters:
l. The election of eleven directors to serve until the next annual meeting
of shareholders;
2. The ratification of the appointment of Arthur Andersen LLP as our
independent public accountants for fiscal year 1999;
3. The adoption of ResortQuest's Amended and Restated 1998 Long-Term
Incentive Plan; and
4. The transaction of any other business that is properly raised at the
meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "IN FAVOR OF" THE THREE PROPOSALS.
By Order of the Board of Directors,
/s/ John K. Lines, Secretary
John K. Lines, Secretary
530 OAK COURT DRIVE, SUITE 360, MEMPHIS, TN 38117, 901-762-0600
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS--------------------------------------------------------------------------
PAGE
-----
<S> <C>
Annual Meeting Information .......................................................... 1
Who is entitled to vote? ........................................................... 1
What am I voting on? ............................................................... 1
How does the Board of Directors recommend I vote on the proposals? ................. 1
How do I vote? ..................................................................... 1
What is a quorum? .................................................................. 2
What vote is required to approve each item? ........................................ 2
Who will count the vote? ........................................................... 2
What is the deadline for shareholder proposals for next year's Annual Meeting? ..... 2
How much did this proxy solicitation cost? ......................................... 2
Securities Ownership of Management and Principal Stockholders ....................... 2
Section 16(a) - Beneficial Ownership Reporting Compliance .......................... 4
Item l -- Election of Directors ..................................................... 4
Nominees ............................................................................ 4
Board Committees and Meeting Attendance ............................................. 8
Audit Committee .................................................................... 9
Compensation Committee ............................................................. 9
Executive Committee ................................................................ 9
Capital Approval Committee ......................................................... 9
Compensation of Directors ........................................................... 10
Report of the Compensation Committee of the Board of Directors ...................... 10
Role of the Compensation Committee ................................................. 10
Executive Compensation Program ..................................................... 10
Policy on Deductibility of Compensation ............................................ 11
Compensation Committee Interlocks and Insider Participation ........................ 11
Corporate Performance ............................................................... 11
Compensation of Executive Officers .................................................. 13
Summary of Compensation ............................................................ 13
Option Grants in Fiscal 1998 and Fiscal Year-End Option Values ..................... 13
Employment Agreements and Covenants not to Compete ................................. 14
Indemnification Agreements ......................................................... 15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS------------------------------------------------------------------------------
PAGE
-----
<S> <C>
Certain Relationships and Related Transactions ........................................... 16
Organization of ResortQuest ............................................................. 16
Leases of Facilities .................................................................... 19
Management Agreements ................................................................... 20
Other Transactions ...................................................................... 21
Item 2 -- Ratification of Appointment of Independent Certified Public Accountants ........ 24
Item 3 -- Adoption of ResortQuest's Amended and Restated 1998 Long-Term Incentive Plan ... 24
General .................................................................................. 24
Awards Granted Under the Plan ............................................................ 25
Description of the Plan .................................................................. 26
Eligibility ............................................................................. 26
Purpose ................................................................................. 26
Administration .......................................................................... 27
Limitation on Awards .................................................................... 27
Options ................................................................................. 27
Other Awards ............................................................................ 28
Changes in Common Stock ................................................................. 29
Amendments to the Plan and Outstanding Awards ........................................... 29
Federal Income Tax Consequences of Stock Options ......................................... 29
Item 4 -- Other Matters .................................................................. 30
Exhibit A -- ResortQuest International, Inc. Amended and Restated 1998 Long-Term Incentive
Plan .................................................................................... A-1
</TABLE>
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
ANNUAL MEETING INFORMATION
------------------------------------------------------
This proxy statement contains information related to the Annual Meeting of
Shareholders of ResortQuest International, Inc. to be held on Thursday, May 13,
1999, beginning at 9 a.m., at the Embassy Suites, 1022 South Shady Grove Road,
Memphis, TN 38120, and at any postponements or adjournments thereof. The proxy
statement was prepared under the direction of ResortQuest's Board of Directors
to solicit your proxy for use at the Annual Meeting. The approximate date of
mailing this proxy statement is April 7, 1999.
WHO IS ENTITLED TO VOTE?
---------------------------------------------------------
ResortQuest's outstanding Common Stock consists of Restricted Common Stock
and non-restricted Common Stock (together, the "Common Stock"). Shareholders
owning our Common Stock on March 23, 1999 are entitled to vote at the Annual
Meeting, or any postponement or adjournment of the meeting. Each holder of
Restricted Common Stock has one-half vote per share on all matters to be voted
on. Each holder of non-restricted Common Stock has one vote per share on all
matters to be voted on. On March 23, 1999, there were 17,188,804 shares of
Common Stock outstanding, consisting of 3,134,630 shares of Restricted Common
Stock and 14,054,174 shares of non-restricted Common Stock.
WHAT AM I VOTING ON?
------------------------------------------------------------
You will be asked to elect nominees to serve on the Board of Directors, to
ratify the appointment of our independent public accountants for the 1999 fiscal
year and to approve our Amended and Restated 1998 Long-Term Incentive Plan. The
Board of Directors is not aware of any other matters to be presented for action
at the meeting. If any other matter requiring a vote of the shareholders should
arise, your signed proxy card gives authority to David C. Sullivan, our Chairman
and Chief Executive Officer, David L. Levine, our President and Chief Operating
Officer and John K. Lines, our Senior Vice President, General Counsel and
Secretary (together, the "Proxies"), to vote in accordance with their best
judgment.
HOW DOES THE BOARD OF DIRECTORS
RECOMMEND I VOTE ON THE PROPOSALS?
----------------------------------------------
The Board recommends a vote FOR each of the nominees for election to the
Board, FOR the appointment of Arthur Andersen LLP as our independent public
accountants for the 1999 fiscal year and FOR the approval of our Amended and
Restated 1998 Long-Term Incentive Plan.
HOW DO I VOTE?
------------------------------------------------------------------
Sign and date each proxy card you receive and return it in the prepaid
envelope. If you sign your proxy, but do not mark your choices, your shares will
be voted for the persons nominated for election as directors, in favor of
ratifying the appointment of Arthur Andersen LLP as independent public
accountants for the 1999 fiscal year and in favor of approving our Amended and
Restated 1998 Long-Term Incentive Plan.
You can revoke your proxy at any time before it is exercised. To do so, you
must give written notice of revocation to the Secretary, ResortQuest
International, Inc., 530 Oak Court Drive, Suite 360, Memphis, TN 38117, submit
another properly signed proxy with a more recent date, or vote in person at the
meeting.
<PAGE>
WHAT IS A QUORUM?
---------------------------------------------------------------
A "quorum" is the presence at the meeting, in person or by proxy, of the
holders of a number of shares entitling them to exercise a majority of the
voting power of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting. There must be a quorum for the meeting to be held. Abstentions
are counted for purposes of determining the presence or absence of a quorum, but
are not considered a vote cast under Delaware law. Shares held by brokers in
street name and for which the beneficial owners have withheld the discretion to
vote from brokers are called "broker non-votes." They are counted to determine
if a quorum is present, but are not considered a vote cast under Delaware law.
Broker non-votes will not affect the outcome of a vote on a particular matter.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
-------------------------------------
The director nominees will be elected by a plurality of the votes cast at
the Annual Meeting. All other matters to be considered at the meeting require
the affirmative vote of a majority of the votes cast at the meeting to be
approved.
WHO WILL COUNT THE VOTE?
--------------------------------------------------------
American Stock Transfer & Trust Company will tabulate the votes cast by
proxy or in person at the Annual Meeting.
WHAT IS THE DEADLINE FOR SHAREHOLDER
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING?
---------------------------------------
Shareholders may submit proposals on matters appropriate for shareholder
action at future annual meetings by following the rules of the Securities and
Exchange Commission. Proposals intended for inclusion in next year's proxy
statement and proxy card must be received by ResortQuest not later than December
9, 1999. If we do not receive notice of any other matter that a shareholder
wishes to raise at the Annual Meeting in 2000 by February 22, 2000 and a matter
is raised at that meeting, the Proxies will have discretionary authority to vote
on the matter. All proposals and notification should be addressed to
ResortQuest's Secretary.
HOW MUCH DID THIS PROXY SOLICITATION COST?
--------------------------------------
We have engaged D. F. King & Co., Inc. to solicit proxies for a fee of
$5,500 plus expenses. We also reimburse banks, brokerage firms and other
institutions, nominees, custodians and fiduciaries for their reasonable expenses
for sending proxy materials to beneficial owners and obtaining their voting
instructions. Certain directors, officers and regular employees of ResortQuest
and its subsidiaries may solicit proxies personally or by telephone or facsimile
without additional compensation.
SECURITIES OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
------------------------------------------------------
The following table shows the number of shares of Common Stock beneficially
owned by each person known to ResortQuest to beneficially own more than 5% of
the Common Stock, by the directors and the Named Executive Officers listed on
page 13, and by the directors and all ResortQuest executive officers as a group.
Unless otherwise indicated, the persons listed have an address c/o ResortQuest's
executive offices and have sole voting and investment power with respect to
their shares.
The table shows ownership as of December 31, 1998.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY PERCENTAGE
NAME OWNED OWNED
---- ------------------ ----------
<S> <C> <C>
Baron Capital Group, Inc. (1)
BAMCO, Inc.
Baron Small Cap Fund
Ronald Baron 1,352,000 8.0%
David C. Sullivan 247,202 1.5
David L. Levine (2) 50,000 *
Jeffery M. Jarvis 40,000 *
W. Michael Murphy (3) 40,200 *
Jules S. Sowder 25,000 *
William W. Abbott, Jr. (4) 145,091 *
Luis Alonso (5) 124,500 *
Elan J. Blutinger (4) 608,538 3.6
Park Brady (4) 41,041 *
Douglas R. Brindley (6) 196,167 1.2
D. Fraser Bullock (4)(13) 629,568 3.7
Paul T. Dobson 85,334 *
Joshua M. Freeman (4)(12) 1,060,457 6.3
Evan H. Gull 88,111 *
Heidi O'Leary Houston (7) 250,667 1.5
Charles O. Howey (4) (8) 456,176 2.7
Daniel L. Meehan (9) 98,930 *
J. Patrick McCurdy (10) 135,152 *
Michael D. Rose (4) 55,455 *
Andre S. Tatibouet 1,708,333 10.1
Hans F. Trupp 651,142 3.9
Joseph V. Vittoria (4) 50,000 *
Theodore L. Weise (4) 10,500 *
All directors and executive officers as a group
(25 persons including those listed above) 6,847,564 40.5
</TABLE>
* Less than 1.0%
(1) The address for the group is 767 Fifth Avenue, New York, NY 10153. Both
voting and dispositive powers are shared.
(2) Includes 15,000 shares held in trust for the benefit of his minor children.
(3) Includes 200 shares owned by his spouse.
(4) Includes 10,000 shares which may be acquired upon the exercise of options.
(5) Includes 3,000 shares held by his spouse as custodian for his minor
children.
(6) Includes 97,500 shares owned by Betty Shotton Brindley, his spouse.
(7) Includes 2,500 shares held in trust for the benefit of her minor children.
(8) Includes 102,963 shares owned by Dolores Howey, his spouse.
(9) Includes 300 shares owned by his minor children.
(10) Includes 569 shares held in trust for his minor children.
(11) Includes 264,450 for which Mr. Trupp has sole voting power pursuant to a
revocable proxy.
(12) Includes 477,750 shares owned by CMF Coastal Resorts L.L.C. ("CMF
Coastal"), in which Mr. Freeman has a 98% membership interest, 33,000
shares held by the Carl M. Freeman Foundation, Inc. (the "Freeman
Foundation"), of which Mr. Freeman is a trustee, and 193,383 shares owned
by CMF RQI Holdings L.L.C. ("Holdings"). Mr. Freeman is the managing member
of Holdings and has sole voting and dispositive power for 118,633 shares
and no voting and sole dispositive power for an additional 74,750 shares
held by Holdings. Mr. Freeman disclaims beneficial ownership of 9,555
shares held by CMF Coastal, 33,000 shares held by the Freeman Foundation
and 74,750 shares held by Holdings.
(13) Includes 5,000 shares held by Mr. Bullock as custodian of his minor
children.
3
<PAGE>
SECTION 16(A) -- BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
------------------------------------------------------------
Under Securities and Exchange Commission rules relating to reporting of
changes of beneficial ownership of ResortQuest Common Stock, one report during
the last fiscal year relating to transactions by ResortQuest's directors and
executive officers was not timely filed. Daniel L. Meehan, a director of
ResortQuest in 1998 who is not a nominee for election at the Annual Meeting,
filed one late report relating to the purchase of Common Stock by his minor
children. Upon discovery, this oversight was promptly corrected.
- --------------------------------------------------------------------------------
ITEM 1 -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
NOMINEES
------------------------------------------------------------------------
Eleven directors will be elected at the Annual Meeting. Directors will
serve until the next annual meeting or until their earlier resignation or
removal. If any nominee is not available for election, proxies will be voted for
another person nominated by the Board of Directors or the size of the Board will
be reduced.
The Compensation Committee of the Board, which considers nominees for
election to the Board, has recommended that the size of the Board of Directors
be reduced from 21 members to 11 members. The Board of Directors unanimously
believes that a reduction of the size of the Board is in the best interest of
ResortQuest and its shareholders. The Board of Directors believes that a smaller
Board will facilitate better communication among the directors and increase the
efficiency of the Board. Accordingly, eleven directors will be elected at the
Annual Meeting.
The following nine current members of the Board are not nominees for
reelection at the Annual Meeting: Luis Alonso, Park Brady, Douglas R. Brindley,
Paul T. Dobson, Evan H. Gull, Charles O. Howey, Daniel L. Meehan, J. Patrick
McCurdy and Hans F. Trupp. Sharon Benson Doucette resigned from the Board of
Directors for personal reasons in February 1999.
The nominees and their biographies are as follows:
- --------------------------------------------------------------------------------
WILLIAM W. ABBOTT, JR.
Director since November 1998
Age 53
- --------------------------------------------------------------------------------
Mr. Abbott is a consultant to ResortQuest. He previously served as Vice
Chairman of Abbott Resorts, Inc. from March 1997 to November 1998. He served as
President and Chairman of the Board of Abbott Resorts from 1976 to March 1997.
Abbott Resorts, the largest provider of beach vacation property rentals,
management services and real estate sales in Florida, is a ResortQuest
subsidiary.
4
<PAGE>
- --------------------------------------------------------------------------------
ELAN J. BLUTINGER
Director since September 1997
Age 43
- --------------------------------------------------------------------------------
Mr. Blutinger is a Managing Director of Alpine Consolidated II, LLC and a
partner in Alpine Consolidated III, LLC, each a merchant bank specializing in
the consolidation of fragmented industries. He is a director and co-founder of
Travel Services International, Inc. and is Chairman of its Compensation
Committee. He founded and, from 1987 until 1995, was the Chief Executive Officer
of Shoppers Express, which became "OnCart" in 1997, an electronic retailing
service. From 1983 until its acquisition in 1986 by Independent Distribution
Incorporated, Mr. Blutinger was Chief Executive Officer of DSI, a wholesale
software distributor.
- --------------------------------------------------------------------------------
D. FRASER BULLOCK
Director since September 1997
Age 43
- --------------------------------------------------------------------------------
Mr. Bullock is a Managing Director of Alpine Consolidated II, LLC and
Alpine Consolidated III, LLC. He is a director and co-founder of Travel Services
International, Inc. and is currently 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 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.
- --------------------------------------------------------------------------------
JOSHUA M. FREEMAN
Director since May 1998
Age 34
- --------------------------------------------------------------------------------
Mr. Freeman has served since 1998 as Chairman, and from 1992 to 1998
served as the President and Chief Operating Officer, of Carl M. Freeman
Associates, Inc., a real estate development and management company. From 1996 to
1998 he also served as President and managing member of Coastal Resorts Realty,
L.L.C. and as President and a director of Coastal Resorts Management, Inc.
- --------------------------------------------------------------------------------
HEIDI O'LEARY HOUSTON
Director since May 1998
Age 46
- --------------------------------------------------------------------------------
Ms. Houston formed Houston and O'Leary Company in 1986 and has served as
President and principal broker since that time. She formed her own real estate
brokerage and development company in 1976. From 1976 to 1986 she consulted on
redevelopment projects in Denver and developed residential and commercial real
estate in Denver and Aspen. Houston and O'Leary Company, a leading provider of
luxury vacation rental properties and sales in Aspen, Colorado, is a ResortQuest
subsidiary.
5
<PAGE>
- --------------------------------------------------------------------------------
DAVID L. LEVINE
Director since May 1998
Age 51
- --------------------------------------------------------------------------------
Mr. Levine became the President and Chief Operating Officer and a director
of ResortQuest in May 1998. Mr. Levine was President and Chief Operating Officer
of Equity Inns, Inc., a real estate investment trust that specializes in hotel
acquisitions, from June 1994 to April 1998. Mr. Levine was also President and
Chief Operations Officer of Trust Management Inc., which operated Equity Inns
properties, from June 1994 until November 1996. Prior to that, he was President
of North American Hospitality, Inc., a hotel management and consulting company,
which he founded in 1985.
- --------------------------------------------------------------------------------
MICHAEL D. ROSE
Director since May 1998
Age 57
- --------------------------------------------------------------------------------
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 from 1989 to 1995 and Chief Executive Officer and
President from 1989 to 1991 of the Promus Companies, Inc. From 1984 to 1990 he
was the Chairman of the Board and from 1988 to 1990 he was the President and
Chief Executive Officer of Holiday Corporation. Mr. Rose is also a director of
Ashland, Inc., Darden Restaurants, Inc., FelCor Lodging Trust, Inc., First
Tennessee National Corporation, General Mills, Inc., and Stein Mart, Inc.
- --------------------------------------------------------------------------------
DAVID C. SULLIVAN
Director since May 1998
Age 59
- --------------------------------------------------------------------------------
Mr. Sullivan became the Chairman and Chief Executive Officer and a director
of ResortQuest in May 1998. 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
Operating Officer of the Hotel Division of The Promus Companies Incorporated. He
was the Senior Vice President of Development and Operations of the Hampton
Inn/Homewood Suites Hotel Division of The Promus Companies from 1991 to 1993.
From 1990 to 1991, Mr. Sullivan was the Vice President of Development of the
Hampton Inn Hotel Division of The Promus Companies. Mr. Sullivan is also a
director of Winston Hotels, Inc.
6
<PAGE>
- --------------------------------------------------------------------------------
ANDRE S. TATIBOUET
Director since May 1998
Age 58
- --------------------------------------------------------------------------------
Mr. Tatibouet has been President of Aston Hotels & Resorts since October
1998. He served as Chairman and Chief Executive Officer of Aston Hotels &
Resorts from 1967 to 1998. Mr. Tatibouet is a director of the Hawaii Hotel
Association, a director and former president of the Hawaii Visitors Bureau, and
a director of the American Hotel & Motel Association. Aston Hotels & Resorts,
the largest condominium resort management company and a major hotel provider in
Hawaii, is a ResortQuest subsidiary.
- --------------------------------------------------------------------------------
JOSEPH V. VITTORIA
Director since May 1998
Age 63
- --------------------------------------------------------------------------------
Mr. Vittoria has been the Chairman and Chief Executive Officer of Travel
Services International, Inc., a leading single source distributor of specialized
leisure travel services, since July 1997. From September 1987 to February 1997,
Mr. Vittoria was the Chairman and Chief Executive Officer of Avis, Inc., a
multinational auto rental company. Mr. Vittoria serves on the Board of Directors
of Carey International, Inc., CD Radio, Inc., Transmedia Europe and Transmedia
Asia.
- --------------------------------------------------------------------------------
THEODORE L. WEISE
Director since May 1998
Age 54
- --------------------------------------------------------------------------------
Since February 1998, Mr. Weise has been the President and Chief Executive
Officer of Federal Express Corporation, the world's largest express
transportation company. He was previously Executive Vice President and Chief
Operating Officer of Federal Express Corporation from February 1996 to January
1998. From August 1991 to February 1996 he served as Senior Vice President of
Air Operations of Federal Express Corporation.
7
<PAGE>
BOARD COMMITTEES AND MEETING ATTENDANCE
-----------------------------------------
The Board of Directors has four committees, the Audit, Compensation,
Executive and Capital Approval Committees. Committees report their actions to
the full Board at its next regular meeting. A description of the duties of each
committee follows the table below.
COMMITTEE MEMBERSHIP AND MEETINGS HELD
<TABLE>
<CAPTION>
CAPITAL
NAME AUDIT COMPENSATION EXECUTIVE APPROVAL
<S> <C> <C> <C> <C>
Luis Alonso -
Elan J. Blutinger -* -
D. Fraser Bullock -*
Joshua M. Freeman - -
Charles O. Howey -
David L. Levine -
Michael D. Rose - - -
David C. Sullivan -* -*
Andre S. Tatibouet -
Hans F. Trupp -
Theodore L. Weise - -
Number of meetings in
fiscal 1998** 2 3 4 10***
</TABLE>
- Member
* Chairperson
** During Fiscal 1998 the Board also had an Operations Committee. The
Operations Committee met three times in Fiscal 1998. The Board held 5
meetings in Fiscal 1998. All but one incumbent director, Mr. Vittoria,
attended at least 75% of the aggregate of all meetings of the Board of
Directors and Committees of the Board.
*** The Capital Approval Committee also includes two advisory members from
senior management who are not members of the Board and who have no voting
rights on any matters brought before the Committee.
AUDIT COMMITTEE
----------------------------------------
o Examines the activities of our independent auditors to determine whether
these activities are reasonably designed to assure the soundness of
accounting and financial procedures.
o Reviews our accounting policies and the objectivity of our financial
reporting.
o Considers annually the qualifications of our independent auditors and the
scope of their audit and makes recommendations to the Board as to their
selection.
8
<PAGE>
COMPENSATION COMMITTEE
------------------------------
o Establishes executive compensation policies and programs.
o Recommends to the Board base salaries and target bonus levels for executive
officers.
o Approves the awards and payments to be made to employees of ResortQuest and
its subsidiaries under its long-term compensation plans.
o Makes recommendations to the Board of Directors concerning outside director
compensation.
o Reviews the qualifications of persons eligible to stand for election as
directors and makes recommendations to the Board on this matter.
o Considers as nominees for director qualified persons recommended by
directors, management and shareholders. Written recommendations for
director nominees should be delivered to the Secretary, ResortQuest
International, Inc., 530 Oak Court Drive, Suite 360, Memphis, TN 38117.
ResortQuest's bylaws do not permit shareholders to nominate candidates from
the floor at an annual meeting without notifying the Secretary at least 60
but not more than 90 days prior to the date of the annual meeting.
Notification must include certain information detailed in the bylaws. If
you intend to nominate a candidate from the floor at an annual meeting,
please contact the Secretary.
EXECUTIVE COMMITTEE
---------------------------------
o Has the full power of the Board between meetings of the Board, with
specified limitations relating to major corporate matters.
CAPITAL APPROVAL COMMITTEE
--------------------------
o Reviews, evaluates, approves and adopts acquisitions and other specific
capital expenditures with an acquisition or specific capital requirement of
$5 million or less without Board approval.
o Reviews, evaluates and approves acquisitions and other specific capital
expenditures with an acquisition or specific capital requirement in excess
of $5 million and provides recommendations to the Executive Committee or
the Board of Directors for its consideration and ultimate approval.
COMPENSATION OF DIRECTORS
-------------------------------------------------------
Employee directors receive no additional compensation for serving on the
Board of Directors or its Committees. Non-employee directors receive $2,000 for
attendance at each Board meeting and $1,000 for each committee meeting, if that
committee meeting is not held on the same day as a Board meeting.
Under ResortQuest's 1998 Long-Term Incentive Plan, each non-employee
director also receives an option to acquire 10,000 shares of Common Stock upon
the non-employee director's initial election as a director and an annual option
to acquire 5,000 shares at each annual meeting at which the non-employee
director is re-elected or continues to serve. These options will have an
exercise price equal to the fair market value of a share of Common Stock on the
date the options are issued.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
-------------------------------------------------------
ROLE OF THE COMPENSATION COMMITTEE
------------------
The Compensation Committee establishes and oversees our executive
compensation policies and programs. The Compensation Committee also recommends
to the Board of Directors base salaries, target bonus levels, actual bonuses,
and long-term incentive awards to be paid to executive officers of ResortQuest
and its subsidiaries. In carrying out these functions, we believe it is
important to align executive compensation with business objectives and
strategies, management initiatives, financial performance and enhanced
shareholder value.
EXECUTIVE COMPENSATION PROGRAM
----------------------
The executive compensation program is designed to enable ResortQuest to:
o recruit, develop and retain highly motivated and qualified managers;
o maximize financial performance, balancing appropriately our short and
long-term goals; and
o align the interests of management with those of its stockholders through
the use of stock options and incentives tied to increases in stockholder
value.
During 1998, the executive officers were compensated pursuant to employment
agreements entered into in connection with our initial public offering and prior
to the appointment of the Compensation Committee. Accordingly, the Compensation
Committee did not determine the 1998 salaries of the executive officers.
In addition to compensation through base salaries, the Compensation
Committee has the authority to issue performance-based bonuses. Bonus payments
made in connection with performance in 1998 were made in cash. In the future,
such bonus payments may, at the discretion of the Compensation Committee, be
made in cash or stock options. The Compensation Committee is responsible for the
selection of the employees to whom options will be granted, the number of shares
subject to each such option and the terms and conditions of such options,
consistent with the 1998 Long-Term Incentive Plan. The Compensation Committee
seeks to use the Plan as a means to motivate management and key personnel.
In addition to year-end performance bonuses, determinations of option
grants may be made during the year, either in connection with new acquisitions,
additional equity offerings, or the addition of new key personnel, as
appropriate in furtherance of ResortQuest's objectives. Such objectives may
include recognition of past qualitative performance and incentives to continue
the growth and profits of our business. To facilitate the Compensation
Committee's achievement of its goals, the committee has engaged an outside
consulting firm to evaluate the compensation structure and make recommendations
to the committee.
10
<PAGE>
POLICY ON DEDUCTIBILITY OF COMPENSATION
-------------
Section 162(m) of the Internal Revenue Code generally limits the tax
deduction to public companies for compensation over $1 million paid to a
corporation's chief executive officer and the four next most highly compensated
executive officers, except to the extent that any such excess compensation is
paid pursuant to a performance-based or stock option plan that has been approved
by stockholders. The Compensation Committee will study the potential impact of
Section 162(m) and will, to the extent it deems appropriate, take reasonable
steps to minimize or eliminate any potential impact of Section 162(m) on
ResortQuest, while at the same time preserving the objective of providing
appropriate incentive awards. The Compensation Committee believes that there are
no current executive compensation programs or outstanding awards that would be
impacted by Section 162(m).
Compensation Committee
Elan J. Blutinger
Michael D. Rose
Theodore L. Weise
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
---------------------------
The Compensation Committee is composed of Messrs. Blutinger, Rose, and
Weise. Neither of Messrs. Rose or Weise has been an officer or employee of
ResortQuest or it subsidiaries. Mr. Blutinger was an officer of ResortQuest
prior to our initial public offering. ResortQuest was initially capitalized by
Alpine Consolidated II, LLC, of which Mr. Blutinger is a Managing Director, and
Capstone Partners, LLC. As a result of an 8,834.76 for-one-stock split effective
on March 9, 1998, the 293.9481 shares of Common Stock initially issued by
ResortQuest to its founders, including Alpine Consolidated II, LLC, totaled
2,596,961 shares on the consummation of the initial public offering. In
connection with the initial public offering, Alpine II, LLC and Capstone
Partners, LLC also received non-qualified stock options to purchase an aggregate
of 250,000 shares of Common Stock.
Prior to consummation of the initial public offering, VPI Funding, LLC, a
Delaware limited liability company, extended loans to ResortQuest from time to
time in amounts equal to the legal, accounting and other transactional costs,
expenses and disbursements we incurred in connection with the initial public
offering and the acquisitions of our operating subsidiaries (the "Operating
Companies") acquired simultaneously with the initial public offering (the
"Founding Companies"). The member managers of VPI Funding were Alpine
Consolidated II, LLC and Capstone Partners, LLC. All amounts loaned by VPI
Funding were repaid, without interest, upon consummation of the initial public
offering. Such loans aggregated $1.2 million.
11
<PAGE>
CORPORATE PERFORMANCE
-----------------------------------------------------------
The line graph shown below shows a comparison of the cumulative total
shareholder return on the Common Stock as compared to the cumulative total
return of two indexes: the S&P 500 Index and the Russell 2000 Index. The graph
covers the period from May 20, 1998, the date on which ResortQuest Common Stock
commenced trading on the New York Stock Exchange, to February 28, 1999.
ResortQuest's fiscal year end is December 31, 1998.
The performance illustrated assumes that $100 was invested in ResortQuest
Common Stock at its closing price on May 20, 1998 and each index on May 20,
1998. The returns reflected in the graph for ResortQuest, the S&P 500 Index and
the Russell 2000 Index were (5.65)%, 11.71% and (11.86)%, respectively, for the
eight-month period ended December 31, 1998 and 13.33%, 12.79% and (17.65)%,
respectively, for the ten-month period ended February 28, 1999.
The closing prices of the Common Stock on May 20, 1998, December 31, 1998
and February 26, 1999, were $15.50, $14.625 and $17.5625, respectively. The
price of the Common Stock in ResortQuest's initial public offering was $11.00
per share.
We do not believe we can reasonably identify a peer group on an industry or
line of business basis, or a published industry or line of business index for
comparison to ResortQuest. As a result we have used the Russell 2000 Index for
comparison purposes because it represents growth companies with market
capitalizations similar to ResortQuest.
[COMPARISON OF CUMULATIVE TOTAL RETURNS GRAPH OMITTED]
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
----------------------------------------------
SUMMARY OF COMPENSATION
-----------------------------
The following table shows cash and other compensation paid or accrued
during the 1998 fiscal year to ResortQuest's Chief Executive Officer and each of
the four other most highly compensated executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
OTHER UNDERLYING ALL
NAME AND PRINCIPAL FISCAL ANNUAL OPTIONS LTIP OTHER
POSITION YEAR(1) SALARY(2) BONUS COMPENSATION GRANTED PAYOUTS COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C>
David C. Sullivan
Chairman and Chief 1998 $122,820 $ 122,820 $ - 100,000 $ - $ -
Executive Officer
David L. Levine
President and Chief 1998 $ 99,792 $ 99,792 $ - 75,000 $ - $ -
Operations Officer
Jeffery M. Jarvis
Senior Vice President 1998 $ 92,115 $ 81,058(3) $ - 50,000 $ - $ -
and Chief Financial Officer
W. Michael Murphy
Senior Vice President
and Chief Development 1998 $ 92,115 $ 76,058(3) $ - 50,000 $ - $ -
Officer
Jules S. Sowder
Senior Vice President 1998 $ 76,763 $ 63,382(3) $ - 25,000 $ - $ -
and Chief Marketing Officer
</TABLE>
(1) Each of the Named Executive Officers commenced employment with ResortQuest
upon consummation of the initial public offering (May 26, 1998).
(2) Annual salaries are as follows: $200,000 for Mr. Sullivan; $162,500 for Mr.
Levine; $150,000 for each of Mr. Jarvis and Mr. Murphy; and $125,000 for
Ms. Sowder.
(3) Includes payments for consulting services rendered prior to ResortQuest's
initial public offering as follows: $35,000 for Mr. Jarvis; $30,000 for Mr.
Murphy and $25,000 for Ms. Sowder.
13
<PAGE>
OPTION GRANTS IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUES
-------------------
The table below presents additional information concerning option awards
for each of the Named Executive Officers shown in the Summary Compensation
table. These options to purchase Common Stock were granted under ResortQuest's
1998 Long-Term Incentive Plan on May 26, 1998. None of the Named Executive
Officers exercised any stock options in 1998. All of the options shown in the
table become exercisable at the rate of 25% per year.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE
NAME GRANTED 1988 PER SHARE EXPIRATION DATE
---- ---------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
David C. Sullivan 100,000 5.3 $ 11.00 5/26/08
David L. Levine 75,000 4.0 $ 11.00 5/26/08
Jeffery M. Jarvis 50,000 2.7 $ 11.00 5/26/08
W. Michael Murphy 50,000 2.7 $ 11.00 5/26/08
Jules S. Sowder 25,000 1.3 $ 11.00 5/26/08
All shareholders (2) n/a n/a n/a n/a
All optionees 1,874,351 100.0% $ 10.90 (3) Various
All optionees gain as a
percentage of all
shareholders gain n/a n/a n/a n/a
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
OPTION TERM (1)
-----------------------------------------
0% 5% 10%
STOCK STOCK STOCK
PRICE PRICE PRICE
NAME $11.00 $17.92 $28.53
---- ------ ------ ------
<S> <C> <C> <C>
David C. Sullivan $ - $ 691,784 $ 1,753,117
David L. Levine $ - $ 518,838 $ 1,314,838
Jeffery M. Jarvis $ - $ 345,892 $ 876,558
W. Michael Murphy $ - $ 345,892 $ 876,558
Jules S. Sowder $ - $ 172,946 $ 438,279
All shareholders (2) $ - $116,855,663 $296,135,194
All optionees $ - $ 12,848,585 $ 32,560,837
All optionees gain as a
percentage of all
shareholders gain 11.0% 11.0%
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at
zero percent, five percent and ten percent rates set by the Securities and
Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, of our stock price. In the above table, we did
not use an alternative formula for a grant valuation, as we are not aware
of any formula which will determine with reasonable accuracy a present
value based on future unknown or volatile factors.
(2) These amounts represent the appreciated value which holders of Common Stock
would receive at the hypothetical zero, five and ten percent rates based on
the market value of Common Stock outstanding at or near the option grant
dates.
(3) Represents the weighted average price of options granted to all optionees.
EMPLOYMENT AGREEMENTS AND COVENANTS
NOT TO COMPETE
--------------------------------------
Messrs. Sullivan, Levine, Jarvis, Murphy and Ms. Sowder have entered into
employment agreements with ResortQuest providing for annual base salaries of
$200,000, $162,500, $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 Operating Companies, including Ms. Houston and
Mr. Tatibouet, have entered into employment agreements for an Initial Term of
three years. Unless terminated or not renewed by ResortQuest 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. The base salaries for
Ms. Houston and Mr. Tatibouet are $150,000 and $120,000, respectively.
Each employment agreement contains a covenant not to compete (the
"Covenant") with ResortQuest for a period of two years immediately following
termination of
14
<PAGE>
employment or, in the case of a termination by ResortQuest without cause in the
absence of a change in control, for a period of one year following termination
of employment. Under the Covenant, the employee generally is prohibited from:
o engaging in any hotel management or non-commercial property management,
rental or sales business in direct competition with ResortQuest within
defined geographic areas in which ResortQuest or any of its subsidiaries
does business;
o enticing a managerial employee of ResortQuest away from ResortQuest;
o calling upon any person or entity which is, or has been, within one year
prior to the date of termination, a customer of ResortQuest; or
o calling upon a prospective acquisition candidate which the employee knew
was approached or analyzed by ResortQuest, 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 ResortQuest.
Each of these employment agreements provides that, in the event of a
termination of employment by ResortQuest without cause during the Initial Term
the employee will be entitled to receive from ResortQuest 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 ResortQuest (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 ResortQuest 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 to acquire an Operating Company also contains a covenant
prohibiting the former owners of the Operating Companies from competing with
ResortQuest for a period of three years from the date of the acquisition. These
noncompetition provisions will not apply with respect to a former owner of an
Operating Company who has entered into an employment agreement with ResortQuest
in the event the former owner is terminated without cause and elects to waive
the right to receive severance compensation.
INDEMNIFICATION AGREEMENTS
--------------------------
ResortQuest has entered into indemnification agreements with each of its
directors and executive officers. The indemnification agreements require, among
other things, that ResortQuest indemnify its directors and executive officers to
the fullest extent permitted by law, and advance to the directors and executive
officers all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. ResortQuest must also
indemnify and advance all expenses incurred by directors and executive officers
seeking to enforce their rights under ResortQuest directors' and officers'
liability insurance. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by provisions in ResortQuest's
Articles of Incorporation and Bylaws, it provides greater assurance to directors
and executive officers that indemnification will be available, because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or by the stockholders to eliminate the rights it provides.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------
ORGANIZATION OF RESORTQUEST
-------------------------
ResortQuest was formed in September 1997. ResortQuest was initially
capitalized by Alpine Consolidated II, LLC, of which Elan J. Blutinger and D.
Fraser Bullock, each a Director of ResortQuest, are Managing Directors, and
Capstone Partners, LLC. As a result of an 8,834.76-for-one stock split effected
in the form of a stock dividend on March 9, 1998, the 293.9481 shares of Common
Stock initially issued by ResortQuest to its founders, including Alpine
Consolidated II, LLC and Capstone Partners, LLC, aggregated 2,596,961 shares on
the closing of the initial public offering. In connection with the initial
public offering, Alpine Consolidated II, LLC and Capstone Partners, LLC also
received non-qualified stock options to purchase an aggregate of 250,000 shares
of Common Stock.
In January and February of 1998, ResortQuest issued a total of 518,369
shares of Common Stock (post-split) at $.01 (pre-split) per share to the
following directors and members of management: Mr. Sullivan - 289,202 shares,
Mr. Levine - 40,000 shares, Mr. Jarvis - 40,000 shares, Mr. Murphy - 40,000
shares, Ms. Sowder - 25,000 shares, Mr. Dobson - 2,000 shares and Mr. Brindley -
1,167 shares.
Prior to the consummation of the initial public offering, VPI Funding, LLC,
a Delaware limited liability company, extended loans to ResortQuest from time to
time in an amount equal to the legal, accounting and other transactional costs,
expenses and disbursements incurred by ResortQuest in connection with the
acquisitions of the Founding Companies and the initial public offering. The
member managers of VPI Funding included Alpine Consolidated II, LLC and Capstone
Partners, LLC. VPI Funding was repaid, without interest, from the gross proceeds
of the initial public offering. Such loans aggregated $1.2 million.
The aggregate consideration paid by ResortQuest in the acquisitions of the
Founding Companies (the "Combinations") consisted of (i) approximately $54.9
million in cash and (ii) 6,119,656 shares of Common Stock. ResortQuest also
assumed an aggregate of approximately $5.7 million of indebtedness of the
Founding Companies in connection with the Combinations. The consideration paid
for each of the Founding Companies was determined through arm's-length
negotiations between ResortQuest and representatives of each Founding Company.
The factors considered by ResortQuest 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.
16
<PAGE>
The aggregate total consideration paid by ResortQuest for each of the
Founding Companies is as follows:
CONSIDERATION PAID FOR FOUNDING COMPANIES
<TABLE>
<CAPTION>
SHARES OF DEBT
COMPANY CASH COMMON STOCK ASSUMED
------- ---- ------------ -------
<S> <C> <C> <C>
Aston Hotels & Resorts $29,500,000 1,708,333 $ 30,000
Brindley & Brindley Realty and Development, Inc. $ 2,000,000 195,000 $ 44,000
Coastal Resorts Realty, L.L.C. $ - 816,667 $ -
Collection of Fine Properties, Inc. $ 4,526,000 404,167 $ 520,000
First Resort Software, Inc. $ 2,854,800 290,767 $ -
Houston and O'Leary Company $ 2,470,000 248,167 $ -
Maui Condominium and Home Realty, Inc. $ 1,620,086 166,667 $ -
The Maury People, Inc. $ 2,000,000 150,000 $ -
Priscilla Murphy Realty, Inc. $ - 1,144,036 $4,892,000
Resort Property Management, Inc. $ 1,116,351 108,333 $ 153,000
Telluride Resort Accommodations, Inc. $ 3,013,762 125,103 $ -
Trupp-Hodnett Enterprises, Inc. $ 5,000,000 627,833 $ -
Whistler Chalets Limited $ 800,000 134,583 $ 11,000
Totals $54,900,999 6,119,656 $5,650,000
</TABLE>
Net assets of approximately $5.1 million, including certain real estate
which is currently leased or managed by ResortQuest, certain non-operating
assets and the assumption or retirement of certain liabilities, were excluded
from the Combinations and retained by certain former stockholders of the
Founding Companies.
Pursuant to the agreements entered into to acquire the Founding Companies,
substantially all of the stockholders of the Founding Companies agreed not to
compete with ResortQuest for three years, commencing on the date of closing of
the initial public offering (until May 26, 2001).
17
<PAGE>
In connection with the acquisitions of the Founding Companies, and as
consideration for their ownership interests in the Founding Companies, certain
executive officers, directors and holders of more than 5% of the outstanding
shares of Common Stock, together with their spouses and trusts for the benefit
of their immediate families, received, directly or indirectly, cash and shares
of Common Stock as follows:
<TABLE>
<CAPTION>
SHARES OF
NAME CASH COMMON STOCK
---- --------- ------------
<S> <C> <C>
Luis Alonso(1) $ 1,423,124 121,250
Park Brady(1) $ 304,763 31,041
Douglas R. Brindley(1) $ 2,000,000 195,000
Paul T. Dobson(1) $ 810,043 83,334
Sharon Benson Doucette(1) $ 2,000,000 150,000
Joshua M. Freeman $ - 803,519
Evan H. Gull(1) $ 1,057,333 88,111
Charles O. Howey(1) $ 1,907,880(2) 446,174
Heidi O'Leary Houston $ 2,470,000 248,167
Daniel L. Meehan(1) $ 1,200,000 98,333
J. Patrick McCurdy(1) $ 800,000 134,583
Andre S. Tatibouet $20,930,000 1,708,333
Hans F. Trupp(1) $ 1,000,000 386,692
</TABLE>
(1) Messrs. Alonso (Collection of Fine Properties), Brady (Telluride Resort
Accommodations), Brindley (B&B On The Beach), Dobson (Maui Condominium and
Home), Gull (First Resort Software), Howey (Priscilla Murphy Realty),
Meehan (Resort Property Management), McCurdy (Whistler Chalets), and Trupp
(Trupp-Hodnett Enterprises) and Ms. Doucette (The Maury People) were
stockholders of the Founding Companies and became directors of ResortQuest
in May 1998. In connection with the reduction of the size of the Board
discussed above, they are not nominees for election to the Board of
Directors at the Annual Meeting.
(2) Represents estimated amount of the pro rata portion of indebtedness of
Priscilla Murphy Realty retired at the closing of the Combinations.
On September 30, 1998, ResortQuest completed the acquisition of all of the
outstanding stock of Abbott Realty Services, Inc. and Tops'l Sales Group, Inc.
("Abbott Resorts"). Under the Stock Purchase Agreement by and among ResortQuest,
Abbott Resorts and its stockholders, ResortQuest agreed to pay total
consideration of $40.0 million, comprised of shares of ResortQuest Common Stock,
cash and assumption of certain indebtedness of Abbott Resorts. The aggregate
consideration paid for Abbott Resorts consisted of $26.5 million in cash,
719,349 shares of Common Stock (valued at approximately $6.6 million based on
the average of the closing prices of the Common Stock for the ten trading days
prior to the effective date of the Stock Purchase Agreement) and $6.9 million in
debt assumed. At the closing, Mr. Abbott received $6.1 million in cash and
115,308 shares of Common Stock in exchange for his interests in Abbott Resorts.
18
<PAGE>
LEASES OF FACILITIES
------------------------------------------------------------
ABBOTT RESORTS. Abbott Resorts leases 9,350 square feet of office space in
Destin, Florida for the main office for its property management and real estate
brokerage activities from SAVA Properties, a Florida general partnership which
is 25.5% owned by William Abbott, Jr. The lease expires September 29, 2018. The
aggregate annual rent paid by Abbott Resorts is $112,200. Abbott Resorts has
signed a lease commitment for approximately 3,706 square feet of indoor and
outdoor space in Santa Rosa, Florida for its rental property management and real
estate sales activities in the Santa Rosa and Grayton Beach, Florida areas. This
facility is currently under construction. Upon completion, this space will be
leased pursuant to a 20-year lease with multiple options to renew from VAGAS
Properties, a Florida general partnership which is 20% owned by William Abbott,
Jr. The aggregate annual rent payment will be approximately $50,000.
Abbott Resorts leases 1,665 square feet of office space in Fort Walton
Beach, Florida for real estate sales activities. This property is leased from
A&A Partnership ("AAP"), a general partnership which is 50% owned by William
Abbott, Jr., pursuant to the terms of a lease agreement which expires January
31, 2001. The aggregate annual rent paid by Abbott Resorts is $19,980. As part
of such lease, Abbott Resorts also leases a two-bedroom apartment at such site,
which is subleased to unaffiliated third parties. Abbott Resorts also leases
2,000 square feet of office space in Destin, Florida from AAP for use as its
personnel office. The lease agreement expires August 31, 2001 and provides for
aggregate annual rent of $22,596.
ASTON HOTELS & RESORTS. Approximately 980 square feet of office space,
which is part of a space leased by Aston Hotels & Resorts, is used by a former
stockholder and the previous corporate secretary of Aston Hotels & Resorts. Mr.
Tatibouet has agreed to assume responsibility for the approximately $33,000
annual rent allocable for this space to the extent and for the period it is used
for non-business purposes.
BRINDLEY & BRINDLEY. Brindley & Brindley leases 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 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. The aggregate annual
rental payment is approximately $135,500.
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 Chairman of CMFA. The rent paid by Coastal Resorts to
CMFA under these leases was $120,308 in 1998. One lease terminated on December
31, 1998. The remaining leases terminate on December 31, 1999 and May 21, 2002.
COLLECTION OF FINE PROPERTIES. Certain commercial space owned by Collection
of Fine Properties was distributed to an entity or entities controlled by the
stockholders thereof, including Luis Alonso, prior to the Combinations and then
leased to ResortQuest. The leases for such property provide for aggregate annual
rentals of approximately $73,000.
PRISCILLA MURPHY REALTY. Priscilla Murphy Realty leases office space and
facilities from trusts affiliated with Charles O. Howey, under three separate
lease agreements. The aggregate rent paid in 1998 by Priscilla Murphy Realty to
Mr. Howey's affiliated trust under these lease agreements was approximately
$143,000. Two of the leases terminate on June 30, 2001 and the
19
<PAGE>
remaining lease terminates on December 31, 2008. 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 approximately $12,000.
This lease also terminates on December 31, 2002.
RESORT PROPERTY MANAGEMENT. Resort Property Management since June 1998 has
leased office space that is owned by Daniel L. Meehan and his wife, Kimberlie
Meehan. The lease expires in June 2008 with two options to extend the lease for
five years each. The annual rent for the facilities is approximately $155,000,
with annual increases equal to the increase in the Consumer Price Index.
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 rental payments of approximately $117,000 for these
properties in 1998. Two of the leases terminate on December 31, 2009, one
terminates on December 31, 2008 and the fourth terminates on April 30, 2007.
During 1998, Mr. Trupp, in the normal course of business, paid
Trupp-Hodnett Enterprises $57,000 as a buyers broker commission on the purchase
of his personal residence and $94,000 as a consulting fee concerning the
purchase of residential building lots.
WHISTLER CHALETS. Office space owned by Whistler Chalets was distributed to
an entity controlled by J. Patrick McCurdy prior to the Combinations and then
leased to ResortQuest. The lease for such property has a term of 5 years, with 3
renewal options of 5 years each, and provides for annual rentals of
approximately $21,000.
MANAGEMENT AGREEMENTS
-------------------------------
ASTON HOTELS & RESORTS. Since 1994, Aston Hotels & Resorts has managed two
hotels owned by Andre S. Tatibouet. The aggregate management and other fees
received by Aston Hotels & Resorts for the management of these properties was
$620,000 in 1998. The management agreements for these hotels terminate on
December 31, 2003. In addition, prior to the Combinations, Aston Hotels &
Resorts was a party to two lease and management agreements for two hotels dated
February 1, 1996 and February 21, 1991, respectively. Aston Hotels & Resorts
transferred these lease and management agreements to AST Holdings, Inc. and
simultaneously entered into management agreements with AST Holdings, Inc. to
manage these properties. AST Holdings, Inc. is owned by Mr. Tatibouet. The
aggregate management and other fees received by Aston Hotels & Resorts during
1998 for the management of these properties was $902,000.
COLLECTION OF FINE PROPERTIES. Prior to the Combinations, Collection of
Fine Properties distributed to Luis Alonso and another stockholder eight
condominiums that were owned and managed by Collection of Fine Properties.
Collection of Fine Properties now manages these properties, pursuant to its
standard management agreement.
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 received aggregate property
management fees related to Mr. Trupp's ownership of these properties of
approximately $41,000 for 1998.
WHISTLER CHALETS. Prior to the Combinations, Whistler Chalets distributed
to J. Patrick McCurdy six vacation condominiums that were owned and managed by
Whistler Chalets. Whistler Chalets now manages these properties, together with
one additional vacation condominium owned by Mr. McCurdy, 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 $180,822 for 1998. Mr.
McCurdy is the President and owner of Whistler Blackcomb.
20
<PAGE>
OTHER TRANSACTIONS
----------------------------------
ABBOTT RESORTS. ResortQuest and Mr. Abbott entered into an agreement with
respect to the payment of commissions on certain properties which were listed
for sale or whose sale was pending as of the date of ResortQuest's acquisition
of Abbott Resorts. Pursuant to such agreement, ResortQuest has agreed to pay
upon closing of the applicable transaction to which the applicable listing
and/or selling fee relates in the aggregate, up to $1,403,827 in listing and/or
selling commissions on such properties.
In connection with the acquisition of Abbott Resorts, Mr. Abbott entered
into a three-year consulting agreement with ResortQuest. For all services
rendered by Mr. Abbott pursuant to the consulting agreement, ResortQuest has
agreed to compensate Mr. Abbott as follows:
o to pay a consulting fee of $125,000 per year;
o to pay premiums for coverage for Mr. Abbott and his immediate family under
such health, hospitalization, disability, dental, life and other insurance
plans that ResortQuest may have in effect from time to time;
o to reimburse Mr. Abbott for all business travel and other out-of-pocket
expenses reasonably incurred by him in the performance of his duties; and
o to pay for a full membership in the Tops'l Beach and Racquet Club (the
current cost for which is $1,200 per year).
The consulting agreement is terminable by ResortQuest or Mr. Abbott, with cause
on ten days written notice and or without cause 30 days written notice.
ASTON HOTELS & RESORTS. Since July 22, 1997, Aston Hotels & Resorts has
provided consulting and administrative services to AST International, LLC ("AST
International"), an entity controlled by Andre S. Tatibouet. AST International
has been billed $272,000 by Aston Hotels & Resorts for its services through
December 31, 1998.
Prior to May 26, 1998, Aston Hotels & Resorts received sales representation
and accounting services from HCP, Inc., a company owned by Mr. Tatibouet. Aston
Hotels & Resorts paid HCP $158,240 in 1998 for these services. Employees of HCP
providing these services were transferred to Rep. Holdings, Ltd., a new
subsidiary of Aston Hotels & Resorts, immediately 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 $4,000 for 1998.
Prior to May 26, 1998, Aston Hotels & Resorts had oral consulting
agreements with Mr. Tatibouet's wife and Mr. Tatibouet's mother, who received
annual aggregate compensation from Aston Hotels & Resorts of $75,000 in 1998.
These agreements have been terminated. Additionally, Aston Hotels & Resorts
executed three promissory notes, each payable to Mr. Tatibouet's wife, in the
aggregate amount of $285,000. These notes are each dated January 31, 1997 and
each comes due on February 28, 1999. These notes were assumed by Mr. Tatibouet
prior to the Combinations.
At December 31, 1998, Mr. Tatibouet owed Aston Hotels & Resorts, either
directly or through entities controlled by him (including properties managed by
Aston Hotels & Resorts), an aggregate amount of $4.2 million. Of this amount,
$4.0 million bears interest at the prime rate less 0.5%, with a minimum of 6%
and maximum of 10%, to be paid within ten years. This loan is fully
collateralized by Mr. Tatibouet with real estate, cash or cash equivalents,
including shares of Common Stock pledged to ResortQuest or by Mr. Tatibouet's
personal guarantee (not to exceed $1 million). The remaining $208,000 owed at
December 31, 1998 is unsecured and related primarily to fees and reimbursements
arising from the management by Aston Hotels & Resorts of properties owned or
controlled by Mr. Tatibouet. Although such fees and reimbursements are
determined as of
21
<PAGE>
December 31, 1998, they are not, in the normal course, payable until the
following month.
Aston Hotels & Resorts has entered into a 20-year royalty free license
agreement with AST Brands, LLC, an entity wholly-owned by Mr. Tatibouet, for use
of the name Aston Hotels & Resorts as well as other service marks, tradenames,
trademarks and logos.
BRINDLEY & BRINDLEY. Brindley & Brindley receives real estate sales
commissions from Outer Banks Ventures, Inc. 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 $8,000
in 1998.
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 $700,000. Coastal Resorts purchased all
the outstanding stock of Sea Colony Management, Inc., a wholly owned subsidiary
of CMF Properties on December 30, 1996 for $100,000. CMF Properties was a
majority owned subsidiary of CMFA, of which Mr. Freeman is President. These
acquisitions were financed by loans from CMFA to Coastal Resorts in the
aggregate amount of $675,000. These loans, together with certain additional
advances aggregating $200,000, were paid in full on January 13, 1998.
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 $1,878,295 for 1998. As of December 31, 1998,
Coastal Resorts had a net receivable from Sea Colony Development of $414,196 for
home sales commissions. This agreement terminates on December 31, 1999. Mr.
Freeman is the President and sole stockholder of Sea Colony Development.
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 $313,178 under this agreement in 1998. The agreement
terminates on December 31, 1999.
Coastal Resorts has a management agreement with CMF Fitness, Inc., 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
$70,000 in 1998, 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., 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 $147,648
in 1998 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 during a two-year term. Coastal Resorts' fee for the
services is the direct costs it incurs plus 5%. Coastal Resorts received $22,000
for services under this Agreement in 1998.
Pursuant to an agreement with CMF Paymaster, Inc. 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 paid $4,074 to
Paymaster under this agreement in 1998. This agreement terminates on December
31, 1999.
22
<PAGE>
CMFA has appointed Coastal Resorts as its exclusive agent for the
management of certain commercial properties located in Bethany Beach, Delaware
pursuant to two management agreements. Both agreements run for three years from
January 1, 1997. Both agreements also provide for payment to Coastal Resorts of
a management fee equal to 5% of the gross receipts of the respective properties.
CMFA paid Coastal Resorts a total of $23,640 under these agreements in 1998.
Pursuant to an agreement dated January 1, 1998, CMFA has appointed Coastal
Resorts as its exclusive agent for the management of a private thoroughfare
running through the Sea Colony West condominium complex. The agreement runs
until the earlier of December 31, 2000 or the sale by CMFA of the property.
Payments to Coastal Resorts will equal 20% of total budget expenditures for
management of the road under a budget prepared by Coastal Resorts and approved
by CMFA. CMFA paid Coastal Resorts $12,000 under the agreement in 1998.
COLLECTION OF FINE PROPERTIES. Pursuant to an oral agreement, Collection of
Fine Properties performs accounting and bookkeeping services for L&D Development
Company. Luis Alonso owns 30% of L&D Development. Collection of Fine Properties
received $35,500 from L&D Development in 1998.
HOUSTON AND O'LEARY. Effective 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 and O'Leary from the stockholder and Heidi
O'Leary Houston, in the aggregate amount of $297,000.
PRISCILLA MURPHY REALTY. At December 31, 1997, Priscilla Murphy Realty owed
$155,000 to Charles O. Howey. At December 31, 1997, Priscilla Murphy Realty also
was indebted to C.O. Condominium Corporation for $2,000,000 under the terms of a
promissory note issued to C.O. Condominium Corporation, dated January 3, 1997.
Both of these notes were repaid in June 1998.
RESORTQUEST. ResortQuest paid approximately $478,000 to Thompson & Company
in 1998 for advertising services, including reimbursement of approximately
$239,000 for purchased advertising, production and printing costs. Mr.
Sullivan's son is a Vice President of Thompson & Company.
TELLURIDE RESORT ACCOMMODATIONS. Park Brady entered into a consulting
agreement with ResortQuest, effective May 26, 1998. The term of the agreement is
one year, during which time Mr. Brady will provide up to ten hours of consulting
services per week for a nominal consideration.
WHISTLER CHALETS. As of December 31, 1997, Res-Resort Services Inc. was
indebted to Whistler Chalets in the amount of $58,547 for various expenses paid
by Whistler Chalets on behalf of Resort Services. Res-Resort Services is owned
by J. Patrick McCurdy. Mr. McCurdy was indebted to Whistler Chalets in the
amount of $101,098 for advances against his management fees and expenses. Both
of these debts were paid prior to the Combinations.
23
<PAGE>
- --------------------------------------------------------------------------------
ITEM 2 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The Board of Directors appointed Arthur Andersen LLP as independent public
accountants to examine and report on ResortQuest's consolidated financial
statements for the 1999 fiscal year and recommends that the shareholders ratify
the appointment. Arthur Andersen has served as our independent public
accountants since ResortQuest was formed in September 1997. If the shareholders
do not ratify the appointment of Arthur Andersen, the Audit Committee and the
Board of Directors will consider the appointment of other independent public
accountants. One or more representatives of Arthur Andersen will be present at
the Annual Meeting. They will have the opportunity to respond to appropriate
questions and to make a statement if they wish to do so.
- --------------------------------------------------------------------------------
ITEM 3 - ADOPTION OF RESORTQUEST'S AMENDED
AND RESTATED 1998 LONG-TERM INCENTIVE PLAN
- --------------------------------------------------------------------------------
GENERAL
-------------------------------------------------------------------------
On March 9, 1998, the Board of Directors adopted the l998 Long-Term
Incentive Plan (the "Plan"). The Plan was also approved by the stockholders of
ResortQuest on March 9, 1998. Individuals may be awarded one or more of the
following:
o either incentive stock options ("ISOs") or non-qualified stock options
("NQSOs");
o stock appreciation rights ("SARs");
o restricted or deferred stock;
o dividend equivalents; and
o other awards not otherwise provided for, the value of which is based in
whole or in part upon the value of the Common Stock.
Such awards, together with any other right or interest granted to a
participant under the Plan, are termed "Awards." Awards may be granted to
officers and employees of ResortQuest or any of its subsidiaries, including any
director who is also an employee, consultants and independent contractors of
ResortQuest or any of its subsidiaries. The Compensation Committee of the Board
of Directors (the "Committee") administers the Plan and generally selects the
individuals who will receive Awards and the terms and conditions of those
Awards.
Options for the purchase of Common Stock, but not other types of Awards,
are also granted under the Plan to eligible non-employee or advisory directors
of ResortQuest ("Eligible Non-Employee Directors"). Each Eligible Non-Employee
Director automatically receives, at the outset of his or her service in such
capacity, an option to purchase 10,000 shares of Common Stock. Thereafter, each
Eligible Non-Employee Director receives an option to purchase 5,000 shares of
Common Stock on the date of each annual meeting (unless an annual meeting occurs
within 3 months following the election of the Eligible Non-Employee Director).
Under the Plan, as originally adopted, the maximum number of common shares
that could be subject to outstanding Awards, determined immediately after the
grant of any Award, could not exceed the greater of 1,800,000 shares or 12% of
the aggregate number of shares of Common Stock outstanding. On February 25,
1999, the Committee authorized an increase in the total number of shares that
may be subject to Awards to 15% of the aggregate number of shares of Common
Stock outstanding.
The Committee believes that such increase is necessary to have sufficient
shares available for Awards to attract, retain and incent management and other
employees as the Company continues to grow through acquisitions and internally.
As of December 31, 1998, 2,027,031 shares were available for Awards under the
Plan, of which Awards for 1,874,351 shares had been granted. Shares of
24
<PAGE>
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.
At the same time, the Committee further authorized the following
amendments:
o increasing the maximum annual per-participant limitation under the Plan for
Awards that may be settled by delivery of shares, from a maximum of 100,000
shares of Common Stock to a maximum of 250,000 shares of Common Stock, and
o including share price appreciation as a criterion which the Committee can
use to establish performance objectives for performance-based Awards under
the Plan.
There have been no other modifications to the Plan. All of these
amendments, including the increase in the number of shares available for Awards
under the Plan, are subject to stockholder approval. The Plan, as so amended, is
referred to as the Amended and Restated Long-Term Incentive Plan or the "Plan."
Stockholder approval of the Plan is required:
o for purposes of compliance with certain exclusions from the limitations of
Section 162(m) of the Code (which can limit the deductibility of
compensation expense over $1.0 million with respect to compensation of
certain top executives in certain circumstances), and
o in order for the Plan to be eligible under the "plan lender" exemption from
the margin requirements of Regulation G promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
o by the rules of the New York Stock Exchange
AWARDS GRANTED UNDER THE PLAN
---------------------------------------------------
During 1998, 1,874,351 non-qualified stock options were granted under the
Plan at exercise prices between $8.94 and $16.81 with a weighted average
exercise price of $10.90. At December 3l, 1998, all of the options granted
remained outstanding as none were exercised or canceled during the year. The
weighted average remaining contractual life of the outstanding options is nine
years and six months. All of the options outstanding under the Plan, except
those granted to Eligible Non-Employee Directors, vest at the rate of 25% per
year. No Awards other than options have been granted under the Plan.
ResortQuest's management believes that Awards granted under the Plan will
be awarded primarily to those persons who possess a capacity to contribute
significantly to the successful performance of ResortQuest, including its
subsidiaries. Because persons to whom discretionary grants of Awards are to be
made are to be determined from time to time by the Committee or the Board in its
discretion, it is impossible at this time to indicate the precise number, name
or position of persons who will hereafter receive such Awards or the number of
shares for which Awards will be granted.
25
<PAGE>
The table below indicates, as of December 31, 1998, with respect to Awards
granted under the Plan, (i) the number of options held by the persons and groups
indicated, and (ii) the value of such options as of such date:
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES OPTIONS AT
OPTION GRANTEES UNDERLYING OPTIONS DECEMBER 31, 1998(1)
--------------- -------------------- --------------------
<S> <C> <C>
David C. Sullivan 100,000 $ 362,500
David L. Levine 75,000 $ 271,875
Jeffery M. Jarvis 50,000 $ 181,250
W. Michael Murphy 50,000 $ 181,250
Jules S. Sowder 25,000 $ 90,625
Executive officers as a group (7 persons) 400,000 $1,450,000
All current directors who are not executive
officers as a group (10 persons) 100,000 $ 379,500
All employees as a group, other than executive
officers (263 persons) 1,374,351 $4,982,022
</TABLE>
(1) For purposes of this table, the value of each option equals the amount, if
any, by which the closing market price of a share of Common Stock on
December 31, 1998 ($14.625) exceeds the option's exercise price. The value
is determined without regard to whether the option is currently exercisable
or not.
DESCRIPTION OF PLAN
-------------------------------------------------------------
Set forth below is a brief description of the material terms of the Plan.
Reference is made to the complete text of the Plan attached as Exhibit A and the
description contained herein is qualified in its entirety by such reference.
ELIGIBILITY
---------------------------------------------------------------------
Executive officers and other key employees of ResortQuest and its
subsidiaries, including any director or officer who is also an employee, and
persons who provide consulting or other services to ResortQuest or its
subsidiaries, are eligible to be granted Awards under the Plan. In addition,
persons who have been offered employment by ResortQuest or its subsidiaries are
eligible to be granted Awards under the Plan. Eligible Non-Employee Directors
are eligible to be granted options for the purchase of Common Stock under the
Plan. Members of the Committee may only receive options for the purchase of
Common Stock. All members of the Committee are non-employee directors of
ResortQuest, and are therefore eligible to receive options for the purchase of
Common Stock on the same terms and conditions as those granted to Eligible
Non-Employee Directors.
PURPOSE
-------------------------------------------------------------------------
The purpose of the Plan is to advance the interests of ResortQuest and its
stockholders by providing a means to attract, retain, and reward eligible
employees and consultants of ResortQuest and its subsidiaries and to enable such
persons to acquire or increase a proprietary interest in ResortQuest, thereby
promoting a closer identity of interests between such persons and ResortQuest's
stockholders.
26
<PAGE>
ADMINISTRATION
------------------------------------------------------------------
The Board has designated the Committee to administer the Plan. The
Committee may consist of the entire Board; provided, however, that if it
consists of less than the entire Board, it will consist of two or more
directors, each of whom is a "non-employee director" within the meaning of Rule
l6b-3 of the Securities Exchange Act of 1934, and to the extent necessary for
any Award to qualify as performance-based under Code Section 162(m), each
member, whether or not the Committee consists of the entire Board, shall be an
"outside director" within the meaning of Code Section 162(m). Subject to the
express provisions of the Plan, the Committee has full authority, among other
things, except with respect to Eligible Non-Employee Directors, (i) to select
participants to whom Awards will be granted, and (ii) to determine the type and
number of Awards to be granted to each participant, the number of shares of
Stock to which an Award will relate, and all other terms and conditions of
Awards and matters relating to Awards (including forfeiture conditions and terms
of any mandatory or elective deferral). In addition, the Committee may prescribe
the form of Award agreements, adopt rules and regulations under the Plan,
interpret the Plan and Award agreements, and make all other decisions under the
Plan.
LIMITATION ON AWARDS
------------------------------------------------------------
The number of shares of Common Stock that may be subject to outstanding
Awards granted under the Plan, determined immediately after the grant of any
Award, may not exceed the greater of 1,800,000 shares or 12% of the total number
of shares of outstanding Common Stock on the date of the grant. Subject to the
adjustment due to certain events (see "Changes in Common Stock" below), the
number of shares that may be delivered upon the exercise of ISOs (as defined in
"Options" below) may not exceed 900,000 shares, and the number of shares that
may be delivered as restricted stock and deferred stock may not exceed, in the
aggregate, 900,000 shares. In addition, subject to adjustment as noted above,
(i) Awards relating to no more than 100,000 shares of Common Stock may be
granted to any one individual in any calendar year, and (ii) 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 100,000 shares of Common Stock at the
date of grant or the date of settlement of Award.
If the proposed amendments to the Plan are adopted, the total amount of
shares of Common Stock which may be subject to outstanding Awards granted under
the Plan may not exceed the greater of 1,800,000 shares or 15% of the total
number of shares of Common Stock outstanding, and limitations relating to the
awards that may be granted to any one individual per year will be increased from
100,000 shares to 250,000 shares.
OPTIONS
-------------------------------------------------------------------------
Options granted under the Plan are either incentive stock options intended
to meet the requirements of Section 422 of the Code, or Non-Qualified Stock
Options which are not intended to meet such requirements. ISOs may be subject to
certain special tax treatment (see "Federal Income Tax Consequences," below).
The terms of each option are determined by the Committee, not inconsistent with
the terms of the Plan, and are set forth in a grant certificate or agreement
which evidences the grant of an option. Options and other Awards (discussed
below) are generally non-transferable except by will or the laws of descent and
distribution. In general, options, except those granted to Eligible Non-Employee
Directors, are subject to the following terms and conditions:
o With respect to a grant of ISOs or NQSOs, the exercise price of any such
option is determined by the Committee in its discretion at the time of the
grant, provided, however, the exercise price of any such option must not be
less than the fair market value (as defined in the Plan) of the Common
Stock on the date of grant.
27
<PAGE>
o The time or times at which an option shall become exercisable are
determined by the Committee.
o The Committee will determine the option term. Options are generally
exercisable for a period of three months following a participant's
termination of employment, but only to the extent such options were
exercisable as of the date of such termination. If, however, the Committee
determines that such termination is for cause, then all outstanding options
granted to such participant will immediately terminate.
o Options that are ISOs will be subject to such additional terms as may be
necessary in order to qualify as ISOs.
o The Committee will determine the methods by which the exercise price for an
option 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.
Options granted to Eligible Non-Employee Directors are subject to the
following terms and conditions:
o The exercise price of any such option is equal to the fair market value (as
defined in the Plan) of a share of Common Stock on the date of grant of the
option.
o The option is exercisable immediately upon its grant to an Eligible
Non-Employee Director.
o The option expires at the earlier of (i) 10 years following the date of the
grant of the option, or (ii) one year after the date the option recipient
ceases to serve as an Eligible Non-Employee Director of ResortQuest.
o An Eligible Non-Employee Director may exercise the option by the payment of
cash to ResortQuest, by the surrender of shares of Common Stock of
ResortQuest already owned by such Eligible Non-Employee Director (except
for shares obtained through the exercise of an option within the six-month
period prior to the current date of exercise), or by a combination thereof.
An Eligible Non-Employee Director may elect to receive fees for his or her
service in such capacity in the form of shares of Common Stock or Deferred
Shares of Common Stock.
OTHER AWARDS
--------------------------------------------------------------------
The following briefly describes the general terms of other Awards that may
be granted under the Plan to participants other than Eligible Non-Employee
Directors. Generally, Awards may be granted, in the discretion of the Committee,
alone, in addition to, in tandem with, or in substitution for, other Awards.
o SARS. SARs entitle the participant to receive the excess of the fair market
value of a share on the date of exercise or other specified date over the
grant price of the SAR. The grant price of an SAR is determined by the
Committee; such prices generally may not be less than 100% of the fair
market value of the stock at the date of grant. The maximum term, methods
of exercise and settlement and other terms of SARs will be determined by
the Committee. In addition, "Limited SARs" may also be granted, which are
exercisable only in the event of a "change in control," on such terms as
the Committee may determine.
o RESTRICTED STOCK. Restricted stock is an Award of shares which may not be
transferred and which may be forfeited in the event of certain terminations
of employment prior to the end of a restriction period. The restriction
period is established by the Committee. Such an Award would entitle the
participant to all of the rights of a stockholder of the issuer, including
the right to vote the shares and the right to receive any dividends
thereon, unless otherwise determined by the Committee.
o DEFERRED STOCK. An Award of deferred stock confers upon a participant the
right to receive shares at the end of a specified deferral period, subject
to possible forfeiture of the Award in the event of
28
<PAGE>
certain terminations of employment prior to the end of a specified
restriction period (which need not be the same as the deferral period).
o DIVIDEND EQUIVALENTS AND BONUS STOCK AND AWARDS IN LIEU OF CASH
OBLIGATIONS. The Plan authorizes the Committee to grant stock as a bonus,
or to grant Awards in lieu of Company obligations to pay cash under other
plans and arrangements, under such terms as determined by the Committee.
The Committee may also grant dividend equivalents entitling a participant
to receive cash, Common Stock, other Awards or property equal in value to
dividends paid with respect to a specified number of shares of Common
Stock. Finally, the Committee may grant other Awards that are denominated
or payable in, valued in whole or in part by reference to, or otherwise
based on, or related to, Common Stock. The Committee determines the terms
and conditions of such Awards. Cash awards may be granted as an element of
or a supplement to other Awards.
CHANGES IN COMMON STOCK
---------------------------------------------------------
The Committee is authorized to adjust the number and kind of shares
available under the Plan, subject to the annual per-person limitation under the
Plan, and subject to outstanding Awards (including adjustments to exercise
prices of options and other affected terms of Awards) in the event that a
dividend or other distribution (whether in cash, Common Stock, or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event affects the Common Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants under the Plan. The Committee is also authorized to
adjust performance conditions and other terms of Awards in response to these
kinds of events or to changes in applicable laws, regulations, or accounting
principles.
AMENDMENTS TO THE PLAN
AND OUTSTANDING AWARDS
----------------------------------------------------------
The Board may amend or terminate the Plan or the Committee's authority to
grant Awards without the consent of stockholders or participants, except
stockholder approval must be obtained if required by law or regulation or under
the rules of any stock exchange or automated quotation system on which the
Common Stock is then listed or quoted, and the Board may, in its discretion,
seek stockholder approval in any circumstance in which it deems such approval
advisable. In a similar manner, the Committee may waive any conditions or rights
under, or amend or terminate, any Award previously granted and any Award
agreement. In either case, however, no amendment or termination of the Plan or
an Award may materially impair the rights of a participant under an outstanding
Award without the consent of such participant.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
--------------------------------
The following is a general description of the federal income tax
consequences of options granted under the Plan. It does not purport to be
complete. In particular, this general description does not discuss the
applicability of the income tax laws of any state or foreign country. The
following tax analysis is intended to summarize certain relevant income tax
consequences of the Plan in effect as of the date of this Proxy Statement.
Legislation may be enacted and regulations may be issued in the future which
create different tax consequences.
There are no federal income tax consequences to participants or ResortQuest
upon the grant of an option under the Plan. Generally, upon the exercise of an
NQSO, a participant will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the Common Stock purchased at
the time of exercise over the exercise price of the option, and ResortQuest
generally will be entitled to a corresponding federal income tax deduction. Upon
the sale of shares acquired by exercise of an option, the participant generally
will realize a capital gain
29
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or loss, but ResortQuest is not entitled to any tax deduction in connection
with such sale.
Subject to the discussion below, participants will not be subject to
federal income taxation upon the exercise of ISOs granted under the Plan, and
ResortQuest will not be entitled to a federal income tax deduction by reason of
such exercise. However, the amount by which the fair market value of the shares
at the time of exercise exceeds the exercise price is a tax adjustment item for
purposes of calculating the participant's alternative minimum taxable income. A
sale of shares acquired by exercise of an ISO that does not occur within one
year after the exercise or within two years after the date of grant generally
will result in the recognition of capital gain or loss in the amount of the
difference between the amount realized on the sale and the exercise price, and
ResortQuest will not be entitled to any tax deduction in connection with such
sale.
If such sale occurs within one year from the date of exercise of the ISO or
within two years from the date of the ISO grant (a "disqualifying disposition"),
the participant generally will recognize ordinary compensation income equal to
the lesser of (i) the excess of the fair market value of the shares on the date
of exercise of the options over the exercise price, or (ii) the excess of the
amount realized on the sale of the shares over the exercise price. Any amount
realized on a disqualifying disposition in excess of the amount treated as
ordinary compensation income (or any loss realized) will be a capital gain (or
loss). ResortQuest generally will be entitled to a tax deduction on a
disqualifying disposition corresponding to the ordinary compensation income
recognized by the participant.
If a participant were to pay the exercise price of either an NQSO or an ISO
by surrender of shares, such shares will generally not be considered a taxable
disposition of the previously owned shares, and thus no gain or loss will be
recognized with respect to such shares. If, in exercising an ISO, a participant
were to surrender shares received upon exercise of an ISO before the applicable
incentive stock option holding period for such shares has been satisfied, the
surrender of such shares will be treated as a disqualifying disposition, and the
rules governing such dispositions, as described above, will apply to determine
the amount of the participant's income and ResortQuest's deduction.
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer and any of the four
most highly compensated executive officers who are employed by such corporation
on the last day of the taxable year, but does allow a deduction for
"performance-based compensation," the material terms of which are disclosed to
and approved by the stockholders. ResortQuest has structured and intends to
implement the Plan so that compensation resulting therefrom would be qualified
"performance-based compensation." In addition to other requirements under law,
in order to allow ResortQuest to qualify such compensation as
"performance-based," ResortQuest is seeking stockholder approval of the Plan.
The affirmative vote of a majority of the votes cast at the meeting, either in
person or by proxy, is required to approve the Plan.
- --------------------------------------------------------------------------------
ITEM 4 - OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any other matter to be presented for
action at the meeting. If any other matter requiring a vote of the shareholders
should arise, the Proxies (or their substitutes) will vote in accordance with
their best judgment.
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EXHIBIT A
RESORTQUEST INTERNATIONAL, INC.
AMENDED AND RESTATED 1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the 1998 Long-Term Incentive Plan (the "Plan")
of ResortQuest 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.
(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.
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(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" 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;
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(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
(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 be 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 1,800,000 shares of Stock or 15%
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 900,000, 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 900,000, 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 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
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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 250,000 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.
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
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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 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
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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, 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
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.
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(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).
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,
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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 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).
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<PAGE>
(b) Options. An Option to purchase 10,000 shares of Stock will be
automatically granted, (i) at the commencement of the Initial Public
Offering, to each person who is serving as 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 5,000 shares of Stock 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 10,000 shares of Stock at the
effective date of initial election or appointment to the Board shall not be
automatically granted an Option to purchase 5,000 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 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).
A-9
<PAGE>
(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
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 an 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
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<PAGE>
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 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
A-11
<PAGE>
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 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.
A-12
<PAGE>
- --------------------------------------------------------------------------------
RESORTQUEST INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David C. Sullivan, David L. Levine and John K.
Lines, or any of them individually and each of them with full power of
substitution to represent them and to vote as designated on the reverse side all
of the shares of Common Stock of the ResortQuest International, Inc., which the
undersigned is entitled to vote, at the Annual Meeting of Stockholders to be
held on Thursday, May 13, 1999 at the Embassy Suites, 1022 South Shady Grove
Road, Memphis, TN 38120, and at any postponements or adjournments thereof.
(To Be Signed on Reverse Side)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
A [X] Please mark your
votes as in this
example.
FOR ALL NOMINEES; WITHHOLD AUTHORITY NOMINEES:
LISTED AT RIGHT TO VOTE FOR ALL William W. Abbott, Jr. Micheal D. Rose
(EXCEPT AS MARKED TO NOMINEES LISTED Elan J. Blutinger David C. Sullivan
THE CONTRARY BELOW) AT RIGHT D. Fraser Bullock Andre S. Tatibouet
Joshua M. Freeman Joseph V. Vittoria
1. ELECTION OF [ ] [ ] Heidi O'Leary Houston Theodore L. Weise
DIRECTORS David L. Levine
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME LISTED AT RIGHT.
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF EACH OF ITEMS 1 THROUGH 3
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. APPOINTMENT OF ACCOUNTANTS
Approval of the appointment of
Arthur Andersen LLP as the
Company's independent public
accountants for the 1999 fiscal
year.
3. AMENDMENT OF LONG-TERM INCENTIVE
PLAN Approval of the adoption of [ ] [ ] [ ]
the Company's Amended and Restated
1998 Long-Term Incentive Plan.
4. VOTE ON OTHER MATTERS In their discretion, the Proxies are authorized
to vote upon matters not known to the Board of Directors as of the
date of the accompanying proxy statement.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE PROXIES SHALL
VOTE FOR THE ELECTION OF THE NOMINEES LISTED ABOVE, FOR THE APPROVAL OF
THE APPOINTMENT OF AUDITORS AND FOR THE APPROVAL OF THE ADOPTION OF THE
AMENDED AND RESTATED 1998 LONG-TERM INCENTIVE PLAN.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
DATED: , 1999
- ------------------------------------------ --------------------------------------------------- -------
SIGNATURE SIGNATURE, IF HELD JOINTLY
NOTE: Signatures should be identical with the name typed on the Proxy. Joint owners should each sign personally.
Persons signing as attorney, executor, administrator, trustee or guardian should give full title as such. If a
corporation, please sign in full corporate name by President or other authorized officer. If partnership, please
sign in partnership name by authorized person.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
