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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
Commission file number 1-14115
RESORTQUEST INTERNATIONAL, INC.
DELAWARE 62-1750352
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
530 OAK COURT DRIVE
SUITE 360
MEMPHIS, TN 38117
(Address of principal executive offices) (Zip Code)
(901)762-0600
(Registrant's telephone number including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT.
NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulations S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in the definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K |_|
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The aggregate market value of the voting stock held by non-affiliates
of the registrant computed by reference to the closing price at which the stock
was sold as of March 21, 2000 was approximately $85,541,016.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 21, 2000 was 18,917,893 shares of common stock, all of
one class.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Shareholders Parts I, II and IV
Portions of the Proxy Statement for the 2000 Annual
Meeting of Shareholders Parts I, III and IV
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TABLE OF CONTENTS
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PART I...................................................................................................1
ITEM 1. Business .......................................................................................1
GENERAL.....................................................................................1
INDUSTRY OVERVIEW...........................................................................2
BUSINESS STRATEGY...........................................................................4
GROWTH STRATEGY.............................................................................5
MARKETS.....................................................................................7
SERVICES OFFERED............................................................................8
MARKETING..................................................................................10
TECHNOLOGY.................................................................................11
YEAR 2000 COMPLIANCE.......................................................................12
COMPETITION................................................................................13
EMPLOYEES..................................................................................13
FACTORS THAT MAY AFFECT FUTURE RESULTS.....................................................14
ITEM 2. Properties....................................................................................24
ITEM 3. Legal Proceedings.............................................................................24
ITEM 4. Submission of Matters to a Vote...............................................................24
Executive Officers of ResortQuest.......................................................................24
PART II.................................................................................................26
ITEM 5. Market for ResortQuest's Common Equity and Related
Stockholder Matters........................................................................26
ITEM 6. Selected Financial Data.......................................................................26
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Result of Operations.........................................................26
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.....................................26
ITEM 8. Financial Statements and Supplementary Data....................................................27
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................................................27
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PART III................................................................................................27
ITEM 10. Directors and Executive Officers of ResortQuest...............................................27
ITEM 11. Executive Compensation........................................................................27
ITEM 12. Security Ownership of Certain Beneficial Owners and Management................................27
ITEM 13. Certain Relationships and Related Transactions................................................27
PART IV.................................................................................................28
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Forms 8-K..............................28
14(a)(1) FINANCIAL STATEMENTS.............................................................28
14(a)(2) FINANCIAL STATEMENT SCHEDULES....................................................28
14(a)(3) EXHIBITS.........................................................................28
14(b) REPORTS ON FORM 8-K.................................................................36
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PART I
ITEM 1. BUSINESS
I. GENERAL
ResortQuest is the first company to offer vacation condominium and home
rentals, sales and property management services under a national brand name and
is a leading provider of vacation rentals in premier destination resorts
throughout the United States and in Canada. Through the consolidation of leading
vacation rental and property management companies, the development of a national
brand and marketing initiative and best practices management systems, we offer
vacationers a branded network of high quality, fully furnished, privately-owned
condominium and home rentals. In addition, we provide property owners with
superior management services by combining local management expertise with the
marketing power and resources of a leading brand, which work to enhance a
property's value and marketability.
We commenced operations on May 26, 1998, concurrent with our initial
public offering and the acquisition of 12 leading vacation rental and property
management companies and the industry's leading management software company
(collectively, the "Founding Companies"). Since that time, we have completed 18
additional vacation rental and property management acquisitions, five in 1998
and 13 in 1999 (together with the Founding Companies, the "Operating
Companies"). Our 1999 acquisitions added more than 4,000 rental units to our
portfolio of vacation rental condominiums and homes and introduced the
ResortQuest brand to several new markets, including Orlando, Florida, the number
one tourist destination in the world. We currently manage approximately 17,000
condominiums and homes in 40 premier destination resort locations throughout the
United States and in Canada.
Most vacationers seeking to rent a condominium or home at a popular
destination resort typically have relied on local vacation rental and property
management firms to inquire about availability and make reservations.
Vacationers made rental choices with limited information and, as a result, faced
great uncertainty concerning the quality of their rental. To address this need,
we established the ResortQuest brand to provide vacationers with access to
quality condominium and home rentals intended to consistently meet their
expectations. The ResortQuest brand is designed to ensure that a vacation rental
meets customer expectations by providing a standardized, basic level of products
and services throughout our extensive national network of quality condominiums
and homes in premier destination resorts and by consistently categorizing
accommodations based on quality, appearance and features.
We also offer vacationers a single source from which they can easily
access information about and make reservations for our condominium and home
rentals. RESORTQUEST.COM, one of the most comprehensive web sites in the
vacation industry, enables vacationers to search through all of our vacation
home and condominium rentals, view extensive information about each rental
property, including photographs and floor plans, take virtual tours of our
condominium and home rental units and popular attractions in all of our resort
locations, check availability and rental rates and make real-time reservations
directly on line. Pursuant to our recent strategic alliance with Target Travel,
visitors to RESORTQUEST.COM also can complete their travel itineraries by
pairing our rental accommodations with Target Travel's competitively priced
airline and car
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rental reservations. In addition, for customers interested in buying or selling
a vacation home, RESORTQUEST.COM provides multiple location real estate listings
for homes and condominiums located in 24 of our resort locations. Vacationers
also have the option of obtaining information from and making reservations
through our 24-hour toll-free reservations line, which is staffed by agents who
are familiar with our managed condominiums and homes.
Our primary source of revenue is property rental fees, which are charged
to the property owners as a percentage of the vacationer's total rental rate.
Fee percentages for condominiums and homes range from approximately 3% to over
40% of rental rates depending on:
- the market;
- the type of services provided to the property owner;
- the type of rental unit managed; and
- which party bears responsibility for certain operating expenses.
For the year ended December 31, 1999, we generated total revenues of
approximately $127.9 million, which includes $65.8 million of revenues from
property management fees, and net income of $4.4 million. We believe that our
national brand and superior management services, which are designed to enhance
rental income for property owners, will provide us with a competitive advantage
in attracting additional high quality condominiums and homes in our markets.
A. Industry Overview
The United States is the largest market in the world for the travel and
tourism business, representing an estimated 20% of total worldwide travel and
tourism expenditures. From 1987 to 1997, the U.S. market consistently grew at a
compounded annual rate of 6.1%. In 1997, expenditures for tourism in the United
States reached approximately $482 billion, or approximately 6% of 1997's gross
domestic product, making the U.S. travel and tourism industry one of the largest
sectors in the U.S. economy. Expenditures for tourism are expected to continue
to increase and reach $594 billion by 2001.
The travel and tourism industry can be segmented into a number of
categories depending on the purpose of travel. The two primary categories are
business travel, including both personal and work related, and pleasure travel.
According to the Department of Transportation's 1995 American Travel Survey,
pleasure travel represented 63% of total trips taken by Americans. We focus on a
subsegment of the pleasure travel area, specifically the leisure segment. The
leisure segment represents all trips taken for vacation purposes other than
those trips to visit family or friends. Within the leisure segment, the total
market for vacation condominium, home and apartment rentals, which are marketed
predominantly by vacation rental and property management companies, was over $10
billion in 1996, representing over 20 million vacation property rentals. Rental
revenues grew 8.7% from 1995 to 1996, and we believe that this growth has been,
and will continue to be, driven by two primary factors: the overall growth in
the leisure travel and tourism industry, which reflected a 16.1% increase in
revenues from 1995 to 1997, and the increasing number of vacationers seeking to
rent vacation condominiums and homes. We believe this data reflects the most
recently available industry information.
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Destination resort vacationers primarily have three alternatives for
overnight accommodations: commercial lodging establishments, timeshare resorts
and privately-owned vacation condominiums and homes. For many vacationers,
particularly those with families, a lengthy stay at a quality commercial lodging
establishment can be expensive. Vacation condominium and home rentals generally
offer families greater space and convenience than a resort hotel room, including
separate living, sleeping and eating quarters. As a result, families generally
have more privacy and greater flexibility in a vacation condominium or home.
Furthermore, by utilizing the full kitchens available in most properties,
vacationers can also save on dining costs in a vacation condominium or home
rental. In addition, vacation condominium and home rentals frequently include
access to private yards, swimming pools, tennis courts and other recreational
facilities, and generally offer a greater variety of locations, accommodations
and price ranges within a market to meet a vacationer's desires.
Vacation property rentals are also a less expensive and more flexible
alternative to timeshare interests. Unlike vacation property rentals, timeshare
interests require the purchase of an ownership interest in a vacation residence
and continuing annual maintenance payments. A timeshare owner has the right to
use the same vacation residence for the same length of time each year. Subject
to availability and the payment of a membership fee and a variable exchange fee
to join a timeshare exchange program, a timeshare owner may request that his
timeshare interval be exchanged for a timeshare interval at another
participating resort. Owners are generally limited to timeshare intervals at
participating resorts and to those units which have been assigned an equal or
lower rating by the exchange program based on the location, size and quality of
the unit, the quality of the resort and the time of year requested.
Most vacation condominiums and homes are second homes with absentee owners
who are unable to manage the rental process easily. Vacation rental and property
management companies facilitate the rental process by handling all interactions
with vacationers, including:
- accepting reservations;
- collecting rental payments, security deposits and other fees;
- operating check-in and check-out locations; and
- arranging for inspections, security and maintenance.
The publishing of catalogs, print advertising and other marketing activities of
a successful vacation rental and property management company also can enhance
the vacation condominium or home's occupancy rate and increase rental income to
the property owner.
The vacation rental and property management industry is highly fragmented,
with an estimated 3,000 vacation rental and property management companies in the
United States. Most vacation rental condominiums and homes are managed by and
booked through local vacation rental and property management firms, whose
principal means of attracting property owners and vacationers are by referral,
word of mouth, limited local advertising and direct mailings. Before
ResortQuest, there was no central reservations service for vacationers or travel
agents to obtain information regarding most condominium or home rental
opportunities at popular destination resorts nationwide or for booking such
rentals once a destination was selected. We believe the vacation rental and
property management industry remains highly inefficient and presents a
significant market opportunity for a well-capitalized company offering a
national, branded
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network of high-quality vacation condominiums and homes with superior levels of
customer service.
B. Business Strategy
Our objective is to enhance our position as a leading provider of premier
condominium and home rentals in destination resorts by pursuing the following
elements of our business strategy:
CONTINUE TO BUILD THE RESORTQUEST BRAND. Prior to ResortQuest, there was
no national brand for vacation condominium and home rentals, no industry
standards for quality and a general lack of access to reliable information
regarding rental opportunities for vacationers. We have increased the
information available to vacationers, established the only national brand in the
fragmented vacation rental industry and continue to provide vacationers with
high quality condominium and home rentals. The ResortQuest brand is designed to
ensure that a vacation rental meets customer expectations by providing a basic,
standardized level of products and services and by consistently categorizing
accommodations based on quality, appearance and amenities.
CAPITALIZE ON TECHNOLOGY. We believe that our investment in technology,
especially that related to the Internet, will create a significant competitive
advantage and be critical in building our national brand, increasing revenue,
reducing costs and managing vacationer, owner, employee and investor
expectations. Our commitment to technology is evidenced by (1) RESORTQUEST.COM,
our comprehensive web site which enables consumers to search through our
vacation rentals, to take virtual tours of rental properties and popular
attractions at our resort locations, to check availability and to make vacation
property, airline and car rental reservations on-line, and (2) First Resort
Software, which is a leading provider of integrated software for the vacation
rental and property management industry. We plan to use First Resort Software to
link our existing and future acquired companies' property management databases
in order to enhance our cross-selling and direct marketing efforts. We also
intend to develop proprietary data mining tools to enhance our cross-selling and
direct marketing efforts.
OFFER VACATIONERS SUPERIOR CUSTOMER SERVICE. We believe that maintaining
superior levels of customer service is critical to maintaining a reputation for
high quality condominiums and homes and for attracting new customers.
Vacationers typically rent vacation condominiums and homes for greater space and
flexibility, but these customers also frequently desire many of the amenities
and services of hotel accommodations. As a result, we require each Operating
Company to deliver a standardized, basic level of amenities and services
designed to enhance the vacationer's overall experience. We have established a
detailed listing of basic standards relating to conveniently located check-in
and check-out locations, efficient check-in and check-out procedures, extended
front desk hours, cleanliness of units and access to emergency contact and
maintenance personnel. We also strive to offer maximum flexibility to meet the
varied needs of our vacationers and in most markets can arrange for services
such as golf tee times, bicycle rentals, ski lift tickets, grocery delivery or
restaurant reservations. By offering the convenience and accommodations of a
condominium or home while providing many of the amenities and services of a
hotel, we believe we will continue to strengthen the loyalty of our existing
customers and attract new vacationers into the vacation condominium and home
rental market.
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ENHANCE VALUE FOR PROPERTY OWNERS. We provide property owners with
superior management services by combining local management expertise with the
marketing power and resources of a leading brand, which work to increase rental
income through increased occupancy and rental rates. Since substantially all of
the condominiums and homes managed by us are second homes with absentee owners,
we offer a range of high quality vacation rental and property management
services designed to meet the broad real estate needs of these owners. In most
markets, we will assume broad responsibility for the condominium or home, from
marketing and coordinating all aspects of renting the individual condominium or
home to managing common areas and homeowners' associations. In addition, we
provide owners with concise, timely and accurate monthly statements and payments
for the rental and management of their condominiums and homes. We believe that
our reputation for high quality, comprehensive management services will be a key
competitive advantage in increasing the number of condominiums and homes under
our management within our existing markets.
CAPITALIZE ON THE EXPERIENCE OF SENIOR MANAGEMENT. Our senior management
team has the breadth of experience necessary to execute our business plan
effectively.
- DAVID L. LEVINE, President and Chief Executive Officer, is the former
President and Chief Operating Officer of Equity Inns, Inc., a leading
real estate investment trust specializing in hotel acquisitions.
Concurrently he served as President and Chief Operations Officer of
Trust Management, Inc. which operated Equity Inns properties.
- JAMES S. OLIN, Chief Operations Officer, is the former President of
Abbott Resorts, our largest Operating Company, and Vice President for
ResortQuest's Gulf Coast Region. He has over 12 years of experience in
the travel and tourism industry.
- J. MITCHELL COLLINS, Senior Vice President and Chief Financial Officer,
is a former senior manager with Arthur Andersen LLP and was head of
real estate and hospitality services for Andersen's Mid-South practice.
He has over a decade of financial consulting experience with significant
experience with mergers and acquisitions and special expertise in the
integration of multiple reporting functions for large hospitality
companies.
- FREDERICK L. FARMER, Senior Vice President and Chief Information
Officer, has more than 20 years of experience working for Fortune 500
companies. Mr. Farmer most recently spent 12 years with Marriott
International as Senior Vice President, Internet and Desktop Services
and was responsible for positioning Marriott for Internet commerce.
- PAUL N. MANTERIS, Senior Vice President, Homeowner Relations/Operations,
is the former Manager of Training and Special Projects for Premier
Resorts, Inc., a hospitality management company operating primarily in
the Western United States and Hawaii. He has over 21 years of experience
in the hospitality industry.
- W. MICHAEL MURPHY, Senior Vice President and Chief Development Officer,
leads our mergers and acquisitions effort. Mr. Murphy has been involved
with real estate acquisition businesses and the hospitality industry for
more than 25 years.
LEVERAGE LOCAL RELATIONSHIPS AND EXPERTISE. Our local management teams
have extensive experience in their respective resort areas, and many of the
individuals are very active in their
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local communities. The management teams have a valuable understanding of their
respective markets and businesses and have developed strong local relationships.
These relationships are critical in attracting additional condominiums and homes
for rental and enable us to provide additional concierge-type services to our
vacationers. Accordingly, our decentralized management strategy is designed to
allow local managers to utilize their knowledge and expertise about the
condominiums and homes available for rent, the offerings of local competitors
and the desires of vacationers in their areas to provide superior customer
service to both property owners and vacationers.
C. Growth Strategy
We believe we can enhance our position as a leading provider of vacation
condominium and home rentals in premier destination resorts by growing both
internally and by selectively pricing strategic acquisitions.
1. Internal Growth
The primary elements of our internal growth strategy include:
FULLY IMPLEMENT OUR NATIONAL MARKETING STRATEGY. We have implemented a
multi-faceted national marketing program designed to increase vacationer
awareness of the ResortQuest brand, while promoting the unique characteristics
of our individual resorts. This comprehensive marketing program targets
consumers and the travel trade through high-profile advertising, direct mail,
e-mail marketing, public relations, promotional programs and RESORTQUEST.COM. In
order to maximize the online exposure of RESORTQUEST.COM and our approximately
17,000 vacation rental properties, we formed strategic alliances in 1999 with
WORLDRES.COM, an online hotel distribution network for leisure travel with a
proprietary network of Internet-based distribution partners, and
VACATIONSPOT.COM, the vacation lodging directory for Microsoft Expedia.
Vacationers have access to all of our vacation rentals through these two
additional online distribution channels. Our marketing program is designed to
attract new customers as well as to cross-sell additional services and locations
to existing customers, thereby increasing customer loyalty by offering customers
similar properties and services in our other resorts that meet the vacationer's
expectations based, in part, on their previous experiences with us. We believe
the integrated marketing efforts of our Operating Companies will increase
customer awareness of the ResortQuest brand, lead to an increased demand for our
rentals and result in higher occupancy and rental rates for our condominium and
home owners. We also believe that the anticipated increase in rental income for
owners will ultimately be a competitive advantage in attracting new property
owners.
INCREASE MARKET SHARE WITHIN EXISTING MARKETS. A key element of our growth
strategy is to increase our selection of condominiums and homes in order to
expand our market share and strengthen the local brands of each of our Operating
Companies. We intend to attract new property owners by achieving high occupancy
rates through effective national and regional marketing, cross-selling and
offering additional incentives to property owners, such as QuestClub, our travel
benefits program for owners of properties we manage. In addition, in order to
capture a higher portion of the rental business from new condominiums and homes
being built
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in our markets, we will focus on building and strengthening our relationships
with both local and national resort developers as well as real estate brokerage
companies.
EXPAND PROFIT MARGINS. Through the implementation of the best management
practices of our Operating Companies, we believe there are numerous
opportunities to improve our overall profit margins. We continue to improve the
efficiency of certain basic services such as reservations, housekeeping and
laundry. We also believe that larger inventories of condominiums and homes in
our markets will provide certain economies of scale in advertising, check-in
locations, management, housekeeping and other services. We have already achieved
savings through company-wide contracts for long distance telephone service,
credit card fees and insurance. We believe that enhanced efficiency and
economies of scale will reduce overall operating costs and allow us to achieve
increased margins by spreading operating and corporate overhead costs over a
larger revenue base. In addition, several of our Operating Companies have
developed unique additional revenue opportunities, such as assisting property
owners in refurbishing their properties, offering trip cancellation insurance
and charging fees for certain concierge-type services, several of which can be
replicated by our other Operating Companies.
USE ADDITIONAL MARKETING CHANNELS. Historically, most vacationers have
located vacation condominiums and homes through referrals, word-of-mouth,
limited local advertising and direct mailings. We believe there are significant
opportunities to expand the use of additional marketing channels. We plan to
capitalize on our extensive market presence by increasing the use of other
marketing channels such as the Internet, travel agents and national print media,
which are difficult for local vacation rental and property management companies
to use in a cost-effective manner. Given our size and presence in premier
destination resorts, we believe we are an attractive partner to travel agents,
tour package operators and other travel providers. These relationships should
continue to be a significant source of new customers and, in particular, will be
a valuable marketing channel for off-peak seasons.
2. Selectively Pursue Strategic Acquisitions
Since we commenced operations in May 1998 with the acquisition of the
13 Founding Companies, we have acquired 18 additional vacation rental and
property management companies. For the foreseeable future, we intend to focus
primarily on further integrating these acquisitions and implementing our
internal growth strategy. We will however, selectively pursue strategic
acquisitions in new markets and tuck-in acquisitions through which we can expand
our selection of rental inventory in our existing markets.
We believe that we provide acquisition candidates with a number of
significant benefits, including:
- affiliation with a national brand;
- the ability to cross-sell to customers of other vacation rental and
property management companies within the ResortQuest network;
- the ability to increase liquidity as a result of our financial strength
as a public company and access to additional sources of capital; and
- the ability to increase profitability as a result of our centralization
of certain administrative functions and other economies of scale.
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D. Markets
We currently manage condominiums and homes in 40 premier Hawaiian,
mountain, beach and desert resorts throughout the United States and in Canada.
The table below sets forth the resort locations at which we manage vacation
condominium and home properties and the aggregate number of properties managed
in each of the following states at December 31, 1999.
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HAWAIIAN RESORTS
Hawaii: Hawaii, Kauai, Maui and Oahu.......................................................... 4,659
MOUNTAIN RESORTS
Colorado: Aspen, Breckenridge, Crested Butte, Dillon, Snowmass Village and Telluride........... 1,440
British Columbia: Whistler..................................................................... 701
Utah: The Canyons, Deer Valley and Park City................................................... 366
Montana: Big Sky............................................................................... 217
Oregon: Sunriver............................................................................... 140
BEACH RESORTS
Florida: Beaches of South Walton, Bonita Springs, Captiva Island, Destin, Fort
Myers, Fort Myers Beach, Marco Island, Okaloosa Island, Fort Walton Beach, Orlando,
Navarre Beach, Naples and Sanibel Island...................................................... 5,138
Massachusetts: Nantucket....................................................................... 1,200
South Carolina: Hilton Head Island............................................................. 694
Delaware: Bethany Beach........................................................................ 658
North Carolina: The Outer Banks................................................................ 511
Georgia: St. Simons Island..................................................................... 453
Alabama: Gulf Shores........................................................................... 372
Ohio: Lake Erie Islands........................................................................ 169
DESERT RESORTS
California: Palm Desert and Palm Springs....................................................... 299
Arizona: Scottsdale and Tucson................................................................. 284
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TOTAL........................................................................................... 17,301
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E. Services Offered
SERVICES OFFERED TO VACATIONERS. We provide services to vacationers during
all stages of the rental process from the selection and reservation of a
condominium or home to the vacationers' arrival and throughout their stay. To
make the selection and reservation process as simple and convenient as possible,
RESORTQUEST.COM, our on-line, single-source, interactive web site, provides
consumers with instant access to our inventory of approximately 17,000 vacation
rental properties. Vacationers can check availability and rental rates, view
extensive information about each property, including photographs and floor
plans, take virtual tours of our condominium and home rental units and popular
attractions in all of our resort locations, obtain information about special
offers and promotions and make real-time reservations directly on-line.
Vacationers can customize their searches of our rental inventory based upon
either type of resort destination, including beach, mountain, island and desert,
or type of activity, including golf, skiing, tennis and fishing. Vacationers
also can search for rental units in several different resort locations
simultaneously. Pursuant to our recent strategic alliance with Target Travel,
visitors to RESORTQUEST.COM also can complete their travel itineraries by
pairing our accommodations with
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Target Travel's competitively priced airline and car rental reservations. Since
the inception of RESORTQUEST.COM, monthly user sessions and the percentage of
on-line bookings have increased from 40,000 and 1.6% in January 1999 to 150,000
and 9.2% in December 1999.
In addition to on-line access to our rental properties, we also provide
vacationers with catalogs containing color photographs and descriptions of
available condominiums or homes in most of our resort locations. Also,
vacationers may choose to make reservations through our 24-hour toll-free
reservations line staffed by agents who are familiar with the specific
condominiums and homes at all of our resort locations.
Because of the variety of our resort locations and the diversity of rental
prices throughout our rental portfolio, we are able to target a broad range of
vacationers, including families, couples and individuals. For vacationers, we
offer the convenience and accommodations of a condominium or home, while
providing many of the amenities and services of a hotel. Vacation condominium
and home rentals generally offer greater space and convenience than resort hotel
rooms, including separate living, sleeping and eating quarters. As a result,
vacationers generally have more privacy and greater flexibility in a vacation
condominium or home.
Upon the vacationer's arrival, we offer conveniently located check-in and
check-out locations, many of which are located on-site at the front desk of our
condominium properties. Off-site check-in locations are typically centrally
located and easily accessible in their respective resort communities. In most
destination resort communities, we maintain multiple conveniently located
check-in facilities. During their stay, vacationers at most locations are
offered frequent cleaning and housekeeping services and access to emergency
contact and maintenance personnel. In most locations, we offer more specialized
concierge services such as bicycle and ski equipment rentals, ski lift tickets
sales, shuttles to ski areas, golf tee times and restaurant reservations. We
typically receive a fee for providing these services.
To help ensure that vacationers' expectations are met, we implemented a
comprehensive quality standard program. As part of this program, each of our
Operating Companies is required to deliver a standardized, basic level of
products and services that affect the overall experience of vacationers. We have
established a detailed listing of standards relating to:
- the reservation, check-in and check-out processes;
- the provisions included in each rental unit;
- the services and amenities provided during the vacationer's stay;
- the maintenance of the grounds and facilities surrounding the rental
unit; and
- the response of employees to problems raised by vacationers.
To promote consistency across all of our locations, we have evaluated,
based on our proprietary rating criteria, substantially all of our vacation
condominiums and homes and segmented them into the following five proprietary
accommodation categories:
Quest Home: an exclusive group of extraordinary accommodations which are so
luxurious and unique that they are in a class of their own;
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Platinum: exceptional accommodations marked by unique design that offers
superior quality furnishings, luxury features, designer
appointments and top-of-the-line kitchens, baths and amenities;
Gold: upscale, well-appointed accommodations with a designer touch
that feature excellent furnishings, special features and
top-quality kitchens, baths and amenities;
Silver: inviting, pleasing accommodations that are tastefully decorated
and feature quality furnishings and contemporary kitchens and
baths; and
Bronze: comfortable, pleasant accommodations that provide many of the
comforts and conveniences of home.
We have developed specific, detailed criteria for each of our
accommodation categories, based on quality, appearance and features of the
rental properties including property furnishings, soft goods, flooring,
kitchen/appliances, televisions and stereos, bathrooms, decor and other features
such as swimming pools and exercise facilities. Similarly, we have standardized
the use of property location descriptions. We perform annual on-site reviews of
each of our rental properties to update our accommodation category ratings.
SERVICES OFFERED TO CONDOMINIUM AND HOME OWNERS. We provide condominium
and home owners a comprehensive set of high-quality vacation rental and property
management services by combining local management expertise and attention with
the marketing resources of a national brand. In most markets, we will assume
complete responsibility for rental management of the condominium or home,
including marketing, renting and maintaining the specific property as well as
managing the common areas and homeowners' associations. We currently engage in
extensive marketing activities, including our interactive web site,
RESORTQUEST.COM, print advertising in high-profile national publications and
e-mail marketing, as well as direct catalog mailings to prior and prospective
vacationers and direct solicitations of travel agents and wholesalers. We also
handle all interaction with vacationers, including accepting reservations,
collecting rental payments and security deposits, operating check-in and
check-out locations and offering linen, housekeeping and other services.
Property owners are paid rental income each month for rental activity in the
preceding month and are given a concise, timely and accurate monthly statement
which details the rental activity and management of their condominiums and
homes.
Property maintenance services are provided by both our employees and third
party independent contractors. Services are either regularly scheduled, or
provided on an "as needed" basis, depending on the service and resort location.
In most markets, we perform periodic inspections and make recommendations to
property owners for maintenance, refurbishments and renovations necessary to
maintain the quality of their condominiums and homes. In several of our
destination resort markets, we provide professional interior design and
refurbishment services to property owners to assist with the upkeep and
appearance of their condominiums and homes. We include routine maintenance
services, such as replacing light bulbs or broken china, as part of an
all-inclusive commission structure in certain locations. In other markets, we
collect
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fees from property owners for maintenance services through service and
maintenance agreements and fees for service arrangements.
For owners desiring to sell their vacation condominium or home, we offer
traditional real estate brokerage services in 24 resort locations, including
listing and showing the property. Also, RESORTQUEST.COM provides multiple
location real estate listings for these resort locations. We believe that
providing real estate brokerage services gives us a competitive advantage in
identifying and securing properties for our rental management services and
allows us to meet all of the needs of vacation property owners.
Owners of condominiums and homes we manage may participate in QuestClub,
our exclusive travel benefits program. QuestClub members receive a 70% savings
on vacation condominium and home rentals for stays of up to 28 days each year at
other QuestClub member properties. The availability of QuestClub privileges is
limited during extremely popular times to preserve the revenue potential for
each participating homeowner.
F. Marketing
The marketing efforts of traditional vacation rental and property
management companies are primarily through word of mouth, including both
vacationers and property owners, print advertising primarily in local newspapers
and regional magazines and direct mail solicitations and catalogs sent to prior
customers. Potential customers typically call as a result of a referral or in
response to an advertisement or other promotion and are assisted by reservation
agents in selecting the appropriate vacation property and making the
reservation.
In addition to local and regional promotional campaigns designed to drive
occupancy rates, our marketing strategy is aimed at building awareness of the
ResortQuest brand name and image, cross-selling our destinations and promoting
RESORTQUEST.COM. Since our initial public offering, we have developed a
comprehensive, national marketing campaign targeting consumers and the travel
trade through direct mail, e-mail marketing, public relations, promotional
programs and high-profile print advertising in publications such as CONDE NAST
TRAVELER, TRAVEL & LEISURE, SKI, GOLF MAGAZINE, SOUTHERN LIVING and SUNSET. We
also market to travel agents primarily through advertisements in trade
publications and attendance at national and regional travel industry trade
shows. Tour package operators typically combine transportation to a destination
resort with our vacation condominiums and homes and a car rental. Tour packages
are distributed almost exclusively through travel agents.
We believe that our most important marketing resource is our web site,
RESORTQUEST.COM. For the first time, consumers can use a single source to visit
resort destinations throughout the United States and in Canada, view photographs
and floor plans and make real-time reservations directly on-line. Pursuant to
our alliance with Target Travel, visitors to RESORTQUEST.COM also can complete
their travel itinerary by securing economical airline and car rental
reservations.
According to Forrester Research, consumers are adopting online travel
faster than any other retail segment of the burgeoning e-commerce field. Online
travel is expected to reach nearly $3 billion in 1999, and $8.9 billion by 2002.
In order to maximize the online exposure of RESORTQUEST.COM and our
approximately 17,000 vacation rental properties, we formed strategic
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alliances in 1999 with WORLDRES.COM, an online hotel distribution network for
leisure travel with a proprietary network of Internet-based distribution
partners, and VACATIONSPOT.COM, the vacation lodging directory for Microsoft
Expedia. Vacationers have access to all of our vacation rentals through these
two additional online distribution channels.
We believe that a national marketing campaign should increase the
effectiveness of the existing Operating Companies and those to be acquired in
the future, and expand the universe of potential customers for each resort
location in which we operate.
We intend to capitalize on our extensive market presence and further
increase our use of the Internet, travel agents and print media. We believe that
our extensive selection of vacation condominiums and homes make us an attractive
partner to travel agents, tour package operators and other travel providers.
These relationships should continue to be a significant source of new customers
and, in particular, will be a valuable marketing channel for off-peak seasons.
G. First Resort Software
First Resort Software is a leading provider of integrated management,
reservations and accounting software for the vacation rental and property
management industry. Twenty-five of our Operating Companies and over 600 other
vacation rental and property management companies use the software programs
developed by First Resort Software. These programs were developed to overcome
problems encountered by rental property managers in attempting to use software
programs developed for the hotel industry. The basic software developed by First
Resort Software allows vacation rental and property management companies to
automate and computerize their reservations, billings, rental management and
accounting tasks. Vacation rental and property management companies can use the
software developed by First Resort Software to enter current rates on individual
condominiums and homes and access specific descriptions of those condominiums
and homes for potential customers. The software also allows companies to
generate monthly revenue reports for property owners and to coordinate
maintenance and housekeeping schedules. First Resort Software also offers
additional modules and interfaces, including a work order generator, activities
management system, credit card interface and on-line booking interface through
the Internet. First Resort Software is developing a JAVA Client/Server based
graphical reservations application that will allow users of its software to
completely integrate their reservations systems with the Internet, as well as a
JAVA Client/Server based version of all of its existing software applications.
We intend to rely on the products and management expertise of First Resort
Software to enhance our technology strategy. We believe that investment in
technology is critical in building a national, branded vacation rental and
property management company for premier destination resorts and will provide us
with a significant competitive advantage in the future. The software developed
by First Resort Software will allow us to quickly link our existing and future
acquired companies' databases. We also intend to develop proprietary data mining
tools in order to enhance our cross-selling and direct marketing efforts.
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H. Year 2000 compliance
During 1999, we took steps to ensure that any significant adverse impact
from the advent of year 2000 would be averted. These steps included evaluation
of property management systems (guest services and back-office accounting);
reservation/inventory management systems; hardware BIOS (software encoded into
hardware components that runs "beneath" the operating system); analysis and/or
management reporting tools; and various non-IT components' embedded control
systems (HVAC, elevator controls, etc.). In addition, we developed contingency
plans including items such as offsite and/or manual reservations/inventory
management, property management (guest services, back-office functions, work
order administration), financial accounting and reporting, and management
reporting. The cost of assessment and remediation of our systems and the
alternative development for contingency plans was approximately $500,000.
Upon the arrival of year 2000 we took additional steps to assess all
systems and determine the actual impact of year 2000, if any. To date, we have
noted no year 2000-related issues that constitute a significant adverse impact
upon our systems and processes, and have discovered no issues that may be
expected to have a significant adverse impact in the future.
I. Competition
The vacation rental and property management industry is highly competitive
and has low barriers to entry. The industry has two distinct customer groups:
vacation property renters and vacation property owners. We believe that the
principal competitive factors in attracting vacation property renters are:
- market share and visibility;
- quality, cost and breadth of services and properties provided; and
- long-term customer relationships.
The principal competitive factors in attracting vacation property owners are
the ability to generate higher rental income and to provide comprehensive
management services at competitive prices. We compete for vacationers and
property owners primarily with approximately 3,500 vacation rental and
property management companies that typically operate in a limited geographic
area. Some of our competitors are affiliated with the owners or operators of
resorts in which such competitors provide their services. Certain of these
smaller competitors may have lower overhead cost structures and may be able
to provide their services at lower rates.
We also compete for vacationers with large hotel and resort companies. Many
of these competitors have greater financial resources than we have, enabling
them to finance acquisition and development opportunities, to pay higher prices
for the same opportunities or to develop and support their own operations. In
addition, many of these companies can offer vacationers services not provided by
vacation rental and property management companies, and they may have greater
name recognition among vacationers. These companies might be willing to
sacrifice profitability to capture a greater portion of the market for
vacationers or pay higher prices than we would for the same acquisition
opportunities. Consequently, we may encounter significant competition in our
efforts to achieve our internal and acquisition growth objectives as well as our
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operating strategies focused on increasing the profitability of our existing and
subsequent acquisitions.
J. Employees
As of December 31, 1999 we had approximately 3,900 total employees. We rely
significantly on temporary employees to meet peak season demands. In the course
of performing service and maintenance work, we also utilize the services of
independent contractors. We believe our relationships with our employees and
independent contractors are good.
FACTORS THAT MAY AFFECT FUTURE RESULTS
OUR DISCLOSURE AND ANALYSIS IN THIS REPORT AND IN OUR 1999 ANNUAL REPORT TO
SHAREHOLDERS CONTAIN SOME FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS
GIVE OUR CURRENT EXPECTATIONS OR FORECASTS OF FUTURE EVENTS. YOU CAN IDENTIFY
THESE STATEMENTS BY THE FACT THAT THEY DO NOT RELATE STRICTLY TO HISTORICAL OR
CURRENT FACTS. THEY USE WORDS SUCH AS "ANTICIPATE," "ESTIMATE," "EXPECT,"
"PROJECT," "INTEND," "PLAN," "BELIEVE," AND OTHER WORDS AND TERMS OF SIMILAR
MEANING IN CONNECTION WITH ANY DISCUSSION OF FUTURE OPERATING OR FINANCIAL
PERFORMANCE. IN PARTICULAR, THESE INCLUDE STATEMENTS RELATING TO FUTURE ACTIONS,
FUTURE PERFORMANCE OR RESULTS OF CURRENT AND ANTICIPATED SERVICES, SALES
EFFORTS, EXPENSES, AND FINANCIAL RESULTS. FROM TIME TO TIME, WE ALSO MAY PROVIDE
ORAL OR WRITTEN FORWARD-LOOKING STATEMENTS IN OTHER MATERIALS WE RELEASE TO THE
PUBLIC.
ANY OR ALL OF OUR FORWARD-LOOKING STATEMENTS IN THIS REPORT, IN THE 1999
ANNUAL REPORT AND IN ANY OTHER PUBLIC STATEMENTS WE MAKE MAY TURN OUT TO BE
WRONG. THEY CAN BE AFFECTED BY INACCURATE ASSUMPTIONS WE MIGHT MAKE OR BY KNOWN
OR UNKNOWN RISKS AND UNCERTAINTIES. MANY FACTORS MENTIONED IN THE DISCUSSION
ABOVE WILL BE IMPORTANT IN DETERMINING FUTURE RESULTS. CONSEQUENTLY, NO
FORWARD-LOOKING STATEMENT CAN BE GUARANTEED. ACTUAL FUTURE RESULTS MAY VARY
MATERIALLY.
WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
YOU ARE ADVISED, HOWEVER, TO CONSULT ANY FURTHER DISCLOSURES WE MAKE ON RELATED
SUBJECTS IN OUR 10-Q, 8-K AND 10-K REPORTS TO THE SEC. ALSO NOTE THAT WE PROVIDE
THE FOLLOWING CAUTIONARY DISCUSSION OF RISKS, UNCERTAINTIES AND POSSIBLY
INACCURATE ASSUMPTIONS RELEVANT TO OUR BUSINESSES. THESE ARE FACTORS THAT WE
THINK COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM EXPECTED AND
HISTORICAL RESULTS. OTHER FACTORS BESIDES THOSE LISTED HERE COULD ALSO ADVERSELY
AFFECT RESORTQUEST. THIS DISCUSSION IS PROVIDED AS PERMITTED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
OUR REPORTED FINANCIAL RESULTS MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE
BECAUSE THEY COVER A PERIOD DURING WHICH OUR OPERATING COMPANIES CONDUCTED
BUSINESS AS INDEPENDENT ENTITIES.
Prior to the time we completed our acquisition of our Operating Companies,
each company operated as a separate, privately-held entity. For financial
reporting, we currently rely on the existing reporting systems of each of these
Operating Companies. The consolidated financial information covers periods when
the Operating Companies and ResortQuest were not under
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common control or management. Consequently, they may not be indicative of our
future financial or operating results.
WE MAY NOT BE ABLE TO INTEGRATE SUCCESSFULLY ANY FUTURE ACQUISITION.
We cannot assure you that our management group will be able to continue to
manage effectively the combined entity or implement effectively our operating
and growth strategies. If we are unable to integrate successfully the existing
Operating Companies and any future acquisitions, it would have a material
adverse effect on our business and financial results.
Our Operating Companies offer a variety of different services to property
owners and vacationers, apply different sales and marketing techniques to
attract new customers, use different fee structures and target different
customer segments. In addition, almost all of our Operating Companies operate in
different geographic markets with varying levels of competition, development
plans and local market dynamics. These differences increase the risk inherent in
successfully completing the integration of our Operating Companies.
WE MAY NOT BE ABLE TO COMPLETE SUCCESSFULLY OUR PLANNED EXPANSION.
We intend to continue to expand the markets we serve and increase the
number of properties we manage, in part, through selective strategic
acquisitions of additional vacation rental and property management companies. We
cannot assure you that we will be able to identify, acquire or profitably manage
additional businesses or successfully integrate acquired businesses into our
existing operations without substantial costs, delays or other operational or
financial problems. It is possible that competition may increase for companies
we might seek to acquire. In such event, there may be fewer acquisition
opportunities available to us, as well as higher acquisition prices.
Acquisitions also involve a number of special risks that could have a
material adverse effect on our business and financial results. These risks
include the following:
- failure of acquired companies to achieve expected financial results;
- diversion of management's attention;
- failure to retain key personnel;
- amortization of acquired intangible assets; and
- increased potential for customer dissatisfaction or performance problems
at a single acquired company to affect adversely our reputation and
brand name.
We may also seek international acquisitions that may be subject to
additional risks associated with doing business in such countries. We
continually review various strategic acquisition opportunities and have held
discussions with a number of such acquisition candidates.
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WE MAY NOT BE ABLE TO FINANCE FUTURE ACQUISITION.
We seek to use shares of our common stock to finance a portion of the
consideration for acquisitions. If our common stock does not maintain a
sufficient market value, or the owners of businesses we may seek to acquire are
otherwise unwilling to accept shares of common stock as part of the
consideration for the sale of their businesses, we may be required to use more
of our cash resources in order to implement our acquisition strategy. If we have
insufficient cash resources, our ability to pursue acquisitions could be limited
unless we are able to obtain additional funds through debt or equity financing.
Our ability to obtain debt financing may be constrained by existing or future
loan covenants, the satisfaction of which may be dependent upon our ability to
raise additional equity capital through either offerings for cash or the
issuance of stock as consideration for acquisitions. We cannot assure you that
our cash resources will be sufficient, or that other financing will be available
on terms we find acceptable. If we are unable to obtain sufficient financing, we
may be unable to implement fully our acquisition strategy.
OUR BUSINESS MAY BE NEGATIVELY AFFECTED IF WE ARE UNABLE TO MANAGE OUR GROWTH
EFFECTIVELY.
We plan to continue to grow internally and through selective acquisitions.
We will expend significant time and effort in expanding the existing Operating
Companies and in identifying, completing and integrating selective acquisitions.
We cannot assure you that our systems, procedures and controls will be adequate
to support our operations as they expand. Any future growth also will impose
significant added responsibilities on members of senior management, including
the need to identify, recruit and integrate new managers and executives. We
cannot assure you that we will be able to identify and retain such additional
management. If we are unable to manage our growth efficiently and effectively,
or we are unable to attract and retain additional qualified management, it could
have a material adverse effect on our business and financial results.
OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY MARKET VOLATILITY.
The following factors, among others, may cause the market price of our
common stock to significantly increase or decrease:
- our failure to meet financial research analysts' estimates of our
earnings;
- variations in our annual or quarterly financial results or the financial
results of our competitors;
- changes by financial research analysts in their estimates of our
earnings;
- conditions in the general economy, or the vacation and property rental
management or leisure and travel industries in particular;
- unfavorable publicity about us or our industry; and
- significant price and volume volatility in the stock market in general
for reasons unrelated to us.
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THE NUMBER OF SHARES AVAILABLE FOR SALE COULD CAUSE OUR STOCK PRICE TO DECLINE.
The market price of our common stock could drop as a result of the sale of
substantial amounts of our common stock in the public market, or the perception
that such sales could occur. We had 18,715,447 shares of our common stock
outstanding as of December 31,1999. The 6,670,000 shares of our common stock
sold in our initial public offering are freely tradable unless held by our
affiliates. Simultaneous with the closing of the acquisition of the 13 Founding
Companies, the stockholders of the 13 Founding Companies received 6,119,656
shares, and our management and founders received 3,134,630 shares. These
9,254,286 shares have not been registered under the Securities Act of 1933, and,
therefore, may not be sold unless registered under the Securities Act of 1933 or
sold pursuant to an exemption from registration, such as the exemption provided
by Rule 144.
We have issued 2,787,725 shares in connection with the 18 acquisitions that
closed since the initial public offering. All of these shares were registered
under the Securities Act and 837,329 of these shares are subject to certain
contractual transfer restrictions expiring between January 5, 2000 and August 6,
2000.
OUR BUSINESS AND FINANCIAL RESULTS DEPEND UPON FACTORS THAT AFFECT THE VACATION
RENTAL AND PROPERTY MANAGEMENT INDUSTRY.
Our business and financial results are dependent upon various factors
affecting the vacation rental and property management industry. Factors such as
the following could have a negative impact on our business and financial
results:
- reduction in the demand for vacation properties, particularly for beach,
island and mountain resort properties;
- adverse changes in travel and vacation patterns;
- adverse changes in the tax treatment of second homes;
- a downturn in the leisure and tourism industry;
- an interruption of airline service;
- increases in gasoline or airfare prices; and
- adverse weather conditions or natural disasters, such as hurricanes,
tidal waves or tornadoes.
OUR OPERATING RESULTS ARE HIGHLY SEASONAL.
Our business is highly seasonal. The financial results of each of our
Operating Companies have been subject to quarterly fluctuations caused primarily
by the combination of seasonal variations and when revenue is recognized in the
vacation rental and property management industry. Peak seasons for our Operating
Companies depend upon whether the resort is primarily a summer or winter
destination. During 1999, we derived approximately 24.7% of our revenues and
45.8% of our operating income in the first quarter and 32.9% of our revenues and
86.8% of our operating income in the third quarter. Although the seasonality of
our financial results may
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be partially mitigated by the geographic diversity of the existing Operating
Companies and any future acquisitions, we expect a significant seasonal factor
with respect to our financial results to continue.
Our quarterly financial results may also be subject to fluctuations as a
result of the timing and cost of acquisitions, the timing of real estate sales,
changes in relationships with travel providers, extreme weather conditions or
other factors affecting leisure travel and the vacation rental and property
management industry. Unexpected variations in our quarterly financial results
could adversely affect the price of our common stock which in turn could
adversely affect our proposed acquisition strategy.
OUR BUSINESS DEPENDS UPON THE EFFORTS OF THIRD PARTIES TO MAINTAIN RESORT
FACILITIES AND TO MARKET OUR HAWAIIAN PROPERTIES.
We manage properties that are generally located in destination resorts that
depend upon third parties to maintain resort amenities such as golf courses and
chair lifts. The failure of third parties to continue to maintain resort
amenities could have a material adverse effect on the rental value of our
properties and, consequently, on our business and financial results.
We also depend on travel agents, package tour providers and wholesalers for
a substantial portion of our revenues. During 1999, we derived approximately 21%
of our revenues from sales made through travel intermediaries. Failure of travel
intermediaries to continue to recommend or package our vacation properties could
result in a material adverse effect on our business and financial results.
OUR BUSINESS COULD BE HARMED IF THE MARKET FOR LEISURE AND VACATION TRAVEL DOES
NOT CONTINUE TO GROW.
Although travel and tourism expenditures in the United States grew at a
compounded annual rate of 6.1% between 1987 and 1997, there have been years in
which spending has declined. We cannot assure you that we or the total market
for vacation property rentals will continue to experience growth. Factors
affecting our ability to continue to experience internal growth include our
ability to:
- maintain existing relationships with property owners;
- expand the number of properties under management;
- increase rental rates and cross-sell among our Operating Companies; and
- sustain continued demand for our rental inventory.
OUR OPERATIONS ARE CONCENTRATED IN THREE GEOGRAPHIC AREAS.
We manage properties that are significantly concentrated in beach and
island resorts located in Florida and Hawaii and mountain resorts located in
Colorado. The following table sets forth the December 31, 1999 consolidated
revenues and percentage of total revenues derived from each region (dollars
in thousands).
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<TABLE>
<CAPTION>
REGION CONSOLIDATED % OF TOTAL
- ------ REVENUES REVENUES
-------- --------
<S> <C> <C>
Florida ...................................................................... $ 42,581 33.3%
Hawaii ....................................................................... 22,448 17.5
Colorado ..................................................................... 15,929 12.5
Other1 ....................................................................... 46,954 36.7
-------- -------
Total $127,912 100.0%
======== =======
</TABLE>
(1) Includes revenues of First Resort Software.
Adverse events or conditions which affect these areas in particular, such
as economic recession, changes in regional travel patterns, extreme weather
conditions or natural disasters, would have a more significant adverse effect on
our operations, than if our operations were more geographically diverse.
OUR BUSINESS DEPENDS ON ATTRACTING AND RETAINING HIGHLY CAPABLE MANAGEMENT AND
EMPLOYEES.
Our business substantially depends on the efforts and relationships of
David L. Levine, President and Chief Executive Officer, the other executive
officers of ResortQuest and the senior management of our Operating Companies.
Furthermore, we will likely be dependent on the senior management of any
businesses acquired in the future. If any of these persons becomes unable or
unwilling to continue in his or her role, or if we are unable to attract and
retain other qualified employees, it could have a material adverse effect on our
business and financial results. Although we have entered into employment
agreements with each of our executive officers and the majority of the managers
of our Operating Companies, we cannot assure you that any of these individuals
will continue in his or her present capacity for any particular period of time.
POTENTIAL CHANGES IN REQUIRED ACCOUNTING METHODOLOGY COULD NEGATIVELY IMPACT OUR
FUTURE REPORTED FINANCIAL RESULTS.
In April 1999, the Financial Accounting Standards Board preliminarily
agreed to eliminate the use of the pooling-of-interests method of accounting
for business combinations. Additionally, the Financial Accounting Standards
Board is considering substantially reducing the amortization period for
goodwill. We expect that these changes in accounting treatment will apply to
any acquisition closed after January 1, 2001. The Financial Accounting
Standards Board issued an Exposure Draft in September of 1999, and expects a
final standard to be issued in the fourth quarter of 2000 that will likely be
effective January 1, 2001. Both of these positions, when issued, could have
an adverse effect on our ability to make future acquisitions and could have a
material negative effect on our future financial results, which in turn could
have a material adverse effect on the market price of our common stock.
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THE SUBSTANTIAL AMOUNT OF GOODWILL RESULTING FROM OUR ACQUISITIONS COULD
ADVERSELY AFFECT OUR FINANCIAL AND OPERATING RESULTS.
Approximately $175.2 million or 68.0% of our total assets at December 31,
1999 is net goodwill, which represents the excess of what we paid over the
estimated fair market value of the net assets we acquired in business
combinations accounted for as purchases. We amortize goodwill on a straight-line
basis over a period of 40 years, except for First Resort Software, whose
goodwill is being amortized over 15 years. The amount of goodwill amortized in a
particular period constitutes a non-cash expense that reduces our net income.
Amortization of goodwill resulting from substantially all of our past
acquisitions, and additional goodwill recorded in certain future acquisitions,
may not be deductible for tax purposes. In addition, we periodically evaluate
the recoverability of goodwill by reviewing the anticipated undiscounted future
cash flows from operations and comparing such cash flows to the carrying value
of the associated goodwill. If goodwill becomes impaired, we would be required
to write down the carrying value of the goodwill and incur a related charge to
our income. A reduction in net income resulting from a write-down of goodwill
would currently affect our financial results and could have a material adverse
impact upon the market price of our common stock.
IF VACATION RENTAL PROPERTY OWNERS DO NOT RENEW A SIGNIFICANT NUMBER OF PROPERTY
MANAGEMENT CONTRACTS OUR BUSINESS WOULD BE ADVERSELY AFFECTED.
We provide rental and property management services to property owners
pursuant to management contracts which generally have one year terms. The
majority of such contracts contain automatic renewal provisions but also allow
property owners to terminate the contract at any time. If property owners do not
renew a significant number of management contracts or we are unable to attract
additional property owners, it would have a material adverse effect on our
business and financial results. In addition, although most of our contracts are
exclusive, industry standards in certain geographic markets dictate that rental
services be provided on a non-exclusive basis. Less than 1% of our revenues for
1999 were derived from rental services provided on a non-exclusive basis. We are
unable to determine the percentage of the national rental services market that
is provided on a non-exclusive basis.
IF HOMEOWNERS' ASSOCIATIONS TERMINATE MANAGEMENT AGREEMENTS, WE COULD LOSE SOME
OF OUR COMPETITIVE ADVANTAGE IN THESE MARKETS.
We currently provide management services at numerous condominium
developments pursuant to contracts with the homeowners' associations. We
frequently provide rental management services for a significant percentage of
the condominiums within these developments. Providing management services for
homeowners' associations frequently leads the associations to request that we
manage and control the front desk operations, laundry facilities and other
related services of the condominium developments. Controlling these services
often gives us a competitive advantage over other vacation rental and property
management companies in retaining the condominiums we currently manage and in
attracting new property owners.
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We cannot assure you that a homeowners' association will not terminate its
management agreement with us. If a homeowners' association terminates a
management agreement, we could lose control or management of the front desk and
related services in that condominium development, thereby eliminating our
competitive advantage in that development. If a number of terminations occur, it
could have a material adverse effect on our business and financial results.
COMPETITION COULD RENDER OUR SERVICES UNCOMPETITIVE.
The vacation rental and property management industry is highly competitive
and has low barriers to entry. The industry has two distinct customer groups:
vacation property renters and vacation property owners. We compete for
vacationers and property owners primarily with local vacation rental and
property management companies located in our markets. Some of these competitors
are affiliated with the owners or operators of resorts where these competitors
provide their services. Certain of these competitors may have lower cost
structures and may provide their services at lower rates.
We also compete for vacationers with large hotel and resort companies. Many
of these competitors are large companies that have greater financial resources
than we do, enabling them to finance acquisition and development opportunities,
pay higher prices for the same opportunities or develop and support their own
operations. In addition, many of these companies can offer vacationers services
not provided by vacation rental and property management companies, and they may
have greater name recognition among vacationers. If such companies chose to
compete in the vacation rental and property management industry, they would
constitute formidable competition for our business. Such competition could cause
us to lose management contracts, increase expenses or reduce management fees
which could have a material adverse effect on our business and financial
results.
EXISTING MANAGEMENT, DIRECTORS AND THEIR AFFILIATES OWN ENOUGH SHARES TO
EXERCISE SUBSTANTIAL INFLUENCE OVER MATTERS REQUIRING A VOTE OF STOCKHOLDERS.
Management, directors and affiliated entities, as of January 1, 2000,
owned shares of common stock representing approximately 25.0% of the total
voting power of the common stock. They would own approximately 26.2% of the
voting power of the common stock if all shares of voting-restricted common
stock, which are entitled to one-half vote per share, were converted into
unrestricted common stock. These persons, if acting together, will likely be
able to exercise substantial influence over the election of the directors and
the disposition of any matter submitted to a vote of stockholders.
ANY ADVERSE CHANGE IN THE REAL ESTATE MARKET COULD ADVERSELY AFFECT OUR
FINANCIAL AND OPERATING RESULTS.
We derived approximately 10.4% of our consolidated revenues for 1999 from
net real estate brokerage commissions. Any factors which adversely affect real
estate sales, such as a downturn
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in general economic conditions or changes in interest rates, the tax treatment
of second homes or property values, could have a material adverse effect on our
business and financial results.
WE ARE SUBJECT TO GOVERNMENTAL REGULATION OF THE VACATION RENTAL AND PROPERTY
MANAGEMENT INDUSTRY.
Our operations are subject to various federal, state, local and foreign
laws and regulations, including licensing requirements applicable to real estate
operations and the sale of alcoholic beverages, laws and regulations relating to
consumer protection and local ordinances. Many states have adopted specific laws
and regulations which regulate our activities, such as:
- anti-fraud laws;
- real estate and travel services provider license requirements;
- environmental laws;
- telemarketing laws;
- labor laws; and
- the Fair Housing Act.
We believe that we are in material compliance with all federal, state,
local and foreign laws and regulations to which we are currently subject.
However, we cannot assure you that the cost of qualifying under applicable
regulations in all jurisdictions in which we desire to conduct business will not
be significant or that we are actually in compliance with all applicable
federal, state, local and foreign laws and regulations. Compliance with or
violation of any current or future laws or regulations could require us to make
material expenditures or otherwise have a material adverse effect on our
business and financial results.
TRANSACTIONS BETWEEN OUR OPERATING COMPANIES AND THEIR AFFILIATES MAY RESULT IN
CONFLICTS OF INTEREST.
Several lease agreements, management contracts and other agreements with
stockholders of our Operating Companies and entities controlled by them
continued after the closing of the acquisitions of our Operating Companies. We
have also entered into certain similar agreements that became effective upon
such acquisitions. In addition, we may enter into similar agreements in the
future. Other than a loan agreement with the former principal stockholder of
Aston Hotels & Resorts, a Founding Company, we believe existing agreements with
related persons are, and that all future agreements will be, on terms no less
favorable to us than we could obtain from unrelated third parties. Conflicts of
interests may arise between us and these related persons.
At December 31, 1999, the former principal stockholder of Aston owed us
approximately $4.9 million, either directly or through entities controlled by
him, including properties managed by Aston. The full amount is fully
collateralized by certain real estate owned by the former principal stockholder.
22
<PAGE>
DELAWARE LAW, OUR CHARTER DOCUMENTS AND STOCKHOLDER RIGHTS PLAN CONTAIN
PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT.
We are subject to Section 203 of the Delaware General Corporation Law,
which generally prohibits us from engaging in a broad range of business
combinations with an interested stockholder for a period of three years after
such a person first becomes an interested stockholder. Interested stockholders
include our affiliates, associates and anyone who owns 15% or more of our
outstanding voting stock. The provisions of Section 203 could delay or prevent a
change of control of ResortQuest.
Provisions of our certificate of incorporation could make it more difficult
for a third party to acquire control of ResortQuest, even if such change in
control would be beneficial to stockholders. The directors are allowed to issue
preferred stock without stockholder approval. Such issuances could make it more
difficult for a third party to acquire ResortQuest. Our bylaws contain
provisions that may have an anti-takeover effect, such as the requirement that
we must receive notice of nomination of directors not less than 60 nor more than
90 days prior to the date of the annual meeting.
On February 25, 1999, our board of directors adopted a stockholder rights
plan designed to protect our stockholders in the event of takeover action that
would deny them the full value of their investment. Under this plan, a dividend
distribution of one right for each share of common stock was declared to holders
of record at the close of business on March 15, 1999. The rights will also
attach to common stock issued after March 15, 1999. The rights will become
exercisable only in the event, with certain exceptions, an acquiring party
accumulates 15% or more of our voting stock, or if a party announces an offer to
acquire 15% or more of our voting stock. The rights will expire on March 15,
2009. Each right will entitle the holder to buy one one-hundredth of a share of
a new series of preferred stock at a price of $87.00. In addition, upon the
occurrence of certain events, holders of the rights will be entitled to purchase
either our stock or shares in an "acquiring entity" at half of market value. We
generally will be entitled to redeem the rights at $0.01 per right at any time
until the date on which a 15% position in our voting stock is acquired by any
person or group.
The rights plan is designed to prevent the use of coercive and/or abusive
takeover techniques and to encourage any potential acquiror to negotiate
directly with our board of directors for the benefit of all stockholders. In
addition, the rights plan is intended to provide increased assurance that a
potential acquiror would pay an appropriate control premium in connection with
any acquisition of ResortQuest. Nevertheless, the rights plan could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change of control.
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ITEM 2. PROPERTIES
ResortQuest has 151 properties located in 40 cities in 17 states and
provinces in the United States and Canada. These properties consist principally
of offices and maintenance, laundry and storage facilities. We own 22 of these
facilities and lease the remaining 129 properties. ResortQuest considers all of
its owned and leased properties to be suitable and adequate for the conduct of
its business.
ITEM 3. LEGAL PROCEEDINGS
ResortQuest is involved in various legal actions arising in the
ordinary course of its business. ResortQuest does not believe that any of these
actions will have a material adverse effect on its business, financial condition
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF RESORTQUEST
As of March 21, 2000, the following executive officers of ResortQuest
hold the offices indicated until their successors are chosen and qualified after
the next annual meeting of shareholders:
<TABLE>
<CAPTION>
<S> <C> <C>
David C. Sullivan...................60 Chairman
David L. Levine.....................52 President and Chief Executive Officer
James S. Olin.......................41 Chief Operating Officer
J. Mitchell Collins.................31 Senior Vice President and Chief Financial Officer
Frederick L. Farmer.................50 Senior Vice President and Chief Information Officer
Paul N. Manteris....................50 Senior Vice President, Homeowner Relations/Operations Support
W. Michael Murphy...................53 Senior Vice President and Chief Development Officer
</TABLE>
DAVID C. SULLIVAN became the Chairman of ResortQuest in December 1999.
From May 1998 to December 1999, he was the Chairman and Chief Executive Officer
of ResortQuest. 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 franchiser, manager and owner of hotels
whose brands include Hampton Inn, Homewood Suites and Embassy Suites. From 1993
to 1995, Mr. Sullivan was the Executive Vice President and Chief Operation
Officer of the Hotel Division of The Promus Companies Incorporated ("PCI"). He
was the Senior Vice President of Development and Operations of the Hampton
Inn/Homewood Suites Hotel Division of PCI from 1991 to 1993. From 1990 to 1991,
Mr. Sullivan was the Vice President of Development of the Hampton Inn Hotel
Division of PCI. Mr. Sullivan will retire as Chairman effective on May 11, 2000.
24
<PAGE>
DAVID L. LEVINE became the President and Chief Executive Officer of
ResortQuest in December 1999. From May 1998 to December 1999, he was the
President and Chief Operations Officer of ResortQuest. 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 formed in 1985. Mr. Levine has been elected by
the Board of Directors to succeed Mr. Sullivan as Chairman effective on May 11,
2000.
JAMES S. OLIN became the Chief Operations Officer of ResortQuest in
January 2000. He was the President of Abbott Resorts, our largest Operating
Company, from 1992 to January 2000. ResortQuest acquired Abbott Resorts in
September 1998. From February 1999 to January 2000, he also served as Vice
President for ResortQuest's Gulf Coast Region, covering 14 resort areas in
Florida and along the Gulf Coast. Prior to joining Abbott Resorts, Mr. Olin was
the Executive Director of the Destin, Florida, Chamber of Commerce from 1989 to
1992.
J. MITCHELL COLLINS became Senior Vice President and Chief Financial
Officer of ResortQuest in March 2000. Mr. Collins was employed with Arthur
Andersen LLP from July 1990 to February 2000 where he was a Senior Manager and
head of real estate and hospitality services for Andersen's Mid-South practice.
He also served on Andersen's global real estate and hospitality services team.
FREDERICK L. FARMER became Senior Vice President and Chief Information
Officer of ResortQuest in May 1998. Mr. Farmer was Senior Vice President for
Internet and Desktop Services of Marriott International from November 1996 to
April 1998. He also served as Vice President of Data Resources & Services for
Marriott International from March 1992 to November 1996.
PAUL N. MANTERIS became Senior Vice President, Homeowner
Relations/Operations Support in January 2000. From September 1988 to January
2000, he was Vice President of Operations for ResortQuest. From November 1997 to
September 1998, Mr. Manteris opened and operated a bagel franchise on the island
of Maui, Hawaii. He was Manager of Training and Special Projects for Premier
Resorts Inc., a hospitality management company operating primarily in the West
and Hawaii, from 1993 to 1997. From 1989 to 1993 Mr. Manteris was employed with
Village Resorts, Inc, a property management company, as general manager of
various resorts including, Radisson Picacho Plaza, Santa Fe, N.M., Wildwood
Lodge, Snowmass Village, Co., The Aspen County Inn, Aspen, Co. and Lakeland
Village Beach & Ski Resort, S. Lake Tahoe, CA.
W. MICHAEL MURPHY became the Senior Vice President and Chief
Development Officer of ResortQuest in May 1998. Mr. Murphy was President of
Footprints International, a company involved in the planning of resort
properties in the Bahamas, from 1996 to 1997. From 1994 to 1996, he was a Senior
Managing Director of Geller & Co., a Chicago-based hotel advisory and asset
management firm. Prior to joining Geller & Co. he acted as a hotel consultant
from 1992 to
25
<PAGE>
1994. Mr. Murphy was a founding partner of the hotel investment firm of Moeckel
Murphy (1990-1992) and a founding general partner of Metric Partners
(1981-1990), a real estate investment company that was a joint venture between
the partners of The Fox Group and Metropolitan Life Insurance Company. Prior to
that time, he was the Director of Real Estate for Holiday Inns, Inc. from 1973
to 1981.
PART II
ITEM 5. MARKET FOR RESORTQUEST'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market for our Common Stock is the New York Stock Exchange.
Information required by this item concerning quarterly sales price data is
incorporated by reference from the table STOCK PRICE on page 39 of the 1999
Annual Report to Shareholders.
The following is certain information concerning all sales of securities by
ResortQuest during the year ended December 31, 1999 that were not registered
under the Securities Act of 1933:
In June of 1999, ResortQuest issued a total of $50 million of Senior
Secured Notes due June 16, 2004. The offer and sale of these notes was
exempt from registration under the Securities Act in reliance on
Section 4(2) thereof because, among other things, the offers and sales
were made to a small number of sophisticated institutional investors
who had access to information about ResortQuest and were able to bear
the economic risk of loss of their investment.
ITEM 6. SELECTED FINANCIAL DATA
Financial information required by this item is incorporated by reference
from the SELECTED FINANCIAL DATA on page 39 of the 1999 Annual Report to
Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is incorporated by reference from the
MANAGEMENT'S DISCUSSION AND ANALYSIS on pages 13 through 20 of the 1999 Annual
Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ResortQuest is exposed to market risk, primarily through changes in
interest rates impacting borrowing rates on our debt. For a more detailed
discussion of the interest rates on our long-term borrowings, see
"NOTE 7-LONG-TERM DEBT" on page 32 of the 1999 Annual Report, which
information is incorporated herein by reference.
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is incorporated by reference from the
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS found on page 38, from the consolidated
financial statements and supplementary data on pages 23 through 37 of the 1999
Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF RESORTQUEST
Information about Directors of ResortQuest is incorporated by reference
from the discussion under Item 1 of our Proxy Statement for the 2000 Annual
Meeting of Shareholders. The balance of the response to this item is contained
in the discussion entitled EXECUTIVE OFFICERS OF RESORTQUEST in Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information about executive compensation is incorporated by reference from
the discussion under the heading COMPENSATION OF EXECUTIVE OFFICERS in our Proxy
Statement for the 2000 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information about security ownership of certain beneficial owners and
management is incorporated by reference from the discussion under the heading
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS in our Proxy
Statement for the 2000 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information about certain relationships and transactions with related
parties is incorporated herein by reference from the discussion under the
heading CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS under Item 1 of our Proxy
Statement for the 2000 Annual Meeting of Shareholders.
27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
14(a)(1) FINANCIAL STATEMENTS
RESORTQUEST INTERNATIONAL, INC. The following consolidated financial
statements, related notes and report of independent public accountants, from the
1999 Annual Report to Shareholders, are incorporated by reference into Item 8 of
Part II of this report.
<TABLE>
<CAPTION>
PAGES(S) IN THE 1999 ANNUAL
REPORT TO SHAREHOLDERS
---------------------------
<S> <C>
Consolidated Balance Sheets.............................................................................23
Consolidated Statements of Income.......................................................................24
Consolidated Statements of Changes in Stockholders' Equity..............................................25
Consolidated Statements of Cash Flows...................................................................26
Notes to Consolidated Financial Statements..............................................................27
Report of Independent Public Accountants................................................................38
Quarterly Results of Operations.........................................................................39
Selected Financial Data.................................................................................39
</TABLE>
14(a)(2) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because they are not required or the information is
given elsewhere in the financial statements. The financial statements of
unconsolidated subsidiaries are omitted because they are not applicable.
14(a)(3) EXHIBITS
THESE EXHIBITS ARE AVAILABLE UPON REQUEST AT A CHARGE OF TEN CENTS PER
PAGE. REQUESTS SHOULD BE DIRECTED TO SECRETARY, RESORTQUEST INTERNATIONAL, INC.,
530 OAK COURT DRIVE, SUITE 360, MEMPHIS, TN 38117
2.1 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc., HCP Acquisition Corp.,
and Hotel Corporation of the Pacific, Inc. and Andre S. Tatibouet
(PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED
HEREIN BY REFERENCE).
28
<PAGE>
2.2 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc., B&B Acquisition Corp.,
Brindley Acquisition Corp., B&B On The Beach, Inc., Brindley and
Brindley Realty and Development, Inc., Douglas R. Brindley and Betty
Shotton Brindley (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
2.3 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc., Coastal Realty
Acquisition LLC, Coastal Management Acquisition Corp. and Coastal
Resorts Realty LLC, Coastal Resorts Management, Inc., Joshua M. Freeman,
T. Michael McNally and CMF Coastal Resorts, L.L.C. (PREVIOUSLY FILED ON
MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT ON
FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
2.4 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc. and Collection of Fine
Properties, Inc., Ten Mile Holdings, Ltd., Luis Alonso, Domingo R.
Moreira, Brenda M. Lopez Ibanez and Ana Maria Moreira (PREVIOUSLY FILED
ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
2.5 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc. and Houston and O'Leary
Company and Heidi O'Leary Houston (PREVIOUSLY FILED ON MARCH 12, 1998 AS
AN EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO.
333-47867) AND INCORPORATED HEREIN BY REFERENCE).
2.6 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc., Jupiter Acquisition Corp.
and Jupiter Property Management at Park City, Inc. and Jon R. Brinton
(PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED
HEREIN BY REFERENCE).
2.7 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc., Maui Acquisition Corp.
and Maui Condominium and Home Realty, Inc., Daniel C. Blair and Paul T.
Dobson (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
2.8 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc., Maury Acquisition Corp.
and The Maury People, Inc. and Sharon Benson Doucette (PREVIOUSLY FILED
ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
29
<PAGE>
2.9 - Agreement and Plan of Organization, dated as of March 11, 1998, by and
among Vacation Properties International, Inc., Priscilla Acquisition
Corp., Realty Consultants Acquisition Corp., Realty Consultants, Inc.,
and Howey Acquisition, Inc., Charles O. Howey and Dolores C. Howey
(PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED
HEREIN BY REFERENCE).
2.10 - Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., RPM Acquisition Corp.
and Resort Property Management, Inc., Daniel L. Meehan, Kimberlie C.
Meehan and Nancy Hess (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT
TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
2.11 - Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Telluride Acquisition
Corp., and Telluride Resort Accommodations, Inc. and Steven A. Schein,
Michael E. Gardner, Park Brady, Daniel Shaw, Carolyn S. Shaw, Virginia
C. Gordon, Joyce Allred, Ronald D. Allred, A.J. Wells, Forrest
Faulconer, Thomas McNamara, Donald J. Peterson, Nancy McNamara, Charles
E. Cobb, Jr., Sue M. Cobb, Stephen A. Martori, Anthony F. Martori,
Arthur John Martori and Alan Mishkin (PREVIOUSLY FILED ON MARCH 12, 1998
AS AN EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE
NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
2.12 - Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Trupp Acquisition
Corp., Management Acquisition Corp. and Trupp-Hodnett Enterprises, Inc.,
THE Management Company, Hans F. Trupp, Roy K. Hodnett, Pat Hodnett
Cooper and Austin Trupp (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN
EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO.
333-47867) AND INCORPORATED HEREIN BY REFERENCE).
2.13 - Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., Whistler Holding
Corp. and Whistler Chalets Ltd. and J. Patrick McCurdy (PREVIOUSLY FILED
ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
2.14 - Agreement and Plan of Organization, dated as of March 11, 1998, by
and among Vacation Properties International, Inc., FRS Acquisition
Corp., First Resort Software, Inc., Thomas A. Leddy, Evan H. Gull and
Daniel Patrick Curry (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT
TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
30
<PAGE>
2.15 - Stock Purchase Agreement dated September 11, 1998 by and among
ResortQuest International, Inc., Abbott Realty Services, Inc., Tops'L
Sales Group, Inc., William W. Abbott, Jr., Stephen J. Abbott, James R.
Steiner, Charles H. Van Driver, Sue C. Van Driver and Angus G. Andrews,
(PREVIOUSLY FILED ON OCTOBER 16, 1998 AS AN EXHIBIT TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-56703) AND INCORPORATED
HEREIN BY REFERENCE).
3.1 - Certificate of Incorporation, as amended (PREVIOUSLY FILED ON MARCH
12, 1998 AS AN EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT ON FORM
S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
3.2 - Bylaws of the Company, Amended as of February 10, 1999 (PREVIOUSLY
FILED ON MARCH 30, 1999 AS AN EXHIBIT TO THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1999 (FILE NO. 001-14115)
AND INCORPORATED HEREIN BY REFERENCE).
3.3 - Certificate of Amendment of Certificate of Incorporation of Company,
dated April 23, 1998 (changing the name of the Company from Vacation
Properties International, Inc. to ResortQuest International, Inc.)
(PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT NO. 1 TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
3.4 - Certificate of Amendment of Certificate of Incorporation of the
Company, dated May 11, 1998 (PREVIOUSLY FILED ON MAY 12, 1998 AS AN
EXHIBIT TO AMENDMENT NO. 3 TO THE COMPANY'S REGISTRATION STATEMENT ON
FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
4.1 - Specimen Common Stock Certificate (PREVIOUSLY FILED ON APRIL 27, 1998
AS AN EXHIBIT TO AMENDMENT NO. 1 TO THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY REFERENCE).
4.2 - Form of Registration Rights Agreements between the Company and each of
Alpine Consolidated II, LLC, Capstone Partners, LLC, John Przywara,
David Marshall, Douglas W. Comfort, Robert G. Falcone, Wayne Heller,
Dwain Wall, Stephen J. Garchik, John Shaw, David Sullivan, Jeffery M.
Jarvis, Frederick L. Farmer, W. Michael Murphy, Jules S. Sowder, John K.
Lines, Brian S. Sullivan, John D. Sullivan, the Sullivan Grandchildren's
Trust, the David L. Levine Irrevocable Children's Trust Under Agreement
dated April 27, 1998 f/b/o Whitney Monica Levine, the David L. Levine
Irrevocable Children's Trust Under Agreement dated April 27, 1998 f/b/o
Ross Michael Levine, the David L. Levine Irrevocable Children's Trust
Under Agreement dated April 27, 1998 f/b/o Keith Phillip Levine and the
David L. Levine Revocable Trust Under Agreement dated April 27, 1998
(PREVIOUSLY FILED ON MAY 26, 1998 AN EXHIBIT TO THE COMPANY'S CURRENT
REPORT ON FORM 8-K (FILE NO. 001-14115) AND INCORPORATED HEREIN BY
REFERENCE).
31
<PAGE>
4.3 Rights Agreement, dated as of February 25, 1999 between ResortQuest
International, Inc. and American Stock Transfer & Trust Company, as
Rights Agent (PREVIOUSLY FILED ON MARCH 30, 1999 AS AN EXHIBIT TO THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31,
1999 (FILE NO. 001-14115) AND INCORPORATED HEREIN BY REFERENCE).
4.4 - Summary of Plan Description for the ResortQuest Savings and Retirement
Plan (PREVIOUSLY FILED AS EXHIBIT 4.1 TO THE COMPANY'S REGISTRATION
STATEMENT ON FORM S-8 FILED ON MAY 21, 1999).
10.1 - Form of 1998 Long-Term Incentive Plan of the Company (PREVIOUSLY
FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S REGISTRATION
STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY
REFERENCE).
10.2 - Form of Employment Agreement between the Company and David C.
Sullivan (PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT
NO. 1 TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO.
333-47867) AND INCORPORATED HEREIN BY REFERENCE).
10.3 - Form of Employment Agreement between the Company and Jeffery M.
Jarvis (PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT
NO. 1 TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO.
333-47867) AND INCORPORATED HEREIN BY REFERENCE).
10.4 - Form of Employment Agreement between the Company and W. Michael
Murphy (PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT
NO. 1 TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO.
333-47867) AND INCORPORATED HEREIN BY REFERENCE).
10.5 - Form of Employment Agreement between the Company and Jules S. Sowder
(PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT NO. 1 TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
10.6 - Form of Employment Agreement between the Company and David L. Levine
(PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT NO. 1 TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
10.7 - Form of Employment Agreement between the Company and John K. Lines
(PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT NO. 1 TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
10.8 - Form of Employment Agreement between the Company and Frederick L.
Farmer (PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT
NO. 1 TO THE
32
<PAGE>
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
10.9 - Form of Employment Agreement between the Company and Luis Alonso
(PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT NO. 1 TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
10.10 - Form of Employment Agreement between the Company and Douglas R.
Brindley (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
10.11 - Form of Employment Agreement between the Company and Paul T. Dobson
(PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED
HEREIN BY REFERENCE).
10.12 - Form of Employment Agreement between the Company and Sharon Benson
Doucette (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
10.13 - Form of Employment Agreement between the Company and Evan H. Gull
(PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED
HEREIN BY REFERENCE).
10.14 - Form of Employment Agreement between the Company and Heidi O'Leary
Houston (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
10.15 - Form of Employment Agreement between the Company and Daniel L.
Meehan (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
10.16 - Form of Management Services Agreement between the Company and J.
Patrick McCurdy (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
10.17 - Form of Employment Agreement between the Company and Andre S.
Tatibouet (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION
33
<PAGE>
STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED HEREIN BY
REFERENCE).
10.18 - Form of Employment Agreement between the Company and Hans F. Trupp
(PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND INCORPORATED
HEREIN BY REFERENCE).
10.19 - Form of Officer and Director Indemnification Agreement (PREVIOUSLY
FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT NO. 1 TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867) AND
INCORPORATED HEREIN BY REFERENCE).
10.20 - Form of Consulting Agreement between the Company and Park Brady
(PREVIOUSLY FILED ON APRIL 27, 1998 AS AN EXHIBIT TO AMENDMENT NO. 1 TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
10.21 - Promissory Note (PREVIOUSLY FILED ON MARCH 12, 1998 AS AN EXHIBIT TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-47867)
AND INCORPORATED HEREIN BY REFERENCE).
10.22 - Credit Agreement dated as of May 26, 1998, in the amount of $30
million, among ResortQuest International, Inc. as Borrower and the
Financial Institutions named thereon and NationsBank, N.A. as agent for
the Financial Institutions (PREVIOUSLY FILED ON JUNE 12, 1998 AS AN
EXHIBIT TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO.
333-56703) AND INCORPORATED HEREIN BY REFERENCE).
10.23 - First Amendment to Credit Agreement, dated September 30, 1998
(PREVIOUSLY FILED ON NOVEMBER 16, 1998 AS EXHIBIT 10.1 TO THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998
(FILE NO. 001-14115) AND INCORPORATED HEREIN BY REFERENCE).
10.24 - Promissory Note, dated September 30, 1998, in the amount of $5.0
million, between ResortQuest International, Inc. and NationsBank, N.A.
(PREVIOUSLY FILED ON NOVEMBER 16, 1998 AS EXHIBIT 10.2 TO THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998
(FILE NO. 001-14115) AND INCORPORATED HEREIN BY REFERENCE).
10.25 Consulting Agreement dated September 10, 1998 by and among Abbott
Realty Services, Inc. and William W. Abbott, Jr. (PREVIOUSLY FILED ON
MARCH 30, 1999 AS AN EXHIBIT TO THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE PERIOD ENDED DECEMBER 31, 1999 (FILE NO. 001-14115) AND
INCORPORATED HEREIN BY REFERENCE).
34
<PAGE>
10.26 - Form of Officer and Director Indemnification Agreement, as amended
(PREVIOUSLY FILED ON MARCH 30, 1999 AS AN EXHIBIT TO THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1999 (FILE
NO. 001-14115) AND INCORPORATED HEREIN BY REFERENCE).
10.27 - Second Amendment to Credit Agreement, dated December 7, 1998
(PREVIOUSLY FILED ON MARCH 30, 1999 AS AN EXHIBIT TO THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1999 (FILE
NO. 001-14115) AND INCORPORATED HEREIN BY REFERENCE).
10.28 - Form of Section 401(k) Profit Sharing Plan Adoption Agreement
(PREVIOUSLY FILED ON MARCH 30, 1999 AS AN EXHIBIT TO THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1999 (FILE
NO. 001-14115) AND INCORPORATED HEREIN BY REFERENCE).
10.29 - Third Amendment to Credit Agreement, dated as of April 16, 1999
(PREVIOUSLY FILED ON MAY 28, 1999 AS EXHIBIT 10.29 TO THE COMPANY'S
POST-EFFECTIVE AMENDMENT (FILE NO. 333-56703) AND INCORPORATED HEREIN BY
REFERENCE).
10.30 - Fourth Amendment to Credit Agreement, dated as of June 1,
1999(PREVIOUSLY FILED ON JULY 16, 1999 AS EXHIBIT 10.30 TO THE COMPANY'S
FORM S-4 REGISTRATION STATEMENT (FILE NO. 333-83059) AND INCORPORATED
HEREIN BY REFERENCE).
10.31 - Note Purchase and Guarantee Agreement, dated as of June 1,
1999(PREVIOUSLY FILED ON JULY 16, 1999 AS EXHIBIT 10.31 TO THE COMPANY'S
FORM S-4 REGISTRATION STATEMENT (FILE NO. 333-83059) AND INCORPORATED
HEREIN BY REFERENCE).
10.32 - Intercreditor and Collateral Agency Agreement dated as of June 1,
1999(PREVIOUSLY FILED ON JULY 16, 1999 AS EXHIBIT 10.32 TO THE COMPANY'S
FORM S-4 REGISTRATION STATEMENT (FILE NO. 333-83059) AND INCORPORATED
HEREIN BY REFERENCE).
10.33 - Amended and Restated 1998 Long-Term Incentive Plan of the Company
(PREVIOUSLY FILED ON APRIL 6, 1999 AS AN EXHIBIT TO THE COMPANY'S PROXY
STATEMENT (FILE NO. 001-14115) AND INCORPORATED HEREIN BY REFERENCE).
10.34 - Fifth Amendment to Credit Agreement, dated as of December 31, 1999.
10.35 - Employment Agreement between the Company and J. Mitchell Collins
dated as of March 13, 2000.
10.36 - Employment Agreement between the Company and Paul Manteris dated as
of January 3, 2000.
10.37 - Employment Agreement between the Company and James Olin dated as of
January 4, 2000.
35
<PAGE>
10.38 - Form of First Amendment to Employment Agreement between the Company
and each of David C. Sullivan, David L. Levine, Frederick L. Farmer and
W. Michael Murphy, dated as of July 29, 1999.
10.39 - Second Amendment to Employment Agreement between the Company and
David L. Sullivan, dated as of December 15, 1999.
10.40 - Second Amendment to Employment Agreement between the Company and
David L. Levine, dated as of December 15, 1999.
13 - The 1999 Annual Report to Shareholders, which, except for those
portions expressly incorporated herein by reference, is furnished solely
for the information of the Commission and is not to be deemed "filed."
21 - Subsidiaries of the Company.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule for the Period Ended December 31, 1999.
14(b) REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the last quarter
of 1999.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RESORTQUEST INTERNATIONAL, INC.
By: /s/ David L. Levine
------------------------------------
David L. Levine, President and
Chief Executive Officer
Dated: March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David C. Sullivan Chairman of the Board March 29, 2000
- -------------------------------
(David C. Sullivan)
/s/ David L. Levine President and Chief Executive March 29, 2000
- ------------------------------- Officer, Director (Principal
(David L. Levine) Executive Officer)
/s/ J. Mitchell Collins Senior Vice President and March 29, 2000
- ------------------------------- Chief Financial Officer
(J. Mitchell Collins) (Principal Financial and
Accounting Officer)
/s/ William W. Abbott, Jr. Director March 29, 2000
- -------------------------------
(William W. Abbott, Jr.)
/s/ Elan J. Blutinger Director March 29, 2000
- -------------------------------
(Elan J. Blutinger)
/s/ D. Fraser Bullock Director March 29, 2000
- -------------------------------
(D. Fraser Bullock)
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Joshua M. Freeman Director March 29, 2000
- -------------------------------
(Joshua M. Freeman)
/s/ Heidi Houston Director March 29, 2000
- -------------------------------
(Heidi Houston)
/s/ Michael D. Rose Director March 29, 2000
- -------------------------------
(Michael D. Rose)
/s/ Andre S. Tatibouet Director March 29, 2000
- -------------------------------
(Andre S. Tatibouet)
/s/ Joseph V. Vittoria Director March 29, 2000
- -------------------------------
(Joseph V. Vittoria)
/s/ Theodore L. Weise Director March 29, 2000
- -------------------------------
(Theodore L. Weise)
</TABLE>
38
<PAGE>
EXHIBIT 10.34
FIFTH AMENDMENT
THIS FIFTH AMENDMENT (this "AMENDMENT"), dated as of December 31, 1999,
is by and among RESORTQUEST INTERNATIONAL, INC., a Delaware corporation (the
"BORROWER"), the Subsidiaries of the Borrower party hereto (collectively the
"GUARANTORS"), the Lenders party hereto (the "LENDERS"), SOCIETE GENERALE, as
Co-Agent (the "Co-Agent") and BANK OF AMERICA, N.A., formerly NationsBank, N.A.,
a national banking association as Agent for the Lenders (the "AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement dated as of May 26, 1998 (as
amended by a letter agreement dated as of September 30, 1998, a Second Amendment
dated as of December 7, 1998, a Third Amendment dated as of April 16, 1999 and a
Fourth Amendment dated as of June 1, 1999, the "EXISTING CREDIT AGREEMENT"),
among the Borrower, the Guarantors, the Lenders, the Co-Agent and the Agent, the
Lenders have extended commitments to make certain credit facilities available to
the Borrower;
WHEREAS, the Borrower has requested certain amendments to the Existing
Credit Agreement; and
WHEREAS, the Lenders have agreed to amend the Credit Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereby agree as follows:
PART I
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment Effective
Date, the Existing Credit Agreement is hereby amended in accordance with this
PART I. Except as so amended, the Existing Credit Agreement shall continue in
full force and effect.
SUBPART 1.1. AMENDMENT TO SECTION 1.1. The definition of "CONSOLIDATED
NET INCOME" contained in Section 1.1 of the Existing Credit Agreement is amended
in its entirety so that such definition now reads as follows:
"CONSOLIDATED NET INCOME" means, for any period, net income
(excluding extraordinary items) after taxes for such period of the
Consolidated Parties on a consolidated basis, as determined in
accordance with GAAP; provided, however, (i) one-time write-down
charges made by the Consolidated Parties for secondary offering costs
and pooling transaction costs, in an aggregate post-tax amount of
$335,000, shall not be taken into account for purposes of determining
Consolidated Net Income for the fiscal quarter ending June 30, 1999
and (ii) one-time write-down charges made by the
<PAGE>
Consolidated Parties for deferred costs for acquisitions, costs
associated with a study to identify alternative equity sources,
severance pay accruals and asset write-offs, in an aggregate
post-tax amount of $1,445,000, shall not be taken into account for
purposes of determining Consolidated Net Income for the fiscal
quarter ending December 31, 1999.
SUBPART 1.2. AMENDMENT TO SECTION 7.11(B). Section 7.11(b) of the
Existing Credit Agreement is amended in its entirety so that such Section now
reads as follows:
(b) LEVERAGE RATIO. The Leverage Ratio, (i) as of the last day
of each fiscal quarter of the Consolidated Parties other than the
fiscal quarter ending December 31, 1999, shall be less than or equal to
2.5 to 1.0 and (ii) as of the last day of the fiscal quarter of the
Consolidated Parties ending December 31, 1999, shall be less than or
equal to 2.7 to 1.0.
SUBPART 1.3. AMENDMENT TO SECTION 7.11(D). Section 7.11(d) of the
Existing Credit Agreement is amended in its entirety so that such Section now
reads as follows:
(d) CONSOLIDATED CAPITAL EXPENDITURES. The Borrower shall not
permit Consolidated Capital Expenditures to exceed (i) $3,000,000 for
the fiscal year 1998, (ii) $5,300,000 for the fiscal year 1999 and
(iii) $4,000,000 for the fiscal year 2000 and thereafter. In each such
fiscal year Consolidated Capital Expenditures shall be computed on a
non-cumulative basis.
PART II
CONDITIONS TO EFFECTIVENESS
SUBPART 2.1. AMENDMENT EFFECTIVE DATE. Upon satisfaction of all of the
conditions set forth in this PART II, this Amendment shall be deemed effective
on December 31, 1999 (the "AMENDMENT EFFECTIVE DATE"), and thereafter this
Amendment shall be known, and may be referred to, as the "FIFTH AMENDMENT."
SUBPART 2.2. EXECUTION OF COUNTERPARTS OF AMENDMENT. The Agent shall
have received counterparts (or other evidence of execution, including telephonic
message, satisfactory to the Agent) of this Amendment, which collectively shall
have been duly executed on behalf of each of the Borrower, the Guarantors and
the Required Lenders.
SUBPART 2.3. FURTHER ASSURANCES. The Agent shall have received such
other documents, instruments and certificates as the Agent may reasonably
request.
2
<PAGE>
PART III
MISCELLANEOUS
SUBPART 3.1. CROSS-REFERENCES. References in this Amendment to any Part
or Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.
SUBPART 3.2. INSTRUMENT PURSUANT TO EXISTING CREDIT AGREEMENT. This
Amendment is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of the
Existing Credit Agreement.
SUBPART 3.3. REFERENCES IN OTHER CREDIT DOCUMENTS. At such time as this
Amendment shall become effective pursuant to the terms of SUBPART 2.1, all
references in the Existing Credit Agreement and the other Credit Documents to
the "Credit Agreement" shall be deemed to refer to the Existing Credit Agreement
as amended by this Amendment.
SUBPART 3.4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower hereby represents and warrants that (a) the conditions precedent to the
initial Loans were satisfied as of the Closing Date (assuming satisfaction or
waiver, if applicable, of all requirements in such conditions that an item be in
form and/or substance reasonably satisfactory to the Agent or any Lenders or
that any event or action have been completed or performed to the reasonable
satisfaction of the Agent or any Lenders), (b) the representations and
warranties contained in SECTION 6 of the Existing Credit Agreement (as amended
or modified by this Amendment) are correct in all material respects on and as of
the date hereof (except for those which expressly relate to an earlier date) as
though made on and as of such date and after giving effect to the amendments
contained herein and (c) no Default or Event of Default exists under the
Existing Credit Agreement on and as of the date hereof and after giving effect
to the amendments contained herein.
SUBPART 3.5. ACKNOWLEDGMENT OF GUARANTORS. The Guarantors acknowledge
and consent to all of the terms and conditions of this Fifth Amendment and agree
that this Fifth Amendment and all documents executed in connection herewith do
not operate to reduce or discharge the Guarantors' obligations under the Credit
Documents
SUBPART 3.6. COUNTERPARTS. This Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SUBPART 3.7. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NORTH
CAROLINA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART 3.8. SUCCESSORS AND ASSIGNS. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
3
<PAGE>
Each of the parties hereto has caused a counterpart of this Amendment
to be duly executed and delivered as of the date first above written.
BORROWER: RESORTQUEST INTERNATIONAL, INC.
a Delaware corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
GUARANTORS: FIRST RESORT SOFTWARE, INC.,
a Colorado corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
B&B ON THE BEACH, INC.,
a North Carolina corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
BRINDLEY & BRINDLEY REALTY &
DEVELOPMENT, INC., a North Carolina
corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
COASTAL RESORTS REALTY L.L.C.,
a Delaware limited liability company
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
<PAGE>
COASTAL RESORTS MANAGEMENT, INC.,
a Delaware corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
COLLECTION OF FINE PROPERTIES, INC.,
a Colorado corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
TEN MILE HOLDINGS, LTD.,
a Colorado corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
HOTEL CORPORATION OF THE PACIFIC, INC.,
a Hawaii corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
HOUSTON AND O'LEARY COMPANY,
a Colorado corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
<PAGE>
MAUI CONDOMINIUM & HOME REALTY, INC.,
a Hawaii corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
THE MAURY PEOPLE, INC.,
a Massachusetts corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
HOWEY ACQUISITION, INC.,
a Florida corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
REALTY CONSULTANTS, INC.,
a Florida corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
RESORT PROPERTY MANAGEMENT, INC.,
a Utah corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
<PAGE>
TELLURIDE RESORT ACCOMMODATIONS, INC.,
a Colorado corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
TRUPP-HODNETT ENTERPRISES, INC.,
a Georgia corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
THE MANAGEMENT COMPANY,
a Georgia corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
WHISTLER CHALETS LTD.,
a British Columbia corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
ABBOTT & ANDREWS REALTY, INC.,
a Florida corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
<PAGE>
ABBOTT REALTY SERVICES, INC.,
a Florida corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
ABBOTT RESORTS, INC.,
a Florida corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
PLANTATION RESORT MANAGEMENT, INC.,
a Florida corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
THE TOPS'L GROUP, INC.,
a Florida corporation
By: /s/ David L. Levine
-----------------------------------------
Name: David L. Levine
--------------------------------------
Title: President and CEO
-------------------------------------
<PAGE>
LENDERS: BANK OF AMERICA, N. A.,
formerly NationsBank, N.A., individually
in its capacity as a Lender and in its
capacity as Agent
By: /s/ John E. Ball
-----------------------------------------
Name: John E. Ball
--------------------------------------
Title: Managing Director
--------------------------------------
<PAGE>
SOCIETE GENERALE,
individually in its capacity as a
Lender and in its capacity as Co-Agent
By:
-----------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
<PAGE>
UNION PLANTERS BANK, N.A.
By: /s/ Elizabeth Rouse
-----------------------------------------
Name: Elizabeth Rouse
--------------------------------------
Title: Vice President
--------------------------------------
<PAGE>
Exhibit 10.35
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), by and between
ResortQuest International, Inc., a Delaware corporation formerly known as
Vacation Properties International, Inc. and J. Mitchell Collins ("Employee"), is
dated as of this 13th day of March, 2000 (the "Effective Date"). If RQI and the
other party to a transaction constituting a Change in Control (as defined
herein) agree that such transaction shall be treated as a "pooling of interests"
for financial reporting purposes, and if the transaction is in fact so treated,
then the provisions of this Agreement shall not be valid to the extent that
RQI's independent public accountants determine in good faith that the provisions
of this Agreement would preclude "pooling of interests" accounting.
WITNESSETH:
WHEREAS, as of the date of this Agreement, RQI is engaged primarily in
the business of providing noncommercial property management, rental and sales
services and hotel management services;
WHEREAS, Employee is employed hereunder by RQI in a confidential
relationship wherein Employee, in the course of Employee's employment with RQI,
has and will continue to become familiar with and aware of information as to
RQI's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by RQI, and future plans with respect
thereto, all of which has been and will be established and maintained at great
expense to RQI, which information is a trade secret and constitutes the valuable
goodwill of RQI;
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, the
parties hereto hereby agree as follows:
AGREEMENTS:
1. EMPLOYMENT AND DUTIES.
(a) RQI hereby employs Employee as Senior Vice President and Chief
Financial Officer of RQI. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a Senior Vice President and
<PAGE>
Chief Financial Officer of RQI and will report to the Chief Executive Officer
("CEO") and the Board of Directors (the "Board") of RQI. Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
SECTION L(C) hereof, agrees to devote Employee's full working time, attention
and efforts to promote and further the business of RQI.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by RQI.
(c) Employee shall not, during the Term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of SECTION 3 hereof.
2. COMPENSATION; OPTIONS.
For all services rendered by Employee, RQI shall compensate Employee as
follows:
(a) BASE SALARY. The base salary payable to Employee shall be $180,000
per year, payable on a regular basis in accordance with RQI's standard payroll
procedures but not less than monthly.
(b) INCENTIVE BONUS PLAN. It is RQI's intent to develop a written
Incentive Bonus Plan (which may be RQI's Incentive Bonus Plan) setting forth the
criteria under which Employee and other officers and key employees will be
eligible to receive year-end bonus awards. RQI contemplates that the maximum
bonus for which Employee may be eligible will be fifty percent (50%) of
Employee's base salary.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from RQI in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that RQI may have in effect from time to time, such benefits
provided to Employee under this clause (I) to be at least equal to such
benefits provided to RQI executives;
2
<PAGE>
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with RQI's expense reporting
policy; and
(iii) RQI shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other RQI-wide employee benefits
as available from time to time.
At the Effective Date, RQI shall grant to Employee options to acquire
fifty thousand (50,000) shares of RQI common stock at a price per share equal to
the closing price on the Effective Date. Such options shall vest in installments
of sixteen thousand six hundred sixty-seven (16,667) shares on each of the first
(1st) and second (2nd) anniversaries of the Effective Date, and sixteen thousand
six hundred sixty-six (16,666) on the third (3rd) anniversary of the Effective
Date.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
RQI, and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for himself or on behalf of or in conjunction with any other
person, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
RQI or any subsidiary of RQI, within one hundred (100) miles of the
locations in which RQI or any of RQI's subsidiaries conducts any
noncommercial property management, rental or sales business or hotel
management business (the "TERRITORY");
(ii) call upon any person who is, at that time, within the
Territory, an employee of RQI (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of RQI
(including
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the subsidiaries thereof), provided that Employee shall be permitted
to call upon and hire any member of his immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
RQI (including the subsidiaries thereof) within the Territory for the
purpose of providing noncommercial property management, rental or sales
services to property owners and/or renters in direct competition with
RQI or any subsidiary of RQI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by RQI (including the subsidiaries
thereof) or for which, to Employee's actual knowledge after due
inquiry, RQI (or any subsidiary thereof) made an acquisition analysis,
for the purpose of acquiring such entity, unless RQI (or any subsidiary
thereof) has expressly declined to pursue such acquisition candidate or
at least one (1) year has elapsed since RQI (or any subsidiary thereof)
has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from (A) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter, or (B) engaging in the
hotel management business if the Employee's employment hereunder is terminated
after the initial Term of this Agreement.
(b) Because of the difficulty of measuring economic losses to RQI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to RQI for which RQI would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
RQI in the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this SECTION 3 impose a reasonable restraint on Employee in light of the
activities and business of RQI (including RQI's subsidiaries) on the date of the
execution of this Agreement and the current plans of RQI (including RQI's
subsidiaries); but it is also the intent of RQI and Employee that such covenants
be construed and enforced in accordance with the changing locations of RQI
(including RQI's subsidiaries) throughout the Term of this Agreement. For
example, if, during the
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Term of this Agreement, RQI (including RQI's subsidiaries) establishes new
locations for its current activities or business, then Employee will be
precluded from soliciting the customers or employees from such new location and
from directly competing within one hundred (100) miles of such locations through
the Term of this Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with RQI (including RQI's
subsidiaries), or similar activities, or business in locations the operation of
which, under such circumstances, does not violate clause (A) of this SECTION 3,
and in any event such new business, activities or location are not in violation
of this SECTION 3 or of Employee's obligations under this SECTION 3, if any,
Employee shall not be chargeable with a violation of this SECTION 3 if RQI
(including RQI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this SECTION 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this SECTION 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against RQI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by RQI of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this Section 3, during which the
agreements and covenants of Employee made in this Section 3 shall be effective,
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of this SECTION 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by RQI to relocate
from Employee's present residence to another geographic location in order
to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event if Employee agrees to relocate, RQI will
pay all
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reasonable relocation costs to move Employee, Employee's immediate family
and their personal property and effects. Such costs may include, by way of
example, but are not limited to: reasonable expenses related to pre-move
visits to search for a new residence, to investigate schools or for other
purposes; reasonable temporary lodging and living costs prior to moving
into a new permanent residence; duplicate home carrying costs; all closing
costs on the sale of Employee's present residence and on the purchase of a
comparable residence in the new location; and added income taxes that
Employee may incur if any unreimbursed relocation costs are not deductible
for tax purposes. The general intent of the foregoing is that Employee
shall not personally bear any out-of-pocket costs as a result of the
relocation, with an understanding that Employee will use Employee's best
efforts to incur only those costs which are reasonable and necessary to
effect a smooth, efficient and orderly relocation with minimal disruption
to the business affairs of RQI, and the personal life of Employee and
Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall constitute "good cause" for
termination of this Agreement under the terms of SECTION 5(c) hereof.
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the Effective Date and
continue until October 1, 2002, and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal (such
initial period and any extensions thereof being referred to herein as the
"Term"). This Agreement and Employee's employment may be terminated in any one
of the following ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such four (4) month period, but which shall not be effective earlier than
the last day of such four (4) month period), RQI may terminate Employee's
employment hereunder, provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provide that Employee
shall have
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furnished RQI with a written statement from a qualified doctor to such effect
and provided, further that, at RQI's request made within thirty (30) days of the
date of such written statement, Employee shall submit to an examination by a
doctor selected by RQI who is reasonably acceptable to Employee or Employee's
doctor and such doctor shall have concurred in the conclusion of Employee's
doctor. In the event this Agreement is terminated as a result of Employee's
disability, Employee shall have no right to any severance compensation.
(c) GOOD CAUSE. RQI may terminate this Agreement ten (10) days after
delivery of written notice to Employee for "good cause", which shall be: (1)
Employee's willful, material and irreparable breach of the Agreement; (2)
Employee's continual and material failure to adequately perform, continuing for
ten (10) days after receipt of written notice of need to cure, any of Employee's
material duties and responsibilities, provided that a termination pursuant to
this clause (2) is approved by a vote of at least two-thirds (2/3) of the Board;
(3) Employee's willful dishonesty, fraud or misconduct which has a material
adverse affect on the operations or reputation of RQI (other than good faith
expense account disputes); (4) Employee's conviction in a court of competent
jurisdiction of a felony (other than a traffic violation); (5) Employee's
chronic alcohol abuse or illegal drug use; or (6) Employee's refusal to relocate
as set forth in Section 4(b) above. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.
(d) WITHOUT GOOD CAUSE. Should Employee be terminated by RQI without
good cause during the Term, Employee shall be entitled to continue to receive
from RQI the base salary at the rate then in effect for whatever time period is
remaining under the Term of this Agreement or for one (1) year, whichever amount
is greater. Should Employee be terminated by RQI without good cause at any time
during or after the Term, Employee shall be entitled to waive Employee's right
to receive severance compensation (by a written waiver delivered to RQI on the
effective date of termination), and, in such case, the noncompetition provisions
of SECTION 3 hereof shall not apply.
(e) BY EMPLOYEE. At any time after the commencement of employment,
Employee may, without "good reason" (as defined in Exhibit A hereto), terminate
this Agreement and Employee's employment, effective thirty (30) days after
written notice is provided to RQI. If Employee resigns or otherwise terminates
Employee's employment without good reason, Employee shall receive no severance
compensation. If Employee's resignation or other termination by Employee is for
good reason, RQI shall pay all amounts and damages to which Employee may be
entitled as a result of such resignation or other termination, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Employee to enforce Employee's rights hereunder. Further, none
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<PAGE>
of the provisions of SECTION 3 hereof shall apply in the event this Agreement is
terminated by Employee for good reason.
(f) CHANGE IN CONTROL OF RQI. In the event of a "Change in Control" of
RQI (as defined below) during the Term, refer to SECTION 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
SECTION 12 hereof. All other rights and obligations of RQI and Employee under
this Agreement shall cease as of the effective date of termination, except that
RQI's obligations under SECTION 9 hereof and Employee's obligations under
SECTIONS 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance
with their terms. Notwithstanding anything herein to the contrary, if a Change
in Control occurs during the Term and there is less than one (1) year remaining
on the Term, the Term shall be extended for one (1) year following the date of
the Change in Control, provided that the payment and other obligations hereunder
shall survive the termination of this Agreement to the extent a Change in
Control has occurred at any time during the Term.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of RQI or its representatives, vendors or customers
which pertain to the business of RQI shall be and remain the property of RQI and
be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of RQI which
is collected by Employee shall be delivered promptly to RQI without request by
it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to RQI any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment or within one (1) year
thereafter, and which are directly related to the business or activities of RQI
and which Employee conceives as a result of Employee's employment by RQI.
Employee hereby assigns and agrees to assign all of Employee's interests therein
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to RQI or its nominee. Whenever requested to do so by RQI, Employee shall
execute any and all applications, assignments or other instruments that RQI
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect RQI's interest therein.
8. TRADE SECRETS.
Employee agrees that he will not, during or after the Term of this
Agreement with RQI, disclose the specific terms of RQI's relationships or
agreements with its significant vendors or customers or any other significant
and material trade secret of RQI, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by RQI against Employee), by reason of the
fact that Employee is or was performing services under this Agreement, then RQI
shall indemnify Employee against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, as actually and reasonably
incurred by Employee in connection therewith. In the event that both Employee
and RQI are made a party to the same third-party action, complaint, suit or
proceeding, RQI agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by RQI
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and RQI shall pay all reasonable
attorneys' fees of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to RQI that the execution of
this Agreement by Employee and his employment by RQI and the performance of
Employee's duties hereunder will not violate or constitute a breach of any
agreement with a former employer, client or any other person or entity. Further,
Employee agrees to indemnify RQI for any claim, including but not limited to
attorneys' fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against RQI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
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11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by RQI on
the basis of Employee's personal qualifications, experience and skills.
Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of SECTION 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to
subsection (C) below, Employee understands and acknowledges that RQI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of RQI hereunder or that RQI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this SECTION 12 shall be applicable.
(b) In the event of a pending Change in Control wherein RQI and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of RQI's business
and/or assets that such successor is willing as of the closing to assume and
agree to perform RQI's obligations under this Agreement in the same manner and
to the same extent that RQI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by RQI without
cause during the Term and the applicable portions of SECTION 5(d) hereof shall
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of SECTION
5(D) and shall payable in a lump sum payment and the noncompetition provisions
of SECTION 3 hereof shall not apply. In addition, RQI shall provide Employee
with the benefits set forth in subsections 12(h)(ii) through (iv) hereof.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to RQI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of SECTION 5(d)
hereof shall apply as though the Company had terminated the Agreement without
cause during the Term; provided, however under such circumstances, the amount of
the severance payment due to Employee shall be double the amount calculated
under the terms of SECTION 5(d) and shall be payable in a lump sum payment and
the
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noncompetition provisions of SECTION 3 hereof shall all apply for a period of
two (2) years from the effective date of termination. Employee shall have the
right to waive Employee's right to receive the severance compensation payable
under this SECTION 12(c) (by a written waiver delivered to RQI on the effective
date of the termination), in which case the noncompetition provisions of SECTION
3 hereof shall not apply.
(d) For purposes of applying SECTION 5 hereof under the circumstances
described in subsections (b) and (c) above, the effective date of termination
shall be the closing date of the transaction giving rise to the Change in
Control, and all compensation, reimbursements and lump-sum payments due Employee
must be paid in full by RQI at or prior to such closing. Further, Employee shall
be given sufficient time and opportunity to elect whether to exercise all or any
of Employee's vested options to purchase RQI Common Stock, including any options
with accelerated vesting under the provisions of RQI's 2000 Long-Term Incentive
Plan, such that Employee may convert the options to shares of RQI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred:
(i) any person or entity, other than RQI or an employee
benefit plan of RQI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of RQI and immediately
after such acquisition such person or entity is, directly or
indirectly, the Beneficial Owner of voting securities representing
fifty percent (50%) or more of the total voting power of all of the
then outstanding voting securities of RQI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of RQI: (A) those individuals
who, as of the closing date of RQI's initial public offering,
constitute the Board of Directors of RQI (the "ORIGINAL DIRECTORS");
(B) those individuals who thereafter are elected to the Board of
Directors of RQI and whose election, or nomination for election, to the
Board of Directors of RQI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) those individuals who are elected to the Board of
Directors of RQI and whose election, or nomination for election, to the
Board of Directors of RQI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original
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Directors then still in office (such directors also becoming
"Additional Original Directors" immediately following their
election);
(iii) the stockholders of RQI shall approve a merger,
consolidation, recapitalization or reorganization of RQI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least seventy-five
percent (75%) of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least seventy-five percent
(75%) of the holders of outstanding voting securities of RQI
immediately prior to the transaction, with the voting power of each
such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of RQI shall approve a plan of complete
liquidation of RQI or an agreement for the sale or disposition by RQI
of all or a substantial portion of RQI's assets (i.e., fifty percent
(50%) or more of the total assets of RQI).
(f) Employee must be notified in writing by RQI at any time that RQI
anticipates that a Change in Control may take place.
(g) (i) In the event any payment that is either received by Employee or
paid by RQI on his behalf or any property or any other benefit provided
to him under this Agreement or under any other plan, arrangement or
agreement with RQI or any other person whose payments or benefits are
treated as contingent on a change of ownership or control of RQI (or in
the ownership of a substantial portion of the assets of RQI) or any
person affiliated with RQI or such person (but only if such payment or
other benefit is in connection with Employee's employment by RQI
(collectively the "RQI PAYMENTS")), shall be subject to the tax (the
"EXERCISE TAX") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "CODE") (and any similar tax that may hereafter
be imposed by any taxing authority), RQI shall pay to Employee at the
time specified in clause (iv) below an additional amount (the "GROSS-UP
PAYMENT") such that the net amount retained by Employee, after
deduction of any Excise Tax on the RQI Payments and any U.S. federal,
state, or local income or payroll tax upon the Gross-up Payment
provided for by this clause (i), but before deduction for any U.S.
federal, state, and local income or payroll tax on the RQI Payments,
shall be equal to the RQI Payments.
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(ii) For purposes of determining whether any of the RQI
Payments and Gross-up Payments (collectively the "TOTAL PAYMENTS") will
be subject to the Excise Tax and the amount of such Excise Tax, (A) the
Total Payments shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "parachute payments"
in excess of the "base amount" (as defined under Code Section
280G(b)(3) of the Code) shall be treated as subject to the Exercise
Tax, unless and except to the extent that, in the opinion of RQI's
independent certified public accountants appointed prior to any Change
in Control or tax counsel selected by such accountants or RQI (the
"ACCOUNTANTS"), such Total Payments (in whole or in part) either do not
constitute "parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the "base amount," or are otherwise not subject
to the Excise Tax, and (B) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code. In the
event that the Accountants are serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, Employee
may appoint another nationally recognized accounting firm to make the
determinations hereunder (which accounting firm shall then be referred
to as the "Accountants" hereunder). All determinations hereunder shall
be made by the Accountants which shall provide detailed supporting
calculations both to RQI and Employee at such time as it is requested
by RQI or Employee. If the Accountants determine that payments under
this Agreement must be reduced pursuant to this SECTION 12, they shall
furnish Employee with a written opinion to such effect. The
determination of the Accountants shall be binding upon RQI and
Employee.
(iii) For purposes of determining the amount of the Gross-up
Payment, Employee shall be deemed to pay U.S. federal income taxes at
the highest marginal rate of U.S. federal income taxation in the
calendar year in which the Gross-up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the
state and locality of Employee's residence for the calendar year in
which the RQI Payments are to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction of
such state and local taxes if paid in such year. In the event that the
Excise Tax is subsequently determined by the Accountants to be less
than the amount taken into account hereunder at the time the Gross-up
Payment is made, Employee shall repay to RQI, at the time that the
amount of such reduction in Excise Tax is finally determined, the
portion of the prior Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up
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Payment attributable to the Excise Tax and U.S. federal, state and local
income tax imposed on the portion of the Gross-up Payment being repaid
by Employee if such repayment results in a reduction in Excise Tax or a
U.S. federal, state and local income tax deduction), plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event
any portion of the Gross-up Payment to be refunded to RQI has been paid
to any U.S. federal, state or local tax authority, repayment thereof
(and related amounts) shall not be required until actual refund or
credit of such portion has been made to Employee, and interest payable
to RQI shall not exceed the interest received or credited to Employee by
such tax authority for the period it held such portion. Employee and RQI
shall mutually agree upon the course of action to be pursued (and the
method of allocating the expense thereof) if Employee's claim for refund
or credit is denied.
In the event that the Excise Tax is later determined by the
Accountants to exceed the amount taken into account hereunder at the
time the Gross-up Payment is made (including by reason of any payment
the existence or amount of which cannot be determined at the time of
the Gross-up Payment), RQI shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties payable with
respect to such excess) at the time that the amount of such excess is
finally determined.
(iv) Not later than the date on which Employee's Excise Tax is
due (which shall include the date that any withholding obligation for
such Excise Tax is required to be satisfied), RQI shall pay to Employee
or, in the case of any withholding obligation, the Internal Revenue
Service on behalf of such Employee, an amount equal to the Excise Tax.
The Gross-up Payment or portion thereof provided for in clause (iii)
above (less any amounts paid pursuant to the preceding sentence) shall
be paid within ten (10) days after Employee delivers a written request
for reimbursement accompanied by a copy of Employee's tax return(s)
showing the Excise Tax actually incurred by Employee.
(v) Employee shall notify the Chief Executive Officer of RQI
in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by RQI of a Gross-up Payment.
Such notification shall be given as soon as practicable but no later
than ten (10) business days after Employee is informed in writing of
such claim and shall apprise RQI of the nature of such claim and the
date on which such claim is requested to be paid. Employee shall not
pay such claim prior to the expiration of the thirty (30) day period
following the date on which it gives
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such notice to RQI (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If RQI notifies
Employee in writing prior to the expiration of such period that it
desires to contest such claim, Employee shall:
(A) give RQI any information reasonably requested by RQI
relating to such claim;
(B) take such action in connection with contesting such
claim as RQI shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by RQI;
(C) cooperate with RQI in good faith in order to effectively
contest such claim; and
(D) permit RQI to participate in any proceedings relating to
such claim;
PROVIDED, HOWEVER, that RQI shall bear and pay directly all costs and expenses
(including, without limitation, additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Employee harmless, on
an after-tax basis, for any Excise Tax or income tax (including any interest and
penalties with respect thereto) imposed as a result of such representation and
payment of cost and expenses.
Without limitation on the foregoing provisions of this clause (v), RQI
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Employee to pay the tax
claimed and sue for a refund or contest the claim in any contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as RQI shall determine;
PROVIDED, HOWEVER, that if RQI directs Employee to pay such claim and sue for a
refund, RQI shall advance the amount of such payment to Employee, on an
interest-free basis, and shall indemnify and hold Employee harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and FURTHER PROVIDED
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, RQI's
control of the contest shall be limited to issues with respect to
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which a Gross-up Payment would be payable hereunder and Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(vi) If, after receipt by Employee of an amount advanced by
RQI pursuant to clause (v) above, Employee becomes entitled to receive
any refund with respect to such claim, Employee shall (subject to RQI's
complying with the requirements of clause (v) promptly pay to RQI the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Employee of an amount advanced by RQI pursuant to clause (v), a
determination is made that Employee shall not be entitled to any refund
with respect to such claim and RQI does not notify Employee in writing
of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall
offset, to the extent thereof, the amount of Gross-up Payment required
to be paid.
(vii) RQI shall be responsible for all charges of the
Accountants.
(viii) RQI and Employee shall promptly deliver to each other
copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax
covered by this SECTION 12.
(h) If Employee's employment by RQI is terminated within one (1) year
after a Change in Control by Employee for good reason or by RQI without good
cause, then RQI shall pay or provide Employee with all of the following
severance benefits:
(i) a lump-sum cash payment within fifteen (15) days of
Employee's date of termination (or, if applicable, such later date as
is necessary for Employee to execute the release described under
SECTION 20(b) herein) equal to three (3) times Employee's annual base
salary in effect immediately prior to the Change in Control;
(ii) any base salary, bonus, vacation pay, deferred
compensation accrued or earned under law or in accordance with RQI's
policies applicable to Employee but not yet paid and any incurred, but
unreimbursed business expenses for the period prior to termination
shall be payable in accordance with RQI's policies and the terms of the
applicable plan ("ACCRUED OBLIGATIONS");
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<PAGE>
(iii) continued participation (at RQI's cost and without any
required employee or dependent contributions) in all health or welfare
plans which cover Employee (and eligible dependents), including,
without limitation, medical, dental, life insurance and disability
coverage upon the same terms and conditions (except for the
requirements of Employee's continued employment) in effect on the
Employee's date of termination (which shall be substantially comparable
to the health or welfare plans in which Employee participated in
immediately prior to the Change in Control) until three (3) years after
the date of termination; provided, however that in the event Employee
obtains other employment that offers substantially similar or improved
benefits, as to any particular health or welfare plan, such
continuation of coverage by RQI for such similar or improved benefit
under such plan shall immediately cease. To the extent such coverage
cannot be provided under RQI's health plans without jeopardizing the
tax status of such plans, for underwriting reasons or because of the
tax impact on Employee, RQI shall pay Employee an amount such that
Employee can purchase such benefits separately at no greater after tax
cost to him than he would have had if such benefits were provided to
him as an employee. The continuation of health benefits for the
thirty-six (36) month period shall reduce and count against Employee's
rights under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; and
(iv) Outplacement services at a level commensurate with
Employee's position, including use of an Employee office and secretary
available through such outplacement services, for a period of one (1)
year commencing on the Employee's date of termination but in no event
extending beyond the date on which Employee commences other full time
employment.
(i) If Employee's employment by RQI is terminated by RQI without
good cause during the one hundred eighty (180) days prior to the effective
date of a Change in Control, then RQI shall pay or provide Employee with all
of the following severance benefits:
(i) a lump sum cash payment within fifteen (15) days of the
Change in Control (or, if applicable, such later date as is necessary
for Employee to execute the release described under SECTION 20(b)
hereof) equal to Employee's base salary at the rate in effect at the
time of Employee's termination for whatever time period is remaining
under the Term of this Agreement at the time of Employee's termination,
less any amounts paid pursuant to SECTION 5(d) hereof between the
effective date of Employee's termination and the effective date of a
Change in Control, plus
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<PAGE>
one (1) times Employee's annual base salary at the rate in effect at
the time of Employee's termination; and
(ii) the benefits set forth in subsections 12(h)(ii) through
(iv) hereof, provided, however, that benefits under subsection
12(h)(iii) shall continue for the same period used to calculate the
lump sum cash payment under clause (i) above.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, between RQI
and Employee, and Employee has no oral representations, understandings or
agreements with RQI or any of its officers, directors or representatives
covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between RQI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of RQI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: ResortQuest International, Inc.
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
Attention: General Counsel
To Employee: J. Mitchell Collins
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt-requested, or when actually received. Either party may
change the address
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<PAGE>
for notice by notifying the other party of such change in accordance with this
SECTION 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative
(including a determination by RQI's independent public accountants in good faith
that any provision of this Agreement would preclude "pooling of interests"
accounting), the other portions of this Agreement shall be deemed valid and
operative and so far as is reasonable and possible, effect shall be given to the
intent manifested by the portion held invalid or inoperative. The section
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in SECTIONS 5(b) and
5(c) hereof, respectively, or that RQI has otherwise materially breached this
Agreement. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be borne by
RQI. To the fullest extent permitted by law, RQI shall promptly pay upon
submission of statements all legal and other professional fees, costs of
litigation, prejudgment interest, and other expenses incurred in connection with
any dispute concerning payments, benefits or any other entitlements under
SECTION 12 hereof; provided, however that RQI shall be reimbursed by Employee
for (a) the fees and expenses advanced in the event Employee's claim is, in a
material manner, in bad faith or frivolous and the arbitrator or court, as
applicable, determines that the reimbursement of such fees and expenses is
appropriate, or (b) to the extent that the arbitrator or court, as appropriate,
determines that such legal and other professional fees are clearly and
demonstrably unreasonable.
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<PAGE>
17. GOVERNING LAW.
This Agreement shall in all respects be interpreted, construed and
enforced according to the internal laws of the State of Tennessee, without
giving effect to choice of law principles thereof.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19. CONFIDENTIALITY.
(a) Employee agrees and understands that during the Employee's position
with RQI, Employee has been and will be exposed to and receive information
relating to the affairs of RQI considered by RQI to be confidential and in the
nature of trade secrets (including but not limited to procedures, memoranda,
notes, records and customer lists, whether such information has been or is made,
developed or compiled by Employee or otherwise has been or is made available to
him) (any and all such information, the "Confidential information"). Employee
agrees that, during the Term and thereafter for a period of two (2) years,
Employee shall keep such Confidential Information confidential and will not
disclose such Confidential Information, either directly or indirectly, to any
third person or entity without the prior written consent of RQI; provided,
however that (i) Employee shall have no such obligation to the extent such
Confidential Information is or becomes publicly known other than as a result of
Employee's breach of his obligations hereunder or is received by Employee
following the date of termination and (ii) Employee may, after giving prior
notice to RQI to the extent practicable under the circumstances, disclose such
Confidential Information to the extent required by applicable laws or
governmental regulations or judicial or regulatory process.
(b) Employee agrees that all Confidential Information is and shall
remain the property of RQI. Employee further agrees that, during the Term and
thereafter, he shall hold in the strictest confidence all Confidential
Information, and shall not, directly or indirectly, duplicate, sell, use, lease,
commercialize, disclose or otherwise divulge to any person or entity any portion
of the Confidential Information or use any Confidential Information for his own
benefit or profit or allow any person or entity, other than RQI and its
authorized employees, to use or otherwise gain access to any Confidential
Information.
20
<PAGE>
20. NO MITIGATION/NO OFFSET/RELEASE.
(a) In the event of any termination of employment hereunder, Employee
shall be under no obligation to seek other employment and there shall be no
offset against any amounts due Employee under this Agreement on account of any
remuneration attributable to any subsequent employment that Employee may obtain.
The amounts payable hereunder shall not be subject to setoff, counterclaim,
recoupment, defense or other right which RQI may have against Employee or
others, except as specifically set forth in SECTION 3 hereof or upon obtaining
by RQI of a final unappealable judgment against Employee.
(b) Any amounts payable and benefits or additional rights provided
pursuant to SECTIONS 5(d), 5(e) or 12 beyond Accrued Obligations shall only be
payable if Employee delivers to RQI a release (substantially in the form of the
release set forth in RQI's standard form severance agreement) of all claims that
Employee has or may have against RQI and its affiliates (other than claims to
payments, benefits or entitlements specifically payable or provided hereunder,
claims under COBRA, claims to vested accrued benefits under RQI's employee
benefit plans or any rights of indemnification under RQI's organizational
documents) occurring up to the release date in such form as reasonably requested
by RQI; provided, however, that such release shall also release Employee of all
claims that RQI and its affiliates have or may have against the Employee. In the
event that RQI fails to deliver such release to Employee within ten (10) days
from the later of (i) the Employee's date of termination or (ii) the date of the
Change in Control, such release shall not be required and shall not prohibit or
otherwise delay payment of any amounts due Employee hereunder.
(c) Upon any termination of employment, upon the request of RQI,
Employee shall deliver to RQI a resignation from all offices and directorships
and fiduciary positions of Employee in which Employee is serving with, or at the
request of, RQI or its subsidiaries, affiliates or benefit plans.
21. LIABILITY INSURANCE.
RQI shall cover Employee under directors and officers liability
insurance both during and, while potential liability exists, after the Term in
the same amount and to the same extent, if any, as RQI covers its other officers
and directors.
22. LITIGATION SUPPORT.
Subject to Employee's other commitments, following the Term, Employee
shall be reasonably available to cooperate (but only truthfully) with RQI and
21
<PAGE>
provide information as to matters which Employee was personally involved, or has
information on, during the Term and which are or become the subject of
litigation or other dispute.
23. MULTIPLE TRIGGERING EVENTS; CANCELLATION AND RECOVERY.
If Employee first becomes eligible to receive payments pursuant to
SECTIONS 5(d) or (e) or SECTIONS 12(b), (c), (h) or (i) hereof, Employee shall
not thereafter be entitled to any additional payments or benefits pursuant to
such provisions (other than pursuant to SECTION 12(i) hereof) which would have
become payable as a result of subsequent events had Employee's employment by RQI
not previously terminated. Notwithstanding anything herein to the contrary, RQI
reserves the right to terminate all payments and benefits hereunder and to
recover from Employee amounts previously paid to Employee if Employee's
employment by RQI is terminated by Employee for good reason or by RQI without
good cause within thirty (30) days after an event which would be grounds for a
termination by RQI for good cause.
[Remainder of Page Intentionally Left Blank - Signature Page Follows]
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RESORTQUEST INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ David L. Levine
------------------------------
Name: David L. Levine
Title: CEO
EMPLOYEE: /S/ J. M. Collins
------------------------
J. MITCHELL COLLINS, INDIVIDUALLY
23
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
The term "good reason" shall mean, without the express written consent
of Employee, the occurrence of any of the following events:
(i) any material diminution or change in (except temporarily during any
period of Disability) Employee's positions, duties, responsibilities, authority
or titles not commensurate with Employee's position or the assignment of duties
or responsibilities not commensurate with Employee's position;
(ii) a reduction by RQI in Employee's base salary provided in SECTION
2(a) hereof;
(iii) a failure to continue bonus, incentive or other equity plans,
programs or arrangements, or Employee's participation therein, on the same basis
as to potential or targeted amounts; or
(iv) a material breach by RQI of any agreement with Employee.
24
<PAGE>
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), by and between ResortQuest
International, Inc., a Delaware corporation formerly known as Vacation
Properties International, Inc. and Paul Manteris ("Employee"), is dated as of
this 3rd day of January, 2000 (the "Effective Date"). If RQI and the other party
to a transaction constituting a Change in Control (as defined herein) agree that
such transaction shall be treated as a "pooling of interests" for financial
reporting purposes, and if the transaction is in fact so treated, then the
provisions of this Agreement shall not be valid to the extent that RQI's
independent public accountants determine in good faith that the provisions of
this Agreement would preclude "pooling of interests" accounting.
WITNESSETH:
WHEREAS, as of the date of this Agreement, RQI is engaged primarily in
the business of providing noncommercial property management, rental and sales
services and hotel management services;
WHEREAS, Employee is employed hereunder by RQI in a confidential
relationship wherein Employee, in the course of Employee's employment with RQI,
has and will continue to become familiar with and aware of information as to
RQI's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by RQI, and future plans with respect
thereto, all of which has been and will be established and maintained at great
expense to RQI, which information is a trade secret and constitutes the valuable
goodwill of RQI;
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, the
parties hereto hereby agree as follows:
AGREEMENTS:
1. EMPLOYMENT AND DUTIES.
(a) RQI hereby employs Employee as Senior Vice President of Homeowner
Relations and Operations Support of RQI. As such, Employee shall
<PAGE>
have responsibilities, duties and authority reasonably accorded to and expected
of a Senior Vice President of RQI and will report to the Chief Operating Officer
("COO") of RQI. Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to Section l(c) hereof, agrees to
devote Employee's full working time, attention and efforts to promote and
further the business of RQI.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by RQI.
(c) Employee shall not, during the Term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of Section 3 hereof.
2. COMPENSATION; OPTIONS.
For all services rendered by Employee, RQI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be $130,000
per year, payable on a regular basis in accordance with RQI's standard payroll
procedures but not less than monthly.
(b) Incentive Bonus Plan. It is RQI's intent to develop a written
Incentive Bonus Plan (which may be RQI's Incentive Bonus Plan) setting forth the
criteria under which Employee and other officers and key employees will be
eligible to receive year-end bonus awards. RQI contemplates that the maximum
bonus for which Employee may be eligible will be fifty percent (50%) of
Employee's base salary.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from RQI in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that RQI may have in effect from time to time, such benefits
provided to
<PAGE>
Employee under this clause (i) to be at least equal to such benefits
provided to RQI executives;
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement, and
in a format and manner consistent with RQI's expense reporting policy;
and
(iii) RQI shall provide Employee with other executive perquisites
as may be available to or deemed appropriate for Employee by the Board
and participation in all other RQI-wide employee benefits as available
from time to time.
At the Effective Date, RQI shall grant to Employee options to acquire
twenty thousand (20,000) shares of RQI common stock at a price per share equal
to the closing price on the Effective Date. Such options shall vest in
installments of 6,667 shares on each of the first (1st), second (2nd)
anniversaries of the Effective Date, and 6,666 shares on the third (3rd)
anniversary of the Effective Date.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
RQI, and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for himself or on behalf of or in conjunction with any other
person, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer or in a managerial capacity whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
RQI or any subsidiary of RQI, within one hundred (100) miles of the
locations in which RQI or any of RQI's subsidiaries conducts any
noncommercial property management, rental or sales business or hotel
management business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of RQI (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with the
intent of
<PAGE>
enticing such employee away from or out of the employ of RQI (including
the subsidiaries thereof), provided that Employee shall be permitted to
call upon and hire any member of his immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
RQI (including the subsidiaries thereof) within the Territory for the
purpose of providing noncommercial property management, rental or sales
services to property owners and/or renters in direct competition with
RQI or any subsidiary of RQI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by RQI (including the subsidiaries
thereof) or for which, to Employee's actual knowledge after due inquiry,
RQI (or any subsidiary thereof) made an acquisition analysis, for the
purpose of acquiring such entity, unless RQI (or any subsidiary thereof)
has expressly declined to pursue such acquisition candidate or at least
one (1) year has elapsed since RQI (or any subsidiary thereof) has taken
any action with respect to pursuing such acquisition candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from (A) acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or over-the-counter, or (B) engaging in the hotel
management business if the Employee's employment hereunder is terminated after
the initial Term of this Agreement.
(b) Because of the difficulty of measuring economic losses to RQI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to RQI for which RQI would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
RQI in the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this Section 3 impose a reasonable restraint on Employee in light of the
activities and business of RQI (including RQI's subsidiaries) on the date of the
execution of this Agreement and the current plans of RQI (including RQI's
subsidiaries); but it is also the intent of RQI and Employee that such covenants
be construed and enforced in accordance with the changing locations of RQI
(including RQI's
<PAGE>
subsidiaries) throughout the Term of this Agreement. For example, if, during the
Term of this Agreement, RQI (including RQI's subsidiaries) establishes new
locations for its current activities or business, then Employee will be
precluded from soliciting the customers or employees from such new location and
from directly competing within one hundred (100) miles of such locations through
the Term of this Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with RQI (including RQI's
subsidiaries), or similar activities, or business in locations the operation of
which, under such circumstances, does not violate clause (a) of this Section 3,
and in any event such new business, activities or location are not in violation
of this Section 3 or of Employee's obligations under this Section 3, if any,
Employee shall not be chargeable with a violation of this Section 3 if RQI
(including RQI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this Section 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against RQI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by RQI of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this Section 3, during which the
agreements and covenants of Employee made in this Section 3 shall be effective,
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of this Section 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by RQI to relocate
from Employee's present residence to another geographic location in order to
more efficiently carry out Employee's duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such
<PAGE>
event if Employee agrees to relocate, RQI will pay all reasonable relocation
costs to move Employee, Employee's immediate family and their personal property
and effects. Such costs may include, by way of example, but are not limited to:
reasonable expenses related to pre-move visits to search for a new residence, to
investigate schools or for other purposes; reasonable temporary lodging and
living costs prior to moving into a new permanent residence; duplicate home
carrying costs; all closing costs on the sale of Employee's present residence
and on the purchase of a comparable residence in the new location; and added
income taxes that Employee may incur if any unreimbursed relocation costs are
not deductible for tax purposes. The general intent of the foregoing is that
Employee shall not personally bear any out-of-pocket costs as a result of the
relocation, with an understanding that Employee will use Employee's best efforts
to incur only those costs which are reasonable and necessary to effect a smooth,
efficient and orderly relocation with minimal disruption to the business affairs
of RQI, and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board
to relocate and Employee refuses, such refusal shall constitute
"good cause" for termination of this Agreement under the terms
of Section 5(c) hereof.
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the Effective Date and
continue for two and one-half (2 1/2) years, and, unless terminated sooner as
herein provided, shall continue thereafter on a year-to-year basis on the same
terms and conditions contained herein in effect as of the time of renewal (such
initial period and any extensions thereof being referred to herein as the
"Term"). This Agreement and Employee's employment may be terminated in any one
of the following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such four (4) month period, but which shall not be effective earlier than
the last day of such four (4) month period), RQI may terminate Employee's
employment hereunder, provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to
<PAGE>
Employee's physical or mental health or life, provide that Employee shall have
furnished RQI with a written statement from a qualified doctor to such effect
and provided, further that, at RQI's request made within thirty (30) days of the
date of such written statement, Employee shall submit to an examination by a
doctor selected by RQI who is reasonably acceptable to Employee or Employee's
doctor and such doctor shall have concurred in the conclusion of Employee's
doctor. In the event this Agreement is terminated as a result of Employee's
disability, Employee shall have no right to any severance compensation.
(c) Good Cause. RQI may terminate this Agreement ten (10) days after
delivery of written notice to Employee for "good cause", which shall be: (1)
Employee's willful, material and irreparable breach of the Agreement; (2)
Employee's continual and material failure to adequately perform, continuing for
ten (10) days after receipt of written notice of need to cure, any of Employee's
material duties and responsibilities, provided that a termination pursuant to
this clause (2) is approved by a vote of at least two-thirds (2/3) of the Board;
(3) Employee's willful dishonesty, fraud or misconduct which has a material
adverse affect on the operations or reputation of RQI (other than good faith
expense account disputes); (4) Employee's conviction in a court of competent
jurisdiction of a felony (other than a traffic violation); (5) Employee's
chronic alcohol abuse or illegal drug use; or (6) Employee's refusal to relocate
as set forth in Section 4 (b) above. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.
(d) Without Good Cause. Should Employee be terminated by RQI without
good cause during the Term, Employee shall be entitled to continue to receive
from RQI the base salary at the rate then in effect for whatever time period is
remaining under the Term of this Agreement or for one (1) year, whichever amount
is greater. Should Employee be terminated by RQI without good cause at any time
during or after the Term, Employee shall be entitled to waive Employee's right
to receive severance compensation (by a written waiver delivered to RQI on the
effective date of termination), and, in such case, the noncompetition provisions
of Section 3 hereof shall not apply.
(e) By Employee. At any time after the commencement of employment,
Employee may, without "good reason" (as defined in Exhibit A hereto), terminate
this Agreement and Employee's employment, effective thirty (30) days after
written notice is provided to RQI. If Employee resigns or otherwise terminates
Employee's employment without good reason, Employee shall receive no severance
compensation. If Employee's resignation or other termination by Employee is for
good reason, RQI shall pay all amounts and damages to which Employee may be
entitled as a result of such resignation or other termination, including
interest thereon and all reasonable legal fees and expenses and other
<PAGE>
costs incurred by Employee to enforce Employee's rights hereunder. Further, none
of the provisions of Section 3 hereof shall apply in the event this Agreement is
terminated by Employee for good reason.
(f) Change in Control of RQI. In the event of a "Change in Control" of
RQI (as defined below) during the Term, refer to Section 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
Section 12 hereof. All other rights and obligations of RQI and Employee under
this Agreement shall cease as of the effective date of termination, except that
RQI's obligations under Section 9 hereof and Employee's obligations under
Sections 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance
with their terms. Notwithstanding anything herein to the contrary, if a Change
in Control occurs during the Term and there is less than one (1) year remaining
on the Term, the Term shall be extended for one (1) year following the date of
the Change in Control, provided that the payment and other obligations hereunder
shall survive the termination of this Agreement to the extent a Change in
Control has occurred at any time during the Term.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of RQI or its representatives, vendors or customers
which pertain to the business of RQI shall be and remain the property of RQI and
be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of RQI which
is collected by Employee shall be delivered promptly to RQI without request by
it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to RQI any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment or within one (1) year
thereafter, and which are directly related to the business or activities of RQI
and which Employee conceives as a result of Employee's employment by RQI.
<PAGE>
Employee hereby assigns and agrees to assign all of Employee's interests therein
to RQI or its nominee. Whenever requested to do so by RQI, Employee shall
execute any and all applications, assignments or other instruments that RQI
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect RQI's interest therein.
8. TRADE SECRETS.
Employee agrees that he will not, during or after the Term of this
Agreement with RQI, disclose the specific terms of RQI's relationships or
agreements with its significant vendors or customers or any other significant
and material trade secret of RQI, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by RQI against Employee), by reason of the
fact that Employee is or was performing services under this Agreement, then RQI
shall indemnify Employee against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, as actually and reasonably
incurred by Employee in connection therewith. In the event that both Employee
and RQI are made a party to the same third-party action, complaint, suit or
proceeding, RQI agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by RQI
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and RQI shall pay all reasonable
attorneys' fees of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to RQI that the execution of
this Agreement by Employee and his employment by RQI and the performance of
Employee's duties hereunder will not violate or constitute a breach of any
agreement with a former employer, client or any other person or entity. Further,
Employee agrees to indemnify RQI for any claim, including but not limited to
attorneys' fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against RQI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
<PAGE>
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by RQI on
the basis of Employee's personal qualifications, experience and skills.
Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of Section 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to
subsection (c) below, Employee understands and acknowledges that RQI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of RQI hereunder or that RQI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this Section 12 shall be applicable.
(b) In the event of a pending Change in Control wherein RQI and Employee
have not received written notice at least five (5) business days prior to the
anticipated closing date of the transaction giving rise to the Change in Control
from the successor to all or a substantial portion of RQI's business and/or
assets that such successor is willing as of the closing to assume and agree to
perform RQI's obligations under this Agreement in the same manner and to the
same extent that RQI is hereby required to perform, then such Change in Control
shall be deemed to be a termination of this Agreement by RQI without cause
during the Term and the applicable portions of Section 5(d) hereof shall apply;
however, under such circumstances, the amount of the severance payment due to
Employee shall be triple the amount calculated under the terms of Section 5(d)
and shall payable in a lump sum payment and the noncompetition provisions of
Section 3 hereof shall not apply. In addition, RQI shall provide Employee with
the benefits set forth in subsections 12(h)(ii) through (iv) hereof.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to RQI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of Section 5(d)
hereof shall apply as though the Company had terminated the Agreement without
cause during the Term; provided, however under such circumstances, the amount of
the severance payment due to Employee shall be double the amount calculated
under the terms of Section 5(d) and shall be payable in a lump sum payment and
the
<PAGE>
noncompetition provisions of Section 3 hereof shall all apply for a period of
two (2) years from the effective date of termination. Employee shall have the
right to waive Employee's right to receive the severance compensation payable
under this Section 12(c) (by a written waiver delivered to RQI on the effective
date of the termination), in which case the noncompetition provisions of Section
3 hereof shall not apply.
(d) For purposes of applying Section 5 hereof under the circumstances
described in subsections (b) and (c) above, the effective date of termination
shall be the closing date of the transaction giving rise to the Change in
Control, and all compensation, reimbursements and lump-sum payments due Employee
must be paid in full by RQI at or prior to such closing. Further, Employee shall
be given sufficient time and opportunity to elect whether to exercise all or any
of Employee's vested options to purchase RQI Common Stock, including any options
with accelerated vesting under the provisions of RQI's 2000 Long-Term Incentive
Plan, such that Employee may convert the options to shares of RQI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of the
following shall have occurred:
(i) any person or entity, ether than RQI or an employee benefit
plan of RQI, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of
any voting security of RQI and immediately after such acquisition such person or
entity is, directly or indirectly, the Beneficial Owner of voting securities
representing fifty percent (50%) or more of the total voting power of all of the
then outstanding voting securities of RQI;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of RQI: (A) those individuals who,
as of the closing date of RQI's initial public offering, constitute the
Board of Directors of RQI (the "Original Directors"); (B) those
individuals who thereafter are elected to the Board of Directors of RQI
and whose election, or nomination for election, to the Board of
Directors of RQI was approved by a vote of at least two-thirds (2/3) of
the Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election);
and (C) those individuals who are elected to the Board of Directors of
RQI and whose election, or nomination for election, to the Board of
Directors of RQI was approved by a vote of at least two-thirds (2/3) of
the Original Directors and Additional Original
<PAGE>
Directors then still in office (such directors also becoming "Additional
Original Directors" immediately following their election);
(iii) the stockholders of RQI shall approve a merger,
consolidation, recapitalization or reorganization of RQI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than any
such transaction which would result in at least seventy-five percent
(75%) of the total voting power represented by the voting securities of
the surviving entity outstanding immediately after such transaction
being Beneficially Owned by at least seventy-five percent (75%) of the
holders of outstanding voting securities of RQI immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of RQI shall approve a plan of complete
liquidation of RQI or an agreement for the sale or disposition by RQI of
all or a substantial portion of RQI's assets (i.e., fifty percent (50%)
or more of the total assets of RQI).
(f) Employee must be notified in writing by RQI at any time that RQI
anticipates that a Change in Control may take place.
(g) (i) In the event any payment that is either received by Employee or
paid by RQI on his behalf or any property or any other benefit provided to him
under this Agreement or under any other plan, arrangement or agreement with RQI
or any other person whose payments or benefits are treated as contingent on a
change of ownership or control of RQI (or in the ownership of a substantial
portion of the assets of RQI) or any person affiliated with RQI or such person
(but only if such payment or other benefit is in connection with Employee's
employment by RQI (collectively the "RQI Payments")), shall be subject to the
tax (the "Exercise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") (and any similar tax that may hereafter be imposed
by any taxing authority), RQI shall pay to Employee at the time specified in
clause (iv) below an additional amount (the "Gross-up Payment") such that the
net amount retained by Employee, after deduction of any Excise Tax on the RQI
Payments and any U.S. federal, state, or local income or payroll tax upon the
Gross-up Payment provided for by this clause (i), but before deduction for any
U.S. federal, state, and local income or payroll tax on the RQI Payments, shall
be equal to the RQI Payments.
(ii) For purposes of determining whether any of the RQI Payments
and Gross-up Payments (collectively the "Total Payments") will be
<PAGE>
subject to the Excise Tax and the amount of such Excise Tax, (A) the Total
Payments shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code) shall be treated
as subject to the Exercise Tax, unless and except to the extent that, in the
opinion of RQI's independent certified public accountants appointed prior to any
Change in Control or tax counsel selected by such accountants or RQI (the
"Accountants"), such Total Payments (in whole or in part) either do not
constitute "parachute payments," represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code in excess
of the "base amount," or are otherwise not subject to the Excise Tax, and (B)
the value of any noncash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles of Section 280G
of the Code. In the event that the Accountants are serving as accountant or
auditor for the individual, entity or group effecting the Change in Control,
Employee may appoint another nationally recognized accounting firm to make the
determinations hereunder (which accounting firm shall then be referred to as the
"Accountants" hereunder). All determinations hereunder shall be made by the
Accountants which shall provide detailed supporting calculations both to RQI and
Employee at such time as it is requested by RQI or Employee. If the Accountants
determine that payments under this Agreement must be reduced pursuant to this
Section 12, they shall furnish Employee with a written opinion to such effect.
The determination of the Accountants shall be binding upon RQI and Employee.
(iii) For purposes of determining the amount of the Gross-up
Payment, Employee shall be deemed to pay U.S. federal income taxes at the
highest marginal rate of U.S. federal income taxation in the calendar year in
which the Gross-up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Employee's
residence for the calendar year in which the RQI Payments are to be made, net of
the maximum reduction in U.S. federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. In the event that
the Excise Tax is subsequently determined by the Accountants to be less than the
amount taken into account hereunder at the time the Gross-up Payment is made,
Employee shall repay to RQI, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and U.S. federal, state and local income tax
imposed on the portion of the Gross-up Payment being repaid by Employee if such
repayment results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Gross-up Payment to be refunded to
RQI has been paid to any U.S. federal, state or local tax
<PAGE>
authority, repayment thereof (and related amounts) shall not be required until
actual refund or credit of such portion has been made to Employee, and interest
payable to RQI shall not exceed the interest received or credited to Employee by
such tax authority for the period it held such portion. Employee and RQI shall
mutually agree upon the course of action to be pursued (and the method of
allocating the expense thereof) if Employee's claim for refund or credit is
denied.
In the event that the Excise Tax is later determined by the Accountants
to exceed the amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-up Payment), RQI shall make
an additional Gross-up Payment in respect of such excess (plus any interest or
penalties payable with respect to such excess) at the time that the amount of
such excess is finally determined.
(iv) Not later than the date on which Employee's Excise Tax is
due (which shall include the date that any withholding obligation for
such Excise Tax is required to be satisfied), RQI shall pay to Employee
or, in the case of any withholding obligation, the Internal Revenue
Service on behalf of such Employee, an amount equal to the Excise Tax.
The Gross-up Payment or portion thereof provided for in clause (iii)
above (less any amounts paid pursuant to the preceding sentence) shall
be paid within ten (10) days after Employee delivers a written request
for reimbursement accompanied by a copy of Employee's tax return(s)
showing the Excise Tax actually incurred by Employee.
(v) Employee shall notify the Chief Financial Officer of RQI in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by RQI of a Gross-up Payment. Such
notification shall be given as soon as practicable but no later than ten
(10) business days after Employee is informed in writing of such claim
and shall apprise RQI of the nature of such claim and the date on which
such claim is requested to be paid. Employee shall not pay such claim
prior to the expiration of the thirty (30) day period following the date
on which it gives such notice to RQI (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).
If RQI notifies Employee in writing prior to the expiration of such
period that it desires to contest such claim, Employee shall:
(A) give RQI any information reasonably requested by RQI
relating to such claim;
<PAGE>
(B) take such action in connection with contesting such
claim as RQI shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by RQI;
(C) cooperate with RQI in good faith in order to
effectively contest such claim; and
(D) permit RQI to participate in any proceedings
relating to such claim;
provided, however, that RQI shall bear and pay directly all costs and expenses
(including, without limitation, additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Employee harmless, on
an after-tax basis, for any Excise Tax or income tax (including any interest and
penalties with respect thereto) imposed as a result of such representation and
payment of cost and expenses.
Without limitation on the foregoing provisions of this clause (v), RQI
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Employee to pay the tax
claimed and sue for a refund or contest the claim in any contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as RQI shall determine;
provided, however, that if RQI directs Employee to pay such claim and sue for a
refund, RQI shall advance the amount of such payment to Employee, on an
interest-free basis, and shall indemnify and hold Employee harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, RQI's
control of the contest shall be limited to issues with respect to which a
Gross-up Payment would be payable hereunder and Employee shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(vi) If, after receipt by Employee of an amount advanced by RQI
pursuant to clause (v) above, Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to RQI's
complying with the requirements of clause (v) promptly pay to RQI the
<PAGE>
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Employee of an amount advanced by RQI pursuant to clause (v), a
determination is made that Employee shall not be entitled to any refund
with respect to such claim and RQI does not notify Employee in writing
of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall
offset, to the extent thereof, the amount of Gross-up Payment required
to be paid.
(vii) RQI shall be responsible for all charges of the
Accountants.
(viii) RQI and Employee shall promptly deliver to each other
copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax
covered by this Section 12.
(h) If Employee's employment by RQI is terminated within one (1) year
after a Change in Control by Employee for good reason or by RQI without good
cause, then RQI shall pay or provide Employee with all of the following
severance benefits:
(i) a lump-sum cash payment within fifteen (15) days of
Employee's date of termination (or, if applicable, such later date as is
necessary for Employee to execute the release described under Section
20(b) herein) equal to three (3) times Employee's annual base salary in
effect immediately prior to the Change in Control;
(ii) any base salary, bonus, vacation pay, deferred compensation
accrued or earned under law or in accordance with RQI's policies
applicable to Employee but not yet paid and any incurred, but
unreimbursed business expenses for the period prior to termination shall
be payable in accordance with RQI's policies and the terms of the
applicable plan ("Accrued Obligations");
(iii) continued participation (at RQI's cost and without any
required employee or dependent contributions) in all health or welfare
plans which cover Employee (and eligible dependents), including, without
limitation, medical, dental, life insurance and disability coverage upon
the same terms and conditions (except for the requirements of Employee's
continued employment) in effect on the Employee's date of termination
(which shall be substantially comparable to the health or welfare plans
in which Employee participated in immediately prior to the Change in
Control) until three (3) years after the date of termination; provided,
<PAGE>
however that in the event Employee obtains other employment that offers
substantially similar or improved benefits, as to any particular health
or welfare plan, such continuation of coverage by RQI for such similar
or improved benefit under such plan shall immediately cease. To the
extent such coverage cannot be provided under RQI's health plans without
jeopardizing the tax status of such plans, for underwriting reasons or
because of the tax impact on Employee, RQI shall pay Employee an amount
such that Employee can purchase such benefits separately at no greater
after tax cost to him than he would have had if such benefits were
provided to him as an employee. The continuation of health benefits for
the thirty-six (36) month period shall reduce and count against
Employee's rights under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended; and
(iv) Outplacement services at a level commensurate with Employee's position,
including use of an Employee office and secretary available through such
outplacement services, for a period of one (1) year commencing on the Employee's
date of termination but in no event extending beyond the date on which Employee
commences other full time employment.
(I) If Employee's employment by RQI is terminated by RQI without
good cause during the one hundred eighty (180) days prior to the
effective date of a Change in Control, then RQI shall pay or provide
Employee with all of the following severance benefits:
(i) a lump sum cash payment within fifteen (15) days of the
Change in Control (or, if applicable, such later date as is necessary
for Employee to execute the release described under Section 20(b)
hereof) equal to Employee's base salary at the rate in effect at the
time of Employee's termination for whatever time period is remaining
under the Term of this Agreement at the time of Employee's termination,
less any amounts paid pursuant to Section 5(d) hereof between the
effective date of Employee's termination and the effective date of a
Change in Control, plus one (1) times Employee's annual base salary at
the rate in effect at the time of Employee's termination; and
(ii) the benefits set forth in subsections 12(h)(ii) through (iv)
hereof, provided, however, that benefits under subsection 12(h)(iii)
shall continue for the same period used to calculate the lump sum cash
payment under clause (i) above.
13. COMPLETE AGREEMENT.
<PAGE>
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, between RQI
and Employee, and Employee has no oral representations, understandings or
agreements with RQI or any of its officers, directors or representatives
covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between RQI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of RQI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: ResortQuest International, Inc.
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
Attention: General Counsel
To Employee: Paul Manteris
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt-requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative
(including a determination by RQI's independent public accountants in good faith
that any provision of this Agreement would preclude "pooling of interests"
accounting), the other portions of this Agreement shall be deemed valid and
operative and so far as is reasonable and possible, effect shall be given to the
intent manifested by the
<PAGE>
portion held invalid or inoperative. The section headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in Sections 5(b) and
5(c) hereof, respectively, or that RQI has otherwise materially breached this
Agreement. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be borne by
RQI. To the fullest extent permitted by law, RQI shall promptly pay upon
submission of statements all legal and other professional fees, costs of
litigation, prejudgment interest, and other expenses incurred in connection with
any dispute concerning payments, benefits or any other entitlements under
Section 12 hereof; provided, however that RQI shall be reimbursed by Employee
for (a) the fees and expenses advanced in the event Employee's claim is, in a
material manner, in bad faith or frivolous and the arbitrator or court, as
applicable, determines that the reimbursement of such fees and expenses is
appropriate, or (b) to the extent that the arbitrator or court, as appropriate,
determines that such legal and other professional fees are clearly and
demonstrably unreasonable.
17. GOVERNING LAW.
This Agreement shall in all respects be interpreted, construed and
enforced according to the internal laws of the State of Tennessee, without
giving effect to choice of law principles thereof.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
<PAGE>
19. CONFIDENTIALITY.
(a) Employee agrees and understands that during the Employee's position
with RQI, Employee has been and will be exposed to and receive information
relating to the affairs of RQI considered by RQI to be confidential and in the
nature of trade secrets (including but not limited to procedures, memoranda,
notes, records and customer lists, whether such information has been or is made,
developed or compiled by Employee or otherwise has been or is made available to
him) (any and all such information, the "Confidential information"). Employee
agrees that, during the Term and thereafter for a period of two (2) years,
Employee shall keep such Confidential Information confidential and will not
disclose such Confidential Information, either directly or indirectly, to any
third person or entity without the prior written consent of RQI; provided,
however that (i) Employee shall have no such obligation to the extent such
Confidential Information is or becomes publicly known other than as a result of
Employee's breach of his obligations hereunder or is received by Employee
following the date of termination and (ii) Employee may, after giving prior
notice to RQI to the extent practicable under the circumstances, disclose such
Confidential Information to the extent required by applicable laws or
governmental regulations or judicial or regulatory process.
(b) Employee agrees that all Confidential Information is and shall
remain the property of RQI. Employee further agrees that, during the Term and
thereafter, he shall hold in the strictest confidence all Confidential
Information, and shall not, directly or indirectly, duplicate, sell, use, lease,
commercialize, disclose or otherwise divulge to any person or entity any portion
of the Confidential Information or use any Confidential Information for his own
benefit or profit or allow any person or entity, other than RQI and its
authorized employees, to use or otherwise gain access to any Confidential
Information.
20. NO MITIGATION/NO OFFSET/RELEASE.
(a) In the event of any termination of employment hereunder, Employee
shall be under no obligation to seek other employment and there shall be no
offset against any amounts due Employee under this Agreement on account of any
remuneration attributable to any subsequent employment that Employee may obtain.
The amounts payable hereunder shall not be subject to setoff, counterclaim,
recoupment, defense or other right which RQI may have against Employee or
others, except as specifically set forth in Section 3 hereof or upon obtaining
by RQI of a final unappealable judgment against Employee.
<PAGE>
(b) Any amounts payable and benefits or additional rights provided
pursuant to Sections 5(d), 5(e) or 12 beyond Accrued Obligations shall only be
payable if Employee delivers to RQI a release (substantially in the form of the
release set forth in RQI's standard form severance agreement) of all claims that
Employee has or may have against RQI and its affiliates (other than claims to
payments, benefits or entitlements specifically payable or provided hereunder,
claims under COBRA, claims to vested accrued benefits under RQI's employee
benefit plans or any rights of indemnification under RQI's organizational
documents) occurring up to the release date in such form as reasonably requested
by RQI; provided, however, that such release shall also release Employee of all
claims that RQI and its affiliates have or may have against the Employee. In the
event that RQI fails to deliver such release to Employee within ten (10) days
from the later of (i) the Employee's date of termination or (ii) the date of the
Change in Control, such release shall not be required and shall not prohibit or
otherwise delay payment of any amounts due Employee hereunder.
(c) Upon any termination of employment, upon the request of RQI,
Employee shall deliver to RQI a resignation from all offices and directorships
and fiduciary positions of Employee in which Employee is serving with, or at the
request of, RQI or its subsidiaries, affiliates or benefit plans.
21. LIABILITY INSURANCE.
RQI shall cover Employee under directors and officers liability
insurance both during and, while potential liability exists, after the Term in
the same amount and to the same extent, if any, as RQI covers its other officers
and directors.
22. LITIGATION SUPPORT.
Subject to Employee's other commitments, following the Term, Employee
shall be reasonably available to cooperate (but only truthfully) with RQI and
provide information as to matters which Employee was personally involved, or has
information on, during the Term and which are or become the subject of
litigation or other dispute.
23. MULTIPLE TRIGGERING EVENTS; CANCELLATION AND RECOVERY.
If Employee first becomes eligible to receive payments pursuant to
Sections 5(d) or (e) or Sections 12(b), (c), (h) or (i) hereof, Employee shall
not thereafter be entitled to any additional payments or benefits pursuant to
such provisions (other than pursuant to Section 12(i) hereof) which would have
become payable as a result of subsequent events had Employee's employment by RQI
not
<PAGE>
previously terminated. Notwithstanding anything herein to the contrary, RQI
reserves the right to terminate all payments and benefits hereunder and to
recover from Employee amounts previously paid to Employee if Employee's
employment by RQI is terminated by Employee for good reason or by RQI without
good cause within thirty (30) days after an event which would be grounds for a
termination by RQI for good cause.
[Remainder of Page Intentionally Left Blank - Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RESORTQUEST INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ David L. Levine
---------------------------
Name: David L. Levine
Title: CEO
EMPLOYEE:
/s/ Paul Manteris
-----------------------------------
Paul Manteris, individually
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
The term "good reason" shall mean, without the express written consent
of Employee, the occurrence of any of the following events:
(i) any material diminution or change in (except temporarily during any
period of Disability) Employee's positions, duties, responsibilities, authority
or titles not commensurate with Employee's position or the assignment of duties
or responsibilities not commensurate with Employee's position;
(ii) a reduction by RQI in Employee's base salary provided in Section
2(a) hereof;
(iii) a failure to continue bonus, incentive or other equity plans, programs or
arrangements, or Employee's participation therein, on the same basis as to
potential or targeted amounts; or
(iv) a material breach by RQI of any agreement with Employee.
<PAGE>
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), by and between ResortQuest
International, Inc., a Delaware corporation formerly known as Vacation
Properties International, Inc. ("RQI"), and James Olin ("Employee"), is dated as
of this 4th day of January, 2000 (the "Effective Date"). If RQI and the other
party to a transaction constituting a Change in Control (as defined herein)
agree that such transaction shall be treated as a "pooling of interests" for
financial reporting purposes, and if the transaction is in fact so treated, then
the provisions of this Agreement shall not be valid to the extent that RQI's
independent public accountants determine in good faith that the provisions of
this Agreement would preclude "pooling of interests" accounting.
W I T N E S S E T H:
WHEREAS, as of the date of this Agreement, RQI is engaged primarily in
the business of providing noncommercial property management, rental and sales
services and hotel management services;
WHEREAS, Employee is employed hereunder by RQI in a confidential
relationship wherein Employee, in the course of Employee's employment with RQI,
has and will continue to become familiar with and aware of information as to
RQI's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by RQI, and future plans with respect
thereto, all of which has been and will be established and maintained at great
expense to RQI, which information is a trade secret and constitutes the valuable
goodwill of RQI;
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, the
parties hereto hereby agree as follows:
A G R E E M E N T S:
1. EMPLOYMENT AND DUTIES.
(a) RQI hereby employs Employee as Chief Operating Officer of
RQI. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a Chief Operating Officer of RQI and will
report to the Chief Executive Officer ("CEO") and the Board of Directors (the
"Board") of RQI. Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to Section l(c) hereof, agrees to
devote Employee's full working time, attention and efforts to promote and
further the business of RQI.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by RQI.
<PAGE>
(c) Employee shall not, during the Term of his employment
hereunder, be engaged in any other business activity pursued for gain, profit or
other pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of Section 3 hereof.
2. COMPENSATION; OPTIONS.
For all services rendered by Employee, RQI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be
$240,000 per year, payable on a regular basis in accordance with RQI's standard
payroll procedures but not less than monthly.
(b) Incentive Bonus Plan. For 2000 and subsequent years, it is
RQI's intent to develop a written Incentive Bonus Plan (which may be RQI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
RQI contemplates that the maximum bonus for which Employee may be eligible will
be sixty percent (60%) of Employee's base salary.
(c) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and compensation from
RQI in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that RQI may have in effect from time to time, such benefits
provided to Employee under this clause (i) to be at least equal to such
benefits provided to RQI executives;
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement, and
in a format and manner consistent with RQI's expense reporting policy;
and
(iii) RQI shall provide Employee with other executive perquisites
as may be available to or deemed appropriate for Employee by the Board
and participation in all other RQI-wide employee benefits as available
from time to time.
At the Effective Date, RQI shall grant to Employee options to acquire
seventy-five thousand (75,000) shares of RQI common stock at a price per share
equal to the closing price on the Effective Date. Such options shall vest in
installments of twenty-five thousand (25,000) shares on each of the first (1st),
second (2nd) and third (3rd) anniversaries of the Effective Date.
<PAGE>
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's
employment with RQI, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation or business
of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer or in a managerial capacity whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
RQI or any subsidiary of RQI, within one hundred (100) miles of the
locations in which RQI or any of RQI's subsidiaries conducts any
noncommercial property management, rental or sales business or hotel
management business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of RQI (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of RQI
(including the subsidiaries thereof), provided that Employee shall be
permitted to call upon and hire any member of his immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
RQI (including the subsidiaries thereof) within the Territory for the
purpose of providing noncommercial property management, rental or sales
services to property owners and/or renters in direct competition with
RQI or any subsidiary of RQI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by RQI (including the subsidiaries
thereof) or for which, to Employee's actual knowledge after due inquiry,
RQI (or any subsidiary thereof) made an acquisition analysis, for the
purpose of acquiring such entity, unless RQI (or any subsidiary thereof)
has expressly declined to pursue such acquisition candidate or at least
one (1) year has elapsed since RQI (or any subsidiary thereof) has taken
any action with respect to pursuing such acquisition candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from (A) acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or over-the-counter, or (B) engaging in the hotel
management business if the Employee's employment hereunder is terminated after
the initial two and one-half-year Term of this Agreement.
(b) Because of the difficulty of measuring economic losses to RQI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that
<PAGE>
could be caused to RQI for which RQI would have no other adequate remedy,
Employee agrees that the foregoing covenant may be enforced by RQI in the event
of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing
covenants in this Section 3 impose a reasonable restraint on Employee in light
of the activities and business of RQI (including RQI's subsidiaries) on the date
of the execution of this Agreement and the current plans of RQI (including RQI's
subsidiaries); but it is also the intent of RQI and Employee that such covenants
be construed and enforced in accordance with the changing locations of RQI
(including RQI's subsidiaries) throughout the Term of is Agreement. For example,
if, during the Term of this Agreement, RQI (including RQI's subsidiaries)
establishes new locations for its current activities or business, then Employee
will be precluded from soliciting the customers or employees from such new
location and from directly competing within one hundred (100) miles of such
locations through the Term of this Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with RQI (including RQI's
subsidiaries), or similar activities, or business in locations the operation of
which, under such circumstances, does not violate clause (a) of this Section 3,
and in any event such new business, activities or location are not in violation
of this Section 3 or of Employee's obligations under this Section 3, if any,
Employee shall not be chargeable with a violation of this Section 3 if RQI
(including RQI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this Section 3 are severable and separate,
and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed.
(e) All of the covenants in this Section 3 shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against RQI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by RQI of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this Section 3, during which the
agreements and covenants of Employee made in this Section 3 shall be effective,
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of this Section 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by RQI to
relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or
<PAGE>
other increase in duties and responsibilities. In such event if Employee agrees
to relocate, RQI will pay all reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, by way of example, but are not limited to: reasonable expenses
related to pre-move visits to search for a new residence, to investigate schools
or for other purposes; reasonable temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any unreimbursed relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket costs as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of RQI, and
the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the
Board to relocate and Employee refuses, such refusal shall constitute "good
cause" for termination of this Agreement under the terms of Section 5(c) hereof.
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the Effective Date and
continue until October 1, 2000 for two and one-half (2 1/2) years, and,
unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in
effect as of the time of renewal (such initial period and any extensions
thereof being referred to herein as the "Term"). This Agreement and
Employee's employment may be terminated in any one of the following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been absent from Employee's
full-time duties hereunder for one hundred twenty (120) consecutive days, then
thirty (30) days afer receiving written notice (which notice may occur before or
after the end of such four (4) month period, but which shall not be effective
earlier than the last day of such four (4) month period), RQI may terminate
Employee's employment hereunder, provided Employee is unable to resume
Employee's full-time duties at the conclusion of such notice period. Also,
Employee may terminate Employee's employment hereunder if his health should
become impaired to an extent that makes the continued performance of Employee's
duties hereunder hazardous to Employee's physical or mental health or life,
provided that Employee shall have furnished RQI with a written statement from a
qualified doctor to such effect and provided, further, that, at RQI's request
made within thirty (30) days of the date of such written statement, Employee
shall submit to an examination by a doctor selected by RQI who is reasonably
acceptable to Employee or Employee's doctor and such doctor shall have concurred
in the conclusion of Employee's doctor. In the event this Agreement is
terminated as a result of Employee's disability, Employee shall have no right to
any severance compensation.
<PAGE>
(c) Good Cause. RQI may terminate this Agreement ten (10) days
after delivery of written notice to Employee for "good cause", which shall
be: (1) Employee's willful, material and irreparable breach of the Agreement;
(2) Employee's continual and material failure to adequately perform,
continuing for ten (10) days after receipt of written notice of need to cure,
any of Employee's material duties and responsibilities, provided that a
termination pursuant to this clause (2) is approved by a vote of at least
two-thirds (2/3) of the Board; (3) Employee's willful dishonesty, fraud or
misconduct which has a material adverse affect on the operations or
reputation of RQI (other than good faith expense account disputes); (4)
Employee's conviction in a court of competent jurisdiction of a felony (other
than a traffic violation); or (5) Employee's chronic alcohol abuse or illegal
drug use. In the event of a termination for good cause, as enumerated above,
Employee shall have no right to any severance compensation.
(d) Without Good Cause. Should Employee be terminated by RQI
without good cause during the Term, Employee shall be entitled to continue to
receive from RQI the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (l) year,
whichever amount is greater. Should Employee be terminated by RQI without good
cause at any time during or after the Term, Employee shall be entitled to waive
Employee's right to receive severance compensation (by a written waiver
delivered to RQI on the effective date of termination), and, in such case, the
noncompetition provisions of Section 3 hereof shall not apply.
(e) By Employee. At any time after the commencement of
employment, Employee may, without "good reason" (as defined in Exhibit A
hereto), terminate this Agreement and Employee's employment, effective thirty
(30) days after written notice is provided to RQI. If Employee resigns or
otherwise terminates Employee's employment without good reason, Employee shall
receive no severance compensation. If Employee's resignation or other
termination by Employee is for good reason, RQI shall pay all amounts and
damages to which Employee may be entitled as a result of such resignation or
other termination, including interest thereon and all reasonable legal fees and
expenses and other costs incurred by Employee to enforce Employee's rights
hereunder. Further, none of the provisions of Section 3 hereof shall apply in
the event this Agreement is terminated by Employee for good reason.
(f) Change in Control of RQI. In the event of a "Change in
Control" of RQI (as defined below) during the Term, refer to Section 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
Section 12 hereof. All other rights and obligations of RQI and Employee under
this Agreement shall cease as of the effective date of termination, except that
RQI's obligations under Section 9 hereof and Employee's obligations under
Sections 3, 6, 7, 8 and l0 hereof shall survive such termination in accordance
with their terms. Notwithstanding anything herein to the contrary, if a Change
in Control occurs during the Term and there is less than one (l) year remaining
on the Term, the Term shall be extended for one (l) year following the date of
the
<PAGE>
Change in Control, provided that the payment and other obligations hereunder
shall survive the termination of this Agreement to the extent a Change in
Control has occurred at any time during the Term.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of RQI or its representatives, vendors or customers
which pertain to the business of RQI shall be and remain the property of RQI and
be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of RQI which
is collected by Employee shall be delivered promptly to RQI without request by
it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to RQI any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment or within one (l) year
thereafter, and which are directly related to the business or activities of RQI
and which Employee conceives as a result of Employee's employment by RQI.
Employee hereby assigns and agrees to assign all of Employee's interests therein
to RQI or its nominee. Whenever requested to do so by RQI, Employee shall
execute any and all applications, assignments or other instruments that RQI
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect RQI's interest therein.
8. TRADE SECRETS.
Employee agrees that he will not, during or after the Term of this
Agreement with RQI, disclose the specific terms of RQI's relationships or
agreements with its significant vendors or customers or any other significant
and material trade secret of RQI, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by RQI against Employee), by reason of the
fact that Employee is or was performing services under this Agreement, then RQI
shall indemnify Employee against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, as actually and reasonably
incurred by Employee in connection therewith. In the event that both Employee
and RQI are made a party to the same third-party action, complaint, suit or
proceeding, RQI agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by RQI
shall have a conflict of interest that prevents such counsel from
<PAGE>
representing Employee, Employee may engage separate counsel and RQI shall pay
all reasonable attorneys' fees of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to RQI that the execution of
this Agreement by Employee and his employment by RQI and the performance of
Employee's duties hereunder will not violate or constitute a breach of any
agreement with a former employer, client or any other person or entity. Further,
Employee agrees to indemnify RQI for any claim, including but not limited to
attorneys' fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against RQI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by RQI on
the basis of Employee's personal qualifications, experience and skills.
Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of Section 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant
to subsection (c) below, Employee understands and acknowledges that RQI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of RQI hereunder or that RQI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this Section 12 shall be applicable.
(b) In the event of a pending Change in Control wherein RQI and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of RQI's business
and/or assets that such successor is willing as of the closing to assume and
agree to perform RQI's obligations under this Agreement in the same manner and
to the same extent that RQI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by RQI without
cause during the Term and the applicable portions of Section 5(d) hereof shall
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of Section
5(d) and shall payable in a lump sum payment and the noncompetition provisions
of Section 3 hereof shall not apply. In addition, RQI shall provide Employee
with the benefits set forth in subsections 12(h)(ii) through (iv) hereof.
<PAGE>
(c) In any Change in Control situation, Employee may elect to
terminate this Agreement by providing written notice to RQI at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of Section 5(d)
hereof shall apply as though the Company had terminated the Agreement without
cause during the Term; provided, however, under such circumstances, the amount
of the severance payment due to Employee shall be double the amount calculated
under the terms of Section 5(d) and shall be payable in a lump sum payment and
the noncompetition provisions of Section 3 hereof shall all apply for a period
of two (2) years from the effective date of termination. Employee shall have the
right to waive Employee's right to receive the severance compensation payable
under this Section 12(c) (by a written waiver delivered to RQI on the effective
date of the termination), in which case the noncompetition provisions of Section
3 hereof shall not apply.
(d) For purposes of applying Section 5 hereof under the
circumstances described in subsections (b) and (c) above, the effective date
of termination shall be the closing date of the transaction giving rise to
the Change in Control, and all compensation, reimbursements and lump-sum
payments due Employee must be paid in full by RQI at or prior to such
closing. Further, Employee shall be given sufficient time and opportunity to
elect whether to exercise all or any of Employee's vested options to purchase
RQI Common Stock, including any options with accelerated vesting under the
provisions of RQI's 1998 Long-Term Incentive Plan, as amended, such that
Employee may convert the options to shares of RQI Common Stock at or prior to
the closing of the transaction giving rise to the Change in Control, if
Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any
of the following shall have occurred:
(i) any person or entity, ether than RQI or an employee benefit
plan of RQI, acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of RQI and immediately after such
acquisition such person or entity is, directly or indirectly, the
Beneficial Owner of voting securities representing fifty percent (50%)
or more of the total voting power of all of the then outstanding voting
securities of RQI;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of RQI: (A) those individuals who,
as of the closing date of RQI's initial public offering, constitute the
Board of Directors of RQI (the "Original Directors"); (B) those
individuals who thereafter are elected to the Board of Directors of RQI
and whose election, or nomination for election, to the Board of
Directors of RQI was approved by a vote of at least two-thirds (2/3) of
the Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election);
and (C) those individuals who are elected to the Board of Directors of
RQI and whose election, or nomination for election, to the Board of
Directors of RQI was approved by a vote of at least two-thirds (2/3) of
the Original Directors and Additional Original Directors then still in
office (such directors also becoming "Additional Original Directors"
immediately following their election);
<PAGE>
(iii) the stockholders of RQI shall approve a merger,
consolidation, recapitalization or reorganization of RQI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than any
such transaction which would result in at least seventy-five percent
(75%) of the total voting power represented by the voting securities of
the surviving entity outstanding immediately after such transaction
being Beneficially Owned by at least seventy-five percent (75%) of the
holders of outstanding voting securities of RQI immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of RQI shall approve a plan of complete
liquidation of RQI or an agreement for the sale or disposition by RQI of
all or a substantial portion of RQI's assets (i.e., fifty percent (50%)
or more of the total assets of RQI).
(f) Employee must be notified in writing by RQI at any time that
RQI anticipates that a Change in Control may take place.
(g) (i) In the event any payment that is either received by
Employee or paid by RQI on his behalf or any property or any
other benefit provided to him under this Agreement or under
any other plan, arrangement or agreement with RQI or any
other person whose payments or benefits are treated as
contingent on a change of ownership or control of RQI (or in
the ownership of a substantial portion of the assets of RQI)
or any person affiliated with RQI or such person (but only
if such payment or other benefit is in connection with
Employee's employment by RQI (collectively the " RQI
Payments")), shall be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") (and any similar tax that may
hereafter be imposed by any taxing authority), RQI shall pay
to Employee at the time specified in clause (iv) below an
additional amount (the "Gross-up Payment") such that the net
amount retained by Employee, after deduction of any Excise
Tax on the RQI Payments and any U.S. federal, state, or
local income or payroll tax upon the Gross-up Payment
provided for by this clause (i), but before deduction for
any U.S. federal, state, and local income or payroll tax on
the RQI Payments, shall be equal to the RQI Payments.
(ii) For purposes of determining whether any of the RQI Payments
and Gross-up Payments (collectively the "Total Payments")
will be subject to the Excise Tax and the amount of such
Excise Tax, (A) the Total Payments shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under Code Section
280G)(3) of the Code) shall be treated as
<PAGE>
subject to the Excise Tax, unless and except to the extent
that, in the opinion of RQI's independent certified public
accountants appointed prior to any Change in Control or tax
counsel selected by such accountants or RQI (the
"Accountants"), such Total Payments (in whole or in part)
either do not constitute "parachute payments," represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the "base amount," or are otherwise not subject to
the Excise Tax, and (B) the value of any noncash benefits or
any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section
280G of the Code. In the event that the Accountants are
serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, Employee may
appoint another nationally recognized accounting firm to
make the determinations hereunder (which accounting firm
shall then be referred to as the "Accountants" hereunder).
All determinations hereunder shall be made by the
Accountants which shall provide detailed supporting
calculations both to RQI and Employee at such time as it is
requested by RQI or Employee. If the Accountants determine
that payments under this Agreement must be reduced pursuant
to this Section 12, they shall furnish Employee with a
written opinion to such effect. The determination of the
Accountants shall be binding upon RQI and Employee.
(iii) For purposes of determining the amount of the Gross-up
Payment, Employee shall be deemed to pay U.S. federal income
taxes at the highest marginal rate of U.S. federal income
taxation in the calendar year in which the Gross-up Payment
is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality
of Employee's residence for the calendar year in which the
RQI Payments are to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such
year. In the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount
taken into account hereunder at the time the Gross-up
Payment is made, Employee shall repay to RQI, at the time
that the amount of such reduction in Excise Tax is finally
determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the
Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion
of the Gross-up Payment being repaid by Employee if such
repayment results in a reduction in Excise Tax or a U.S.
federal, state and local income tax deduction), plus
interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of
<PAGE>
the Code. Notwithstanding the foregoing, in the event any
portion of the Gross-up Payment to be refunded to RQI has
been paid to any U.S. federal, state or local tax authority,
repayment thereof (and related amounts) shall not be
required until actual refund or credit of such portion has
been made to Employee, and interest payable to RQI shall not
exceed the interest received or credited to Employee by such
tax authority for the period it held such portion. Employee
and RQI shall mutually agree upon the course of action to be
pursued (and the method of allocating the expense thereof)
if Employee's claim for refund or credit is denied.
In the event that the Excise Tax is later determined by the
Accountants to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made
(including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-up
Payment), RQI shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(iv) Not later than the date on which Employee's Excise Tax is
due (which shall include the date that any withholding
obligation for such Excise Tax is required to be satisfied),
RQI shall pay to Employee or, in the case of any withholding
obligation, the Internal Revenue Service on behalf of such
Employee, an amount equal to the Excise Tax. The Gross-up
Payment or portion thereof provided for in clause (iii)
above (less any amounts paid pursuant to the preceding
sentence) shall be paid within ten (l0) days after Employee
delivers a written request for reimbursement accompanied by
a copy of Employee's tax return(s) showing the Excise Tax
actually incurred by Employee.
(v) Employee shall notify the Chief Financial Officer of RQI in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by RQI of a
Gross-up Payment. Such notification shall be given as soon
as practicable but no later than ten (10) business days
after Employee is informed in writing of such claim and
shall apprize RQI of the nature of such claim and the date
on which such claim is requested to be paid. Employee shall
not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such
notice to RQI (or such shorter period ending on the date
that any payment of taxes with respect to such claim is
due). If RQI notifies Employee in writing prior to the
expiration of such period that it desires to contest such
claim, Employee shall:
<PAGE>
(A) give RQI any information reasonably requested by RQI
relating to such claim;
(B) take such action in connection with contesting such
claim as RQI shall reasonably request in writing from
time to time, including, without limitation, accepting
legal representation with respect to such claim by an
attorney reasonably selected by RQI;
(C) cooperate with RQI in good faith in order to
effectively contest such claim; and
(D) permit RQI to participate in any proceedings relating
to such claim;
PROVIDED, HOWEVER, that RQI shall bear and pay directly all costs and
expenses (including, without limitation, additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold Employee harmless, on an after-tax basis, for any Excise Tax or
income tax (including any interest and penalties with respect thereto)
imposed as a result of such representation and payment of cost and
expenses.
Without limitation on the foregoing provisions of this
clause (v), RQI shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Employee to pay the tax claimed and sue for a refund or
contest the claim in any contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as RQI shall determine; provided, however,
that if RQI directs Employee to pay such claim and sue for a refund, RQI
shall advance the amount of such payment to Employee, on an
interest-free basis, and shall indemnify and hold Employee harmless,
on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of
Employee with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, RQI's
control of the contest shall be limited to issues with respect to
which a Gross-up Payment would be payable hereunder and Employee
shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(vi) If, after receipt by Employee of an amount advanced by RQI
pursuant to clause (v) above, Employee becomes entitled to
receive any refund with respect to such claim, Employee
shall (subject to RQI's complying with the requirements of
clause (v)) promptly pay to RQI the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Employee
of an amount
<PAGE>
advanced by RQI pursuant to clause (v), a determination is
made that Employee shall not be entitled to any refund with
respect to such claim and RQI does not notify Employee in
writing of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such
determination, then such advance shall offset, to the extent
thereof, the amount of Gross-up Payment required to be paid.
(vii) RQI shall be responsible for all charges of the
Accountants.
(viii) RQI and Employee shall promptly deliver to each other
copies of any written communications, and summaries of any
verbal communications, with any taxing authority regarding
the Excise Tax covered by this Section 12.
(h) If Employee's employment by RQI is terminated within one (1)
year after a Change in Control by Employee for good reason or by RQI without
good cause, then RQI shall pay or provide Employee with all of the following
severance benefits:
(i) a lump-sum cash payment within fifteen (15) days of
Employee's date of termination (or, if applicable, such
later date as is necessary for Employee to execute the
release described under Section 20(b) herein) equal to three
(3) times Employee's annual base salary in effect immediately
prior to the Change in Control;
(ii) any base salary, bonus, vacation pay, deferred
compensation accrued or earned under law or in accordance with
RQI's policies applicable to Employee but not yet paid and any
incurred, but unreimbursed business expenses for the period
prior to termination shall be payable in accordance with RQI's
policies and the terms of the applicable planv("Accrued
Obligations");
(iii) continued participation (at RQI's cost and without any
required employee or dependent contributions) in all health or
welfare plans which cover Employee (and eligible dependents),
including, without limitation, medical, dental, life insurance
and disability coverage upon the same terms and conditions
(except for the requirements of Employee's continued employment)
in effect on the Employee's date of termination (which shall be
substantially comparable to the health or welfare plans in
which Employee participated in immediately prior to the Change
in Control) until three (3) years after the date of termination;
provided, however, that in the event Employee obtains other
employment that offers substantially similar or improved
benefits, as to any particular health or welfare plan, such
continuation of coverage by RQI for such similar or improved
benefit under such plan shall immediately cease. To the extent
such coverage cannot be provided under RQI's health plans without
jeopardizing the tax status of such plans, for underwriting
reasons or because of the tax
<PAGE>
impact on Employee, RQI shall pay Employee an amount such that
Employee can purchase such benefits separately at no greater
after tax cost to him than he would have had if such benefits
were provided to him as an employee. The continuation of
health benefits for the thirty-six (36) month period shall
reduce and count against Employee's rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended; and
(iv) Outplacement services at a level commensurate with
Employee's position, including use of an Employee office and
secretary available through such outplacement services, for a
period of one (l) year commencing on the Employee's date of
termination but in no event extending beyond the date on which
Employee commences other full time employment.
(i) If Employee's employment by RQI is terminated by RQI without
good cause during the one hundred eighty (180) days prior to the effective date
of a Change in Control, then RQI shall pay or provide Employee with all of the
following severance benefits:
(i) a lump sum cash payment within fifteen (15) days of
the Change in Control (or, if applicable, such later date as
is necessary for Employee to execute the release described
under Section 20(b) hereof) equal to Employee's base salary at
the rate in effect at the time of Employee's termination for
whatever time period is remaining under the Term of this
Agreement at the time of Employee's termination, less any
amounts paid pursuant to Section 5(d) hereof between the
effective date of Employee's termination and the effective
date of a Change in Control, plus one (1) times Employee's
annual base salary at the rate in effect at the time of
Employee's termination; and
(ii) the benefits set forth in subsections 12(h)(ii)
through (iv) hereof; provided, however, that benefits under
subsection 12(h)(iii) shall continue for the same period used
to calculate the lump sum cash payment under clause (i) above.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, between RQI
and Employee, and Employee has no oral representations, understandings or
agreements with RQI or any of its officers, directors or representatives
covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between RQI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or
<PAGE>
written agreements. This written Agreement may not be later modified except by a
written instrument signed by a duly authorized officer of RQI and Employee, and
no term of this Agreement may be waived except by a written instrument signed by
the party waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: ResortQuest International, Inc.
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
Attention: General Counsel
To Employee: James S. Olin
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative
(including a determination by RQI's independent public accountants in good faith
that any provision of this Agreement would preclude "pooling of interests"
accounting), the other portions of this Agreement shall be deemed valid and
operative and so far as is reasonable and possible, effect shall be given to the
intent manifested by the portion held invalid or inoperative. The section
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in Sections 5(b) and
5(c) hereof, respectively, or that RQI has otherwise materially breached this
Agreement. A decision by a
<PAGE>
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be borne by RQI. To the fullest
extent permitted by law, RQI shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation, prejudgment
interest, and other expenses incurred in connection with any dispute concerning
payments, benefits or any other entitlements under Section 12 hereof; provided,
however, that RQI shall be reimbursed by Employee for (a) the fees and expenses
advanced in the event Employee's claim is, in a material manner, in bad faith or
frivolous and the arbitrator or court, as applicable, determines that the
reimbursement of such fees and expenses is appropriate, or (b) to the extent
that the arbitrator or court, as appropriate, determines that such legal and
other professional fees are clearly and demonstrably unreasonable.
17. GOVERNING LAW.
This Agreement shall in all respects be interpreted, construed and
enforced according to the internal laws of the State of Tennessee, without
giving effect to choice of law principles thereof.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19. CONFIDENTIALITY.
(a) Employee agrees and understands that during the Employee's
position with RQI, Employee has been and will be exposed to and receive
information relating to the affairs of RQI considered by RQI to be confidential
and in the nature of trade secrets (including but not limited to procedures,
memoranda, notes, records and customer lists, whether such information has been
or is made, developed or compiled by Employee or otherwise has been or is made
available to him) (any and all such information, the "Confidential
information"). Employee agrees that, during the Tenn and thereafter for a period
of two (2) years, Employee shall keep such Confidential Information confidential
and will not disclose such Confidential Information, either directly or
indirectly, to any third person or entity without the prior written consent of
RQI; provided, however, that (i) Employee shall have no such obligation to the
extent such Confidential Information is or becomes publicly known other than as
a result of Employee's breach of his obligations hereunder or is received by
Employee following the date of termination and (ii) Employee may, after giving
prior notice to RQI to the extent practicable under the circumstances, disclose
such Confidential Information to the extent required by applicable laws or
governmental regulations or judicial or regulatory process.
(b) Employee agrees that all Confidential Information is and
shall remain the property of RQI. Employee further agrees that, during the Term
and thereafter, he shall hold in the strictest confidence all Confidential
Information, and shall not, directly or indirectly,
<PAGE>
duplicate, sell, use, lease, commercialize, disclose or otherwise divulge to any
person or entity any portion of the Confidential Information or use any
Confidential Information for his own benefit or profit or allow any person or
entity, other than RQI and its authorized employees, to use or otherwise gain
access to any Confidential Information.
20. NO MITIGATION/NO OFFSET/RELEASE.
(a) In the event of any termination of employment hereunder,
Employee shall be under no obligation to seek other employment and there shall
be no offset against any amounts due Employee under this Agreement on account of
any remuneration attributable to any subsequent employment that Employee may
obtain. The amounts payable hereunder shall not be subject to setoff,
counterclaim, recoupment, defense or other right which RQI may have against
Employee or others, except as specifically set forth in Section 3 hereof or upon
obtaining by RQI of a final unappealable judgment against Employee.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Sections 5(d), 5(e) or 12 beyond Accrued Obligations shall
only be payable if Employee delivers to RQI a release (substantially in the form
of the release set forth in RQI's standard form severance agreement) of all
claims that Employee has or may have against RQI and its affiliates (other than
claims to payments, benefits or entitlements specifically payable or provided
hereunder, claims under COBRA, claims to vested accrued benefits under RQI's
employee benefit plans or any rights of indemnification under RQI's
organizational documents) occurring up to the release date in such form as
reasonably requested by RQI; provided, however, that such release shall also
release Employee of all claims that RQI and its affiliates have or may have
against the Employee. In the event that RQI fails to deliver such release to
Employee within ten (10) days from the later of (i) the Employee's date of
termination or (ii) the date of the Change in Control, such release shall not be
required and shall not prohibit or otherwise delay payment of any amounts due
Employee hereunder.
(c) Upon any termination of employment, upon the request of RQI,
Employee shall deliver to RQI a resignation from all offices and directorships
and fiduciary positions of Employee in which Employee is serving with, or at the
request of, RQI or its subsidiaries, affiliates or benefit plans.
21. LIABILITY INSURANCE.
RQI shall cover Employee under directors and officers liability
insurance both during and, while potential liability exists, after the Term in
the same amount and to the same extent, if any, as RQI covers its other officers
and directors.
22. LITIGATION SUPPORT.
Subject to Employee's other commitments, following the Term, Employee
shall be reasonably available to cooperate (but only truthfully) with RQI and
provide information as to
<PAGE>
matters which Employee was personally involved, or has information on, during
the Term and which are or become the subject of litigation or other dispute.
23. MULTIPLE TRIGGERING EVENTS; CANCELLATION AND RECOVERY.
If Employee first becomes eligible to receive payments pursuant to
Sections 5(d) or (e) or Sections 12(b), (c), (h) or (i) hereof, Employee shall
not thereafter be entitled to any additional payments or benefits pursuant to
such provisions (other than pursuant to Section 12(i) hereof) which would have
become payable as a result of subsequent events had Employee's employment by RQI
not previously terminated. Notwithstanding anything herein to the contrary, RQI
reserves the right to terminate all payments and benefits hereunder and to
recover from Employee amounts previously paid to Employee if Employee's
employment by RQI is terminated by Employee for good reason or by RQI without
good cause within thirty (30) days after an event which would be grounds for a
termination by RQI for good cause.
* * * * * * * * * *
[Remainder of Page Intentionally Left Blank - Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RESORTQUEST INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ David L. Levine
-------------------------
Name:
-------------------------
Title: CEO
-------------------------
EMPLOYEE:
/s/ James Olin
-----------------------------
James Olin, individually
<PAGE>
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
The term "good reason" shall mean, without the express written consent
of Employee, the occurrence of any of the following events:
(i) any material diminution or change in (except temporarily during any
period of Disability) Employee's positions, duties, responsibilities,
authority or titles not commensurate with Employee's position or the
assignment of duties or responsibilities not commensurate with
Employee's position;
(ii) a reduction by RQI in Employee's base salary provided in Section
2(a) hereof;
(iii) a failure to continue bonus, incentive or other equity plans,
programs or arrangements, or Employee's participation therein, on the
same basis as to potential or targeted amounts; or
(iv) a material breach by RQI of any agreement with Employee.
<PAGE>
Exhibit 10.38
AMENDMENT TO
EMPLOYMENT AGREEMENT
FIRST AMENDMENT made as of this 29th day of July, 1999 to the
Employment Agreement dated as of April 29, 1998 by and between ResortQuest
International, Inc., a Delaware corporation formerly known as Vacation
Properties International, Inc. ("VPI"), and [____________________] (the
"Employee"), which became effective on May 26, 1998, the date of the
consummation of the initial public offering of the common stock of VPI (the
"Employment Agreement"). If VPI and the other party to a transaction
constituting a Change in Control (as defined in the Employment Agreement) agree
that such transaction shall be treated as a "pooling of interests" for financial
reporting purposes, and if the transaction is in fact so treated, then the
provisions of this Amendment shall not be valid to the extent that VCPI's
independent public accountants determine in good faith that the provisions of
this Amendment would preclude "pooling of interests" accounting.
W I T N E S S E T H:
WHEREAS, VPI and Employee have previously entered into the Employment
Agreement; and
WHEREAS, VPI and Employee desire to amend the Employment Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. The first sentence of subparagraph 5(c) of the Employment Agreement
is hereby amended in its entirety to read as follows:
"VPI may terminate the Agreement ten (10) days after delivery
of written notice to Employee for good cause, which shall be:
(1) Employee's willful, material and irreparable breach of the
Agreement; (2) Employee's continual and material failure to
adequately perform, continuing for 10 days after receipt of
written notice of need to cure, any of Employee's material
duties and responsibilities, provided that a termination
pursuant to this clause is approved by a vote of at least
two-thirds (2/3) of the Board; (3) Employee's willful
dishonesty, fraud or misconduct which has a material adverse
effect on the operations or reputation of VPI (other than good
faith expense account disputes); (4) Employee's conviction in
a court of competent jurisdiction of a felony (other than a
traffic violation); or (5) Employee's chronic alcohol abuse or
illegal drug use."
2. The third sentence of sub-paragraph 5(e) of the Employment Agreement
is hereby amended in its entirety to read as follows:
<PAGE>
"If Employee's resignation or other termination by Employee is
for good reason (as defined in Exhibit A hereto), VPI shall
pay all amounts and damages to which Employee may be entitled
as a result of such resignation or other termination,
including interest thereon and all reasonable legal fees and
expenses and other costs incurred by Employee to enforce
Employee's rights thereunder."
3. Paragraph 5 of the Employment Agreement is hereby amended by adding
the following language at the end thereof:
"Notwithstanding anything herein to the contrary, if a Change
in Control occurs during the Term and there is less than one
(1) year remaining on the Term, the Term shall be extended for
one (1) year following the date of the Change in Control and
provided further that the payment and other obligations
hereunder shall survive the termination of this Agreement to
the extent a Change in Control has occurred at any time during
the Term."
4. Sub-paragraph 12(b) of the Employment Agreement is hereby amended by
adding of the following language at the end thereof:
"In addition, VPI shall provide Employee with the benefits set
forth in sub-paragraphs 12(h)(ii) through (iv)."
5. Sub-paragraph 12(e) of the Employment Agreement is hereby amended by
deleting the phrase "unless the transaction or event shall have been approved by
at least two-thirds (2/3) of the Board of Directors of VPI."
6. Sub-paragraph 12(g) of the Employment Agreement is hereby amended in
its entirety to read as follows:
"(i) In the event any payment that is either received by
Employee or paid by VPI on his or her behalf or any property
or any other benefit provided to him or her under this
Agreement or under any other plan, arrangement or agreement
with VPI or any other person whose payments or benefits are
treated as contingent on a change of ownership or control of
VPI (or in the ownership of a substantial portion of the
assets of VPI) or any person affiliated with VPI or such
person (but only if such payment or other benefit is in
connection with Employee's employment by VPI) collectively the
"VPI Payments"), will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") (and any similar tax that may
hereafter be imposed by any taxing authority), VPI shall pay
to Employee at the time specified in subparagraph (iv) below
an additional amount (the "Gross-up Payment") such that the
net amount retained by Employee, after deduction of any Excise
Tax on the VPI Payments and any U.S. federal, state or local
income or payroll tax upon the Gross-up Payment provided for
by this subparagraph (i), but before deduction for any U.S.
federal, state, and
2
<PAGE>
local income or payroll tax on the VPI Payments, shall be
equal to the VPI Payments.
(ii) For purposes of determining whether any of the VPI
Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "parachute payments" in excess of the
"base amount" (as defined under Code Section 280G(b)(3) of the
Code) shall be treated as subject to the Excise Tax, unless
and except to the extent that, in the opinion of VPI's
independent certified public accountants appointed prior to
any Change in Control or tax counsel selected by such
accountants or VPI (the "Accountants") such Total Payments (in
whole or in part) either do not constitute "parachute
payments," represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the "base amount" or are otherwise not
subject to the Excise Tax, and (y) the value of any non-cash
benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the
principles of Section 280G of the Code. In the event that the
Accountants are serving as accountant or auditor for the
individual, entirety or group effecting the Change in Control,
Employee may appoint another nationally recognized accounting
firm to make the determinations hereunder (which accounting
firm shall then be referred to as the "Accountants"
hereunder). All determinations hereunder shall be made by the
Accountants which shall provide detailed supporting
calculations both to VPI and Employee at such time as it is
requested by VPI or Employee. If the Accountants determine
that payments under this Agreement must be reduced pursuant to
this paragraph, they shall furnish Employee with a written
opinion to such effect. The determination of the Accountants
shall be binding upon VPI and Employee.
(iii) For purposes of determining the amount of the Gross-up
Payment, Employee shall be deemed to pay U.S. federal income
taxes at the highest marginal rate of U.S. federal income
taxation in the calendar year in which the Gross-up Payment is
to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of
Employee's residence for the calendar year in which the VPI
Payments are to be made, net of the maximum reduction in U.S.
federal income taxes which could be obtained from deduction of
such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the
Accountants to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, Employee
shall repay to VPI, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of
the prior Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the
Excise Tax and U.S. federal, state and local income tax
3
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imposed on the portion of the Gross-up Payment being repaid by
Employee if such repayment results in a reduction in Excise
Tax or a U.S. federal, state and local income tax deduction),
plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. Notwithstanding
the foregoing, in the event any portion of the Gross-up
Payment to be refunded to VPI has been paid to any U.S.
federal, state or local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or
credit of such portion has been made to Employee, and interest
payable to VPI shall not exceed the interest received or
credited to Employee by such tax authority for the period it
held such portion. Employee and VPI shall mutually agree upon
the course of action to be pursued (and the method of
allocating the expense thereof) if Employee's claim for refund
or credit is denied.
In the event that the Excise Tax is later determined by the
Accountant to exceed the amount taken into account hereunder
at the time the Gross-up Payment is made (including by reason
of any payment the existence or amount of which cannot be
determined at the time of the Gross-up Payment), VPI shall
make an additional Gross-up Payment in respect of such excess)
(plus any interest or penalties payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
(iv) Not later than the date on which Employee's Excise Tax is
due (which shall include the date that any withholding
obligation for such Excise Tax is required to be satisfied),
VPI shall pay to Employee or, in the case of any withholding
obligation, the Internal Revenue Service on behalf of such
Employee, an amount equal to the Excise Tax. The Gross-up
Payment or portion thereof provided for in subparagraph (iii)
above (less any amounts paid pursuant to the preceding
sentence) shall be paid within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a
copy of Employee's tax return(s) showing the Excise Tax
actually incurred by Employee.
(v) Employee shall notify the Chief Financial Officer of VPI
in writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by VPI of a Gross-up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
Employee is informed in writing of such claim and shall
apprise VPI of the nature of such claim and the date on which
such claim is requested to be paid. Employee shall not pay
such claim prior to the expiration of the thirty (30) day
period following the date on which it gives such notice to VPI
(or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If VPI notifies
Employee in writing prior to the expiration of such period
that it desires to contest such claim, Employee shall:
4
<PAGE>
(A) give VPI any information reasonably
requested by VPI relating to such claim,
(B) take such action in connection with
contesting such claim as VPI shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by VPI,
(C) cooperate with VPI in good faith in order to
effectively contest such claim, and
(D) permit VPI to participate in any proceedings
relating to such claim;
provided, however, that VPI shall bear and pay directly all
costs and expenses (including, without limitation, additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including
any interest and penalties with respect thereto) imposed as a
result of such representation and payment of cost and
expenses. Without limitation on the foregoing provisions of
this subparagraph (v), VPI shall control all proceedings taken
in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct Employee to pay the tax claimed and sue
for a refund or contest the claim in any contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as VPI shall determine; provided, however, that if VPI directs
Employee to pay such claim and sue for a refund, VPI shall
advance the amount of such payment to Employee, on an
interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest to such advance or with respect to any
imputed income with respect to such advance; and further
provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Employee
with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore,
VPI's control of the contest shall be limited to issues with
respect to which a Gross-up Payment would be payable hereunder
and Employee shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(vi) If, after receipt by Employee of an amount advanced by
VPI pursuant to subparagraph (v) Employee becomes entitled to
receive any refund with respect to such claim, Employee shall
(subject to VPI's complying with the requirements of
subparagraph (v) promptly pay to VPI
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<PAGE>
the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after
the receipt by Employee of an amount advanced by VPI pursuant
to subparagraph (v), a determination is made that Employee
shall not be entitled to any refund with respect to such claim
and VPI does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of
thirty (30) days after such determination, then such advance
shall offset, to the extent thereof, the amount of Gross-up
Payment required to be paid.
(vii) VPI shall be responsible for all charges of the
Accountant.
(viii) VPI and Employee shall promptly deliver to each other
copies of any written communications, and summaries of any
verbal communications, with any taxing authority regarding the
Excise Tax covered by this paragraph."
7. A new sub-paragraph 12(h) is hereby added to the Employment
Agreement to read as follows:
"(h) If Employee's employment by VPI is terminated within one
(1) year after a Change in Control by Employee for good reason
or by VPI without good cause, then VPI shall pay or provide
Employee with all of the following severance benefits:
(i) a lump-sum cash payment within fifteen (15) days of
Employee's date of termination (or, if applicable, such later
date as is necessary for Employee to execute the release
described under paragraph 20(b) herein) equal to three (3)
times Employee's annual base salary in effect immediately
prior to the Change in Control;
(ii) any base salary, bonus, vacation pay, deferred
compensation accrued or earned under law or in accordance with
VPI's policies applicable to Employee but not yet paid and any
incurred but unreimbursed business expenses for the period
prior to termination shall be payable in accordance with VPI's
policies and the terms of the applicable plan ("Accrued
Obligations");
(iii) continued participation (at VPI's cost and without any
required employee or dependent contributions) in all health or
welfare plans which cover Employee (and eligible dependents),
including, without limitation, medical, dental, life insurance
and disability coverage upon the same terms and conditions
(except for the requirements of Employee's continued
employment) in effect on the Employee's date of termination
(which shall be substantially comparable to the health or
welfare plans in which Employee participated in immediately
prior to the Change in Control) until three (3) years after
the date of termination; provided, however, that in the event
Employee obtains other employment that offers
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<PAGE>
substantially similar or improved benefits, as to any
particular health or welfare plan, such continuation of
coverage by VPI for such similar or improved benefit under
such plan shall immediately cease. To the extent such coverage
cannot be provided under VPI's health plans without
jeopardizing the tax status of such plans, for underwriting
reasons or because of the tax impact on Employee, VPI shall
pay Employee an amount such that Employee can purchase such
benefits separately at no greater after tax cost to him or her
than he or she would have had if the benefits were provided to
him or her as an employee. The continuation of health benefits
for the thirty-six (36) month period shall reduce and count
against Employee's rights under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iv) Outplacement services at a level commensurate with
Employee's position, including use of an Employee office and
secretary available through such outplacement services, for a
period of one (1) year commencing on the Employee's date of
termination but in no event extending beyond the date on which
Employee commences other full time employment."
8. New sub-paragraphs 12(i) and (j) are hereby added to the Employment
Agreement to read as follows:
"(i) If Employee's employment by VPI is terminated by VPI
without good cause during the one hundred eighty (180) days
prior to the effective date of a Change in Control, then VPI
shall pay or provide Employee with all of the following
severance benefits:
(ii) a lump sum cash payment within fifteen (15) days of the
Change in Control (or, if applicable, such later date as is
necessary for Employee to execute the release described under
paragraph 20(b) herein) equal to Employee's base salary at the
rate in effect at the time of Employee's termination for
whatever time period is remaining under the Term of this
Agreement at the time of Employee's termination, less any
amounts paid pursuant to subparagraph 5(d) between the
effective date of Employee's termination and the effective
date of a Change in Control, plus one (1) times Employee's
annual base salary at the rate in effect at the time of
Employee's termination; and
(ii) the benefits set forth in sub-paragraphs 12(h)(ii)
through (iv) hereof; provided, however, that benefits under
sub-paragraph 12(h)(iii) shall continue for the same period
used to calculate the lump sum cash payment under Section
12(i)(i)."
(j) In the event that Employee elects to terminate employment
or is terminated under subparagraphs 12(b) or (c), Employee
shall be entitled to continued health insurance coverage for
the three (3) year period after the
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<PAGE>
date of termination in the same manner and to same extent set
forth in subparagraph 12(h)(iii). Following the three (3) year
period of continued health insurance coverage described in
this subparagraph 12(j) and under subparagraph 12(h)(iii),
Employee shall be entitled to continued health insurance
coverage for the five (5) year period after the expiration of
the three (3) year period in the same manner and to the same
extent set forth in subparagraph 12(h)(iii), provided that the
Employee reimburses VPI for the full premium for such
coverage.
9. Paragraph 16 of the Employment Agreement is hereby amended by adding
of the following language at the end thereof:
"To the fullest extent permitted by law, VPI shall promptly
pay upon submission of statements all legal and other
professional fees, costs of litigation, prejudgment interest,
and other expenses incurred in connection with any dispute
concerning payments, benefits or any other entitlements under
paragraph 12; provided, however, VPI shall be reimbursed by
Employee for (i) the fees and expenses advanced in the event
Employee's claim is, in a material manner, bad faith or
frivolous and the arbitrator or court, as applicable,
determines that the reimbursement of such fees and expenses is
appropriate, or (ii) to the extent that the arbitrator or
court, as appropriate, determines that such legal and other
professional fees are clearly and demonstrably unreasonable."
10. A new paragraph 19 is hereby added to the Employment Agreement to
read as follows:
"19. CONFIDENTIALITY.
(a) Employee agrees and understands that during the Employee's
position with VPI, Employee has been and will be exposed to
and receive information relating to the affairs of VPI
considered by VPI to be confidential and in the nature of
trade secrets (including but not limited to procedures,
memoranda, notes, records and customer lists, whether such
information has been or is made, developed or compiled by
Employee or otherwise has been or is made available to him)
(any and all such information, the "Confidential
Information"). Employee agrees that, during the Term and
thereafter for a period of two years, Employee shall keep
such Confidential Information confidential and will not
disclose such Confidential Information, either directly or
indirectly, to any third person or entity without the prior
written consent of VPI; provided, however, that (i) Employee
shall have no such obligation to the extent such Confidential
Information is or becomes publicly known other than as a
result of Employee's breach of his obligations hereunder or
is received by Employee following the date of termination and
(ii) Employee may, after giving prior notice to VPI to the
extent practicable under the circumstances, disclose such
Confidential Information to the extent
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<PAGE>
required by applicable laws or governmental regulations or
judicial or regulatory process.
(b) Employee agrees that all Confidential Information is and
will remain the property of VPI. Employee further agrees that,
during the Term and thereafter, he shall hold in the strictest
confidence all Confidential Information, and shall not,
directly or indirectly, duplicate, sell, use, lease,
commercialize, disclose, or otherwise divulge to any person or
entity any portion of the Confidential Information or use any
Confidential Information for his own benefit or profit or
allow any person or entity, other than VPI and its authorized
employees, to use or otherwise gain access to any Confidential
Information."
11. A new paragraph 20 is hereby added to the Employment Agreement to
read as follows:
"20. NO MITIGATION/NO OFFSET/RELEASE.
(a) In the event of any termination of employment hereunder,
Employee shall be under no obligation to seek other employment
and there shall be no offset against any amounts due Employee
under this Agreement on account of any remuneration
attributable to any subsequent employment that Employee may
obtain. The amounts payable hereunder shall not be subject to
setoff, counterclaim, recoupment, defense or other right which
VPI may have against Employee or others, except as
specifically set forth in paragraph 3 hereof or upon obtaining
by VPI of a final unappealable judgment against Employee.
(b) Any amounts payable and benefits or additional rights
provided pursuant to paragraphs 5(d), 5(e) or 12 beyond
Accrued Obligations shall only be payable if Employee delivers
to VPI a release (substantially in the form of the release set
forth in VPI's standard form severance agreement) of all
claims that Employee has or may have against VPI and its
affiliates (other than claims to payments, benefits or
entitlements specifically payable or provided hereunder,
claims under COBRA, claims to vested accrued benefits under
VPI's employee benefit plans or any rights of indemnification
under VPI's organizational documents) occurring up to the
release date in such form as reasonably requested by VPI,
provided, however, that such release shall also release
Employee of all claims that VPI and its affiliates have or may
have against the Employee. In the event that VPI fails to
deliver such release to Employee within ten (10) days from the
later of (i) the Employee's date of termination or (ii) the
date of the Change in Control, such release shall not be
required and shall not prohibit or otherwise delay payment of
any amounts due Employee hereunder.
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<PAGE>
(c) Upon any termination of employment, upon the request of
VPI, Employee shall deliver to VPI a resignation from all
offices and directorships and fiduciary positions of Employee
in which Employee is serving with, or at the request of, VPI
or its subsidiaries, affiliates or benefit plans."
12. A new paragraph 21 is hereby added to the Employment Agreement to
read as follows:
"21. LIABILITY INSURANCE. VPI shall cover Employee under
directors and officers liability insurance both during and,
while potential liability exists, after the Term in the same
amount and to the same extent, if any, as VPI covers its other
officers and directors."
13. A new paragraph 22 is hereby added to the Employment Agreement to
read as follows:
"22. LITIGATION SUPPORT. Subject to Employee's other
commitments, following the Term, Employee shall be reasonably
available to cooperate (but only truthfully) with VPI and
provide information as to matters which Employee was
personally involved, or has information on, during the Term
and which are or become the subject of litigation or other
dispute."
14. A new paragraph 23 is hereby added to the Employment Agreement to
read as follows:
"23. MULTIPLE TRIGGERING EVENTS; CANCELLATION AND RECOVERY. If
Employee first becomes eligible to receive payments pursuant
to sub-paragraphs 5(d) or (e) or sub-paragraphs 12(b), (c),
(h) or (i) hereof, Employee shall not thereafter be entitled
to any additional payments or benefits pursuant to such
provisions (other than pursuant to sub-paragraph 12(i)) which
would have become payable as a result of subsequent events had
Employee's employment by VPI not previously terminated.
Notwithstanding anything herein to the contrary, VPI reserves
the right to terminate all payments and benefits hereunder and
to recover from Employee amounts previously paid to Employee
if Employee's employment by VPI is terminated by Employee for
good reason or by VPI without good cause within thirty (30)
days after an event which would be grounds for a termination
by VPI for good cause."
15. Exhibit A is hereby added to the Employment Agreement to read as
follows:
"Good reason' shall mean, without the express written consent
of Employee, the occurrence of any of the following events:
(i) any material diminution or change in (except temporarily
during any period of Disability) Employee's positions, duties,
responsibilities,
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<PAGE>
authority or titles not commensurate with Employee's position
or the assignment of duties or responsibilities not
commensurate with Employee's position;
(ii) if Employee is a member of the Board, removal or
dismissal from the Board;
(iii) a reduction by VPI in Employee's base salary provided in
paragraph 2(a) hereof;
(iv) relocation of Employee's principal business location to
an area outside a fifty (50) mile radius of its current
location or relocation of Employee from the headquarters of
VPI or relocation of the headquarters of VPI to a location
which is at least fifty (50) miles from VPI's current
headquarters;
(v) a failure to continue bonus, incentive, or other equity
plans, programs or arrangements, or Employee's participation
therein, on the same basis as to potential or targeted
amounts; or
(vi) a material breach by VPI of any agreement with Employee."
16. SEVERABILITY. In any portion of this Amendment is held invalid or
inoperative (including a determination by VPI's independent public accountants
in good faith that any provision of this Amendment would preclude "pooling of
interests" accounting), the other portions of this Amendment shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative.
17. ASSIGNMENT; BINDING EFFECT. Employee understands that he or she has been
selected for employment by VPI on the basis of Employee's qualifications,
experience and skills. Employee, therefore, shall not assign all or any portion
of Employee's performance under this Amendment. Subject to the preceding two (2)
sentences, this Amendment shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
18. COMPLETE AGREEMENT. This Amendment, together with the Employment Agreement
(as amended hereby), supersedes any other agreements or understandings, written
or oral, between VPI and Employee, and Employee has no oral representations,
understandings or agreements with VPI or any of its officers, directors or
representatives covering the same subject matter as the Employment Agreement (as
amended hereby).
This written Amendment, together with the Employment Agreement (as
amended hereby) is the final, complete and exclusive statement and expression of
all the terms of the Employment Agreement, and it cannot be varied, contradicted
or supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Amendment, together with the Employment Agreement (as
amended hereby), may not be later modified except by a written instrument signed
by a duly authorized officer of VPI and Employee, and no term of this
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<PAGE>
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
19. GOVERNING LAW. This Amendment shall in all respects be construed according
to the laws of the State of Tennessee.
20. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To VPI: ResortQuest International, Inc.
530 Oak Court Drive
Suite 360
Memphis, TN 38117
Attention: General Counsel
To Employee: To the address specified below Employee's
name at the end of this Amendment.
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 21.
21. THE EMPLOYMENT AGREEMENT. Except as expressly set forth herein, all
other provisions of the Employment Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
RESORTQUEST INTERNATIONAL, INC.
By:_______________________________________
/s/ John Lines
Title
_______________________________________
Employee
Address:
_______________________________________
_______________________________________
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<PAGE>
Exhibit 10.39
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This SECOND AMENDMENT TO EMPLOYMENT AGREEMENT is made as of the 15th
day of December, 1999 (the "Effective Date of the Second Amendment") to the
Employment Agreement dated as of April 29, 1998, as amended by the First
Amendment To Employment Agreement (the "First Amendment") entered into on the
29th day of July, 1999, by and between ResortQuest International, Inc., a
Delaware Corporation formerly known as Vacation Properties International, Inc.
("RQI") and David C. Sullivan (the "Employee") (collectively the "Employment
Agreement").
BACKGROUND
A. ResortQuest and Employee have previously entered into the Employment
Agreement and the First Amendment to Employment Agreement; and
B. ResortQuest and Employee desire to amend the Employment Agreement, as amended
by the First Amendment.
STATEMENT OF AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties, the parties hereto agree as
follows:
1. The first sentence of paragraph 1(a) of the Employment Agreement is hereby
amended to read as follows:
"(a) ResortQuest hereby employs Employee as an employee of
ResortQuest."
2. Subparagraph 2(a) is amended in its entirety to read as follows:
"(a) Base Salary. The base salary payable to Employee shall be $150,000
per year, payable on a regular basis in accordance with ResortQuest's
standard procedures, but not less than monthly.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of
the day and year first written above.
RESORTQUEST INTERNATIONAL, INC.
By: /s/ John K. Lines
-----------------------------------
Name: John K. Lines
Title: Sr. Vice President, General Counsel
& Secretary
/s/ David C. Sullivan
-----------------------------------
Employee: David C. Sullivan
<PAGE>
Exhibit 10.40
AMENDMENT TO
EMPLOYMENT AGREEMENT
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT made as of this 15th day of
December, 1999 (the "Effective Date of the Second Amendment") to the Employment
Agreement dated as of April 29, 1998, as amended by the First Amendment To
Employment Agreement (the "First Amendment") entered into on the 29th day of
July, 1999, by and between ResortQuest International, Inc., ("ResortQuest") a
Delaware corporation formerly known as Vacation Properties International, Inc.
("VPI") and David L. Levine (the "Employee"), which became effective on May 26,
1998, the date of the consummation of the initial public offering of the common
stock of VPI (the "Employment Agreement").
WITNESSETH:
WHEREAS, ResortQuest, formerly known as VPI, and Employee have
previously entered into the Employment Agreement and the First Amendment To
Employment Agreement; and
WHEREAS, ResortQuest and Employee desire to amend the Employment
Agreement, as amended by the First Amendment.
NOW, THEREFORE, the parties hereto agree as follows:
1. The first sentence of paragraph 1(a) of the Employment Agreement is hereby
amended in its entirety to read as follows:
"ResortQuest hereby employs Employee as President and Chief Executive
Officer of ResortQuest. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a President
and Chief Executive Officer of ResortQuest and will report directly to
the Board of Directors of ResortQuest (the "Board"). Employee hereby
accepts this employment upon the terms and conditions herein contained
and, subject to paragraph 1(c) hereof, agrees to devote Employee's full
working time, attention and efforts to promote and further the business
of ResortQuest.
2. Subparagraph 2(a) is hereby amended to read as follows:
"(a) BASE SALARY. The base salary payable to Employee shall be
$275,000.00 a year, payable on a regular basis in accordance with
ResortQuest's standard payroll procedures but not less than monthly. The
effective date of Employee's change in base salary shall be December 15,
1999."
3. The last paragraph of Paragraph 2 is hereby amended to add the following new
paragraph:
<PAGE>
"On December 15, 1999 ResortQuest shall grant to Employee options to
acquire an additional 75,500 shares of ResortQuest common stock at the
price per share at which such stock closed on the New York Stock
Exchange on December 15, 1999. Such options shall vest in installments
of 25,166 on each of the first and second anniversaries of the
Effective Date of the Second Amendment, and 25,168 shares on December
15, 2002. Such options shall be exercisable for a term of five (5)
years from and after the date upon which such options are granted."
4. The initial paragraph of Paragraph 5 of the Employment Agreement is hereby
amended to read as follows:
"The term of this Agreement shall begin on the Effective Date of the
Second Amendment and continue until December 15, 2002 (the "initial
period"), and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and
conditions contained herein in effect as of the time of renewal (such
initial period and any extensions thereof being referred to herein as
the "term"). This Employment Agreement, as amended by the First and
Second Amendments, and Employee's employment may be terminated in any
one of the following ways:"
5. Subparagraph 12(h) of the Employment Agreement, as amended by the First
Amendment, is hereby amended to read as follows:
"(h) If Employee's employment by ResortQuest is terminated within one
(1) year after a Change in Control by Employee for good reason or by
ResortQuest without good cause, or if Employee voluntarily terminates
employment with ResortQuest at any time within the one (1) year period
after a Change in Control, then ResortQuest shall pay or provide
Employee with the following severance benefits:"
6. Subparagraph 12(j) of the Employment Agreement, as amended by the First
Amendment, shall be amended to read as follows:
"(j) In the event that Employee elects to terminate employment at the
expiration of the initial term or at the expiration of any applicable renewal
term(s), or in the event Employee elects to terminate pursuant to subparagraph
12(c), or the Employment Agreement, as amended by the First and Second
Amendments, is terminated by ResortQuest for any reason, Employee shall be
entitled to continued family health insurance coverage for the three (3) year
period after the date of termination in the same manner and to the same extent
set forth in subparagraph 12(h)(iii). Following the three (3) year period of
continued health and welfare plan insurance coverage, including without
limitation family medical, family dental, life insurance and disability
coverage, described in this subparagraph 12(j) and under subparagraph
12(h)(iii), Employee shall be entitled to continued participation in all health
or welfare plans which cover Employee (and eligible dependents), including
without limitation family medical, family dental, life
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<PAGE>
insurance and disability coverage, in effect on the Employee's date of
termination (which shall be the same or substantially equivalent to the health
or welfare plans in which Employee participated on the Effective Date of this
Agreement), for the five (5) year period after the expiration of the three (3)
year period in the same manner and to the same extent set forth in subparagraph
12(h)(iii), provided that the Employee reimburses ResortQuest for the full
premium for such coverage. It being the intent of the parties that Employee
shall be entitled participate in the full eight (8) years health and welfare
plan benefit coverage set forth in this paragraph, any other provisions of the
Employment Agreement notwithstanding, if Employee should leave employment at
ResortQuest for any reason whatsoever.
In the event that Employee elects to terminate voluntarily without good
reason prior to the expiration of the initial term of the Agreement, or prior to
the expiration of any applicable renewal term, except if Employee elects to
terminate employment under subparagraph 12(c) as set forth above, Employee shall
be entitled to the full eight (8) years of continued health and welfare benefits
provided for in this subparagraph 12(j), provided that Employee reimburses
ResortQuest for the full premium for such coverage."
7. Exhibit A to the Employment agreement is hereby amended to add new
subparagraph (vii) to read as follows:
"(vii) Employee reporting to anyone other than the Board or Chairman of the
Board."
8. SEVERABILITY. If any portion of this Second Amendment is held invalid or
inoperative, the other portions of this Amendment shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative.
9. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been selected
for employment by ResortQuest on the basis of Employee's qualifications,
experience and skills. Employee, therefore, shall not assign all or any portion
of Employee's performance under this Amendment. Subject to the preceding two (2)
sentences, this Amendment shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
10. COMPLETE AGREEMENT. This Second Amendment, together with the Employment
Agreement, as amended by the First Amendment (all as amended hereby), supersedes
any other employment agreements or understandings, written or oral, between
ResortQuest and Employee, and Employee has no oral representations,
understandings or employment agreements with ResortQuest or any of its officers,
directors or representatives covering the same subject matter as the Employment
Agreement and First Amendment to Employment Agreement (as amended hereby).
This written Second Amendment, together with the Employment Agreement
and First Amendment to Employment Agreement (as amended hereby) is the final,
complete
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<PAGE>
and exclusive statement and expression of all the terms of the Employment
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Second
Amendment, together with the Employment Agreement and First Amendment to
Employment Agreement (as amended hereby), may not be later modified except by a
written instrument signed by a duly authorized officer of ResortQuest and
Employee, and no term of this Agreement may be waived except by a written
instruments signed by the party waiving the benefit of such term
11. GOVERNING LAW. This Second Amendment shall in all respects be construed
according to the laws of the State of Tennessee.
12. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To ResortQuest: ResortQuest International, Inc.
530 Oak Court Drive
Suite 360
Memphis, TN 38117
Attention: General Counsel
To Employee: To the address specified below Employee's
name at the end of this Amendment.
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this Second Amendment.
13. THE EMPLOYMENT AGREEMENT. Except as expressly set forth herein, all other
provisions of the Employment Agreement, as amended by the First Amendment to
Employment Agreement, shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
RESORTQUEST INTERNATIONAL, INC.
By: /s/ John K. Lines
-----------------------------------------
Name: John K. Lines
Title: Sr. Vice President,
General Counsel & Secretary
/s/ David Levine
----------------------------------
Employee: David L. Levine
349 River Oaks Road
Memphis, Tennessee 38120
5
<PAGE>
Exhibit 13-Front
Corporate Profile
ResortQuest International is the first brand name and online booking service
(resortquest.com) in vacation condominium and home rentals, sales and property
management services, with more than 17,000 properties in premier locations
across the United States and in Canada. The company is headquartered in Memphis,
Tenn.
Units/Inventory
1997* 5,406
1998* 13,515
1999 17,301
Revenue
1997* $26.8
1998* $55.4
1999 $127.9
* 1997-98 numbers restated to include pooling transactions completed.
<PAGE>
Travel inspires the mind, rejuvenates the spirit and creates memories that last
a lifetime. That's why travel journals are often an important part of
vacationing. In them, people record their most memorable travel experiences -
thrilling adventures, joy of family, and some of the best times of their lives.
Long after the bags are unpacked, the memories of past vacations motivate us to
plan the next getaway. At ResortQuest, we are dedicated to providing
once-in-a-lifetime vacation experiences. After all, we want to be a part of
every guest's cherished memory - and next vacation.
1
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Letter to Shareholders
If 1998 was a year of beginnings for ResortQuest, 1999 can best be characterized
as a year of tremendous growth, as we attained critical mass that allows us to
add incremental value for our guests, homeowners, shareholders, operating
companies and employees.
A year and a half ago, ResortQuest reinvented the vacation rental
industry by embarking on a strategy to offer vacationers a vast network of
high-quality, privately owned condominium and home rentals. In just 18 months,
we have grown the company to more than 17,000 premium vacation rentals in 40 of
the most desirable, geographically and seasonally diversified resort locations
in North America and Hawaii.
ResortQuest completed 13 acquisitions in 1999, adding more than 4,000
vacation rental units to our inventory. We introduced the ResortQuest brand to
several important new markets, including Orlando, Florida, the number one
tourist destination in the world, and four popular golf resort
destinations--Palm Springs and Palm Desert, California, and Scottsdale and
Tucson, Arizona.
We also increased our penetration in resort destinations where we
already had a presence as part of our strategy to be a leader in every market in
which we compete. In Colorado, we acquired our second Aspen management company
and now are the dominant provider of vacation rental properties and real estate
sales in the Aspen and Snowmass Village markets. We also enhanced our presence
in Whistler, British Columbia, bringing our market penetration to more than 50%
of the area's condominium, townhome and private home rentals.
Besides Orlando, we added six other locations to our Florida portfolio,
which now approximates 5,000 units. Again, this increased penetration affords us
significant opportunities for cost savings, operating synergies and
cross-selling initiatives.
This growth produced a revenue increase from $55.4 million in 1998 to
$127.9 million in 1999, a growth rate of 130.9%, and an increase in earnings
before interest, taxes, depreciation and amortization (EBITDA) from $8.5 million
to $20.4 million, a 140.0% increase.
Enhancing our Infrastructure
Our 1999 acquisition pace saw us add one company to the ResortQuest portfolio
every 28 days. Since our initial public offering, we have integrated 27
individual companies and categorized 17,000 rental
2
<PAGE>
units by quality, condition and amenities, according to standards defined in our
proprietary rating system, a system that helps us deliver a consistent,
high-quality product to our customers.
Major Strides in Marketing
The strength and integrity of the ResortQuest brand continues to be a major
focus for us. To help increase brand awareness and loyalty, we launched a
national brand marketing initiative in 1999, which included major, high-profile
travel publications and key Internet sites.
We significantly enhanced our resortquest.com web site with the
introduction of online booking capabilities and the launch of virtual tours of
our properties--an industry first. Our Internet bookings have grown nearly
six-fold since January 1, 1999.
In August and September, we announced three new strategic alliances to
help us maximize our visibility on the Internet. Beginning in 2000,
ResortQuest's entire inventory of vacation rentals will be available through
VacationSpot.com, the premier vacation lodging directory for Microsoft Expedia.
Visitors also will be able to access ResortQuest's inventory through
WorldRes.com, an extensive network of Internet-based distribution partners that
connects leisure travelers with hotels, inns, resorts and homes around the
world.
Our alliance with Target Travel will allow travelers to create a
complete vacation itinerary, pairing ResortQuest vacation rental accommodations
with Target Travel's competitively priced, travel-related products, such as
airlines, car rentals and other services. We continue to aggressively pursue
other partnership opportunities that will allow us to fully utilize the
marketing power of the Internet.
Balance Sheet
ResortQuest maintains a conservative capital structure, and several transactions
we completed during the year further strengthened our balance sheet. In June, we
completed the issuance of $50 million of senior secured notes due June 2004 at a
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9.06% interest rate, which not only increased our debt capacity but also
introduced alternative funding sources.
These measures, coupled with our current $50 million Credit Facility,
provide us with greater financial flexibility to respond to business
opportunities as they arise.
Year 2000
In 2000, we plan to leverage our critical mass, which will allow us to become
more efficient and cost effective throughout virtually every area of our
company. We intend to take advantage of opportunities for cost savings,
operating synergies and cross-selling that simply are not available to smaller
organizations, which will enable us to grow more quickly and achieve higher
operating margins.
Our strategy moving forward is to focus primarily on internal growth,
which will be enhanced by selected acquisitions in strategically important
markets and business-building partnerships with other travel and Internet
companies.
A number of initiatives and programs will help accelerate our internal
growth. Enhancements to our financial and operating systems will enable us to
streamline our property/inventory management. Improving our inventory tracking
capability will allow us to take greater advantage of our extensive database to
market even more effectively.
We also intend to take advantage of what we refer to as "elastic
supply." Unlike a hotel, resort or timeshare company, ResortQuest can build
inventory without heavy capital investment. We can attract non-affiliated unit
owners in our local markets by demonstrating that ResortQuest consistently
delivers superior management and returns.
The ResortQuest brand name, Internet presence, national marketing
programs and operating systems represent significant competitive advantages in
attracting new local unit owners to our rental programs. As we continue to grow,
so does our ability to take advantage of the economies of scale that additional
size brings. While we are a market leader in virtually all of our locations, new
acquisitions coupled with our ability to sign up additional owners will further
increase our market penetration.
Acquisitions, while important, will play a lesser role for the
foreseeable future. Our long-term goal is to be a major presence in every resort
region, and we
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plan to continue to selectively acquire leading management companies in new
resort markets. Where appropriate, we also will make acquisitions in current
markets we serve to strengthen our market penetration.
As part of our strategic decision to focus primarily on internal
growth, we have changed our management structure to put greater emphasis on
hands-on management expertise. In January 2000, James S. Olin was appointed
chief operating officer. As president of Abbott Resorts, our largest local
management company, and regional vice president of our Florida Gulf Coast
Region, Jim had compiled an impressive record. We plan to continue to recruit
the best and the brightest from the field as we move the company forward.
Outlook
Looking ahead, we are excited about the future of vacation travel and the trends
we see developing. We have a passion for this industry and the talented people
who are a part of it. Our strategies to capitalize on these trends remain on
target, our concept and our brand have been validated by the consumer, and we
have the people and programs in place or under development to take the company
into the future. We are confident that the programs we will implement in 2000
will put us on a path of sustainable future growth.
/s/ David C. Sullivan
- ---------------------
David C. Sullivan
Chairman of the Board
/s/ David L. Levine
- ---------------------
David L. Levine
President and Chief Executive Officer
5
<PAGE>
Vacation travel preferences are changing and being reshaped, in large part, by
the convergence of two inexorable forces: the aging of the baby boom generation
and the phenomenal growth of e-commerce.
According to consumer and leisure travel experts, Yankelovich Partners,
aging baby boomers are shifting their priorities from consuming things to
consuming experiences, with travel topping the list. They also are looking for
alternative lodging choices that give them more space, greater privacy and
increased flexibility. And, time-constrained boomers increasingly are looking to
the Internet for a quick, easy way to book travel.
No other company offers more diversified and geographically dispersed
vacation rental experiences than ResortQuest, and no other company offers such a
comprehensive website - resortquest.com - to respond to the full range of
vacation rental needs. This translates into significant benefits and advantages
for the company's four most important constituents:
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Vacation Homeowners
Owners of more than 17,000 condominium and vacation homes in 40 resorts across
the U.S. and in Canada rely on ResortQuest to maximize occupancy and rental
fees. As the vacation property management industry's only national brand,
ResortQuest has the marketing muscle to impact millions of potential customers
that often are beyond the reach of local or regional competitors, through its
high-powered web site, resortquest.com, as well as through targeted marketing
programs that combine national advertising, direct mail, publicity and
promotions.
In addition, ResortQuest supports a variety of local and regional
marketing programs to attract more guests to its units. ResortQuest's
broad-based marketing efforts attract renters from around the world, and its
local-level service commitment and operational expertise keep them coming back
year after year.
Typically, vacationers like trying new vacation experiences and
ResortQuest is ideally positioned to cross-market to its other locations. For
example, satisfied vacationers that rent a beach home from ResortQuest are more
likely to book a mountain vacation rental from the company because they know
they can count on ResortQuest.
Homeowners also take comfort in knowing that their properties are
well-managed and maintained using proven operating systems based on the best
practices of ResortQuest's 27 individual operating companies. Operational focus,
as always, is local, with a staff that lives in the resort area and understands
the market.
Owners interested in selling can take advantage of ResortQuest's
extensive real estate sales network. More than 250 licensed ResortQuest real
estate agents with special expertise in resort properties can refer interested,
qualified buyers from around the world. In 1999, ResortQuest real estate agents
sold homes and condominiums at prices ranging from $150,000 to $12 million.
ResortQuest vacation homeowners reap the benefits of a national
organization with the critical mass to consistently deliver more potential
renters and the local, hands-on management to provide better service and
support.
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<PAGE>
Vacationers
ResortQuest offers the broadest variety of vacation experiences in the industry
and gives leisure travelers a range of choices no other company can equal. With
vacation properties in 40 resort locations--from Orlando, Fla., to Maui, Hawaii
and Nantucket, Mass., to Whistler, British Columbia--vacationers can experience
a new ResortQuest property every year for four decades without staying at the
same location twice. With this kind of breadth, the hardest part about taking a
ResortQuest vacation is deciding where to go.
Another reason vacationers choose ResortQuest is because they have
confidence in the company's proprietary rating system that categorizes each
vacation residence into one of five levels, based on condition, quality,
appearance and amenities. Vacation planners can check a rental unit's rating at
RESORTQUEST.COM, the company's state-of-the-art, user-friendly web site, and
find other useful details about each property and resort destination, view
photographs and floor plans, check rental rates and availability, and take
virtual tours. On its web site, the company regularly features special rental
values and offers at its properties. Visitors also have the opportunity to
reserve discounted air and other travel-related services.
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<PAGE>
Booking a ResortQuest home or condominium is fast and easy. At resortquest.com,
vacationers can select the location and find the exact rental to meet their
needs. Once the decision is made, the property can be booked in real time in a
matter of seconds. Or, customers can call the company's toll-free reservation
number, 877-588-5800, to talk to an experienced, knowledgeable reservation
agent.
Once a vacationer arrives at a ResortQuest destination, he or she knows
exactly what to expect. The ResortQuest staff is always available to provide
information about the resort and its neighboring attractions. Behind the scenes,
they're busy maintaining rental properties to exacting standards.
ResortQuest continues to gain the acceptance, confidence and trust of
vacationers from around the world.
ResortQuest has developed a five-level rating system that categorizes
accommodations according to specific criteria so guests will always know what to
expect at every ResortQuest location.
Accommodation Categories
Quest Home
An exclusive group of extraordinary accommodations which are so luxurious and
unique that they are in a class of their own.
Platinum
Exceptional accommodations marked by unique design that offers superior quality
furnishings, luxury features, designer appointments, and top-of-the-line
kitchens, baths, and amenities.
Gold
Upscale, well-appointed accommodations with a designer touch that includes
excellent furnishings, special features, and top-quality kitchens, baths, and
amenities.
Silver
Inviting, pleasing accommodations that are tastefully decorated and feature
quality furnishings and contemporary kitchens and baths.
Bronze
Comfortable, pleasant accommodations that provide many of the comforts and
conveniences of home.
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Local Operating Companies
Although ResortQuest's focus will primarily be on internal growth, the company
will continue to grow externally through selective acquisitions of proven
operators in new strategic resort locations, and through the addition of
companies in specific where ResortQuest already has a presence. The company
seeks compatible operators that are leaders in their markets, have strong, local
expertise and a desire to grow with an innovative, entrepreneurial organization.
Local operating companies that already have joined ResortQuest
universally cite the company's financial strength, national brand marketing
programs and sophisticated operating systems as major advantages.
In the highly competitive vacation property management industry,
skillful marketing and operational expertise separate successful companies from
the competition. ResortQuest's marketing initiatives and leading-edge web site
give its local operating companies a clear, competitive advantage over other
vacation rental organizations. No other company markets as broadly and to a more
carefully targeted group of potential renters than ResortQuest.
Sophisticated software gives local managers a powerful tool to produce
superior returns. ResortQuest's First Resort Software company provides software
solutions that enable local management to react swiftly to changing demand
patterns in order to achieve maximum occupancy and rate for its owners. Efforts
are under way to make the software product even more sophisticated and flexible,
further distancing ResortQuest operators from local competitors.
Because of its size and distribution, ResortQuest also brings
substantial economies of scale that can produce significant cost savings at the
local level in such areas as purchasing and marketing. The company plans to
build on its leadership in each market by aggressively recruiting non-affiliated
home and condominium owners to its rental pool, and by expanding its management
of homeowner associations. This internal growth potential, along with the
increasing strength of the ResortQuest brand name and the benefits it brings to
owners, are compelling reasons to become affiliated with ResortQuest.
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<PAGE>
Team Members
ResortQuest offers its team members some of the industry's best benefits and
greatest opportunities for personal growth. Because of its national scope, the
company can attract quality employees, who have an opportunity to learn and
build a career with a growing, entrepreneurial organization.
The company's size provides increased buying power to upgrade and
standardize its benefits programs across the entire organization. Yet, a highly
competitive benefits package is just one of the ways the company attracts the
best employees in each market.
Perhaps the greatest benefit Resort-Quest offers its team members is
the opportunity for personal growth. The company routinely takes its best people
from the field and places them in positions of increasing responsibility within
the organization. ResortQuest is committed to providing the training and
experience that will enable each team member to reach his or her full potential.
This strong commitment to training and advancement from within and an
entrepreneurial culture that encourages innovation and rewards results are the
ingredients that will help the company maintain the best people organization in
the industry.
11
<PAGE>
1999 MILESTONES
JANUARY 1999
Introduced resortquest.com, the first branded online booking resource in the
vacation rental industry to offer online reservation capabilities.
JANUARY 1999
Acquired property management company in Oregon (Sunriver), expanding presence
in Western U.S.
JANUARY 1999
Purchased property management company in Big Sky, Mont.
JANUARY 1999
Entered important Southern California market with acquisition in Palm
Desert/Palm Springs.
FEBRUARY 1999
Penetrated Hilton Head Island, S.C. market with acquisition of one of the
area's leading property management companies.
FEBRUARY 1999
Entered Scottsdale, Ariz. market with 10th acquisition since initial public
offering.
MARCH 1999
Acquired High Country Resorts, in Crested Butte, Colo.
MARCH 1999
Acquired Mountain High Management in Whistler, British Columbia and rolled
operations into existing Whistler Chalets.
JUNE 1999
Entered the growing Tucson, Arizona market with 13th acquisition.
JUNE 1999
Acquired Coates Reid & Waldron, the leading real estate and property
management company in the Aspen/Snowmass market.
JULY 1999
Entered Lake Erie Islands resort market with the acquisition of the area's
premier vacation rental company.
JULY 1999
Announced web site enhancements including virtual tours, more powerful search
capability and enhanced lodging information.
JULY 1999
Acquired second property management company in Hilton Head, S.C., doubling
ResortQuest's local market share.
AUGUST 1999
Announced partnerships with two leading Internet companies, VacationSpot.com
and WorldRes.com, enabling ResortQuest to significantly expand its web
presence and reach.
AUGUST 1999
Acquired a high-profile vacation rental and sales company in Orlando, Fla.
bringing to 36 the number of resort destinations the brand offers.
AUGUST 1999
Established strategic alliance with Boston-based Target Travel to offer
ResortQuest customers discounted airline tickets, car rentals and other
travel-related services.
OCTOBER 1999
Acquired a well-established vacation property management and brokerage
company in southwest Florida with properties in Bonita Springs, Naples, Ft.
Myers Beach and Marco Island.
DECEMBER 1999
David L. Levine elected chief executive officer by the ResortQuest Board of
Directors.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ResortQuest is the leading provider of vacation condominium and home rentals,
sales, and rental property management services in premier destination resorts
located in the continental United States, Hawaii and Canada. We have developed
the first and only branded nationwide network of vacation rental properties, and
currently offer more than 17,000 rental properties in 40 premier beach, island,
mountain and desert destination locations.
Our rental properties are generally second homes or investment properties
owned by individuals who assign us the responsibility of managing, marketing and
renting their properties. We earn management fees as a percentage of the rental
income from each property, but have no ownership interest in the properties. In
addition to the vacation property management business, we offer real estate
brokerage services, and other rental and property owner services and have
developed a proprietary vacation rental software package which we utilize
internally and have marketed to over 600 vacation property management companies
together with related services.
We provide value-added services to both vacationers and property owners.
For vacationers, we offer the value, convenience and features of a condominium
or home while providing many of the amenities and services of a hotel. For
property owners, we offer a comprehensive package of marketing, management and
rental services designed to enhance rental income and profitability while
providing services to maintain the property. To increase customer satisfaction,
we have developed and implemented a five-tier rating system that, based on
condition, quality, appearance and amenities, categorizes each vacation
residence in our portfolio into one of five levels: Bronze, Silver, Gold,
Platinum and Quest Home.
We completed our initial public offering on May 26, 1998 ("IPO") and
simultaneously acquired 12 vacation rental and property management companies and
one vacation property management software company, First Resort Software, Inc.
(together the "Founding Companies") (the "Combinations"). Since our IPO, we have
acquired an additional 18 vacation rental and property management companies (the
"Post-IPO Acquisitions"), increasing properties under management by
approximately 68%, expanding our presence into 12 new resort markets and further
enhancing our unique national platform.
Index of Financials
13 Management's Discussion and Analysis
23 Consolidated Balance Sheets
24 Consolidated Statements of Income
25 Consolidated Statements of Changes in Stockholders' Equity
26 Consolidated Statements of Cash Flows
27 Notes to Consolidated Financial Statements
38 Report of Independent Public Accountants
38 Management's Report on
Consolidated Financial Statements
39 Quarterly Results of Operations
39 Selected Financial Data
40 Investor Information
41 Directors and Officers
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RESULTS OF OPERATIONS
Our revenues are derived primarily from property rental fees on vacation
condominium and home rentals, and service fees from additional services provided
to vacationers and property owners. Our operations include the Hawaiian Islands,
Mountain, Beach, Desert and Other in 40 resort locations. We receive property
rental fees when the properties are rented, which are generally a percentage of
the rental price of the vacation property. Rental fees range from approximately
3% to over 40% of rents collected based upon the type of services provided by us
to the property owner and the type of rental units managed. Revenues are
recognized ratably over the rental period based on our proportionate share of
the total rental price of the vacation condominium or home.
For the year ended December 31, 1999, we recognized $65.8 million of
property rental fees, representing 51.4% of total 1999 revenues. Additional
services such as reservations, housekeeping, long-distance telephone, ski lift
tickets, beach equipment and pool cleaning are charged separately and recorded
as service fees revenue. During 1999, we recognized $38.6 million of service
fees, representing 30.2% of our total 1999 revenues. The remaining $23.5 million
of 1999 revenues are derived from other sources, including the sale and service
of vacation rental and property management software, net broker commissions on
real estate sales and food & beverage sales.
Direct operating expenses include direct compensation, telecommunication
expenses, housekeeping supplies, printing, marketing and food & beverage costs.
Compensation includes salaries, wages, bonuses and benefits for employees
involved with the rental or maintenance of the rental units, housekeeping,
marketing, reservation and food & beverage facilities. Telecommunication costs
result primarily from the cost of toll-free numbers, as well as the cost of
telephone service provided by us to property owners in certain markets.
General and administrative expenses consist primarily of salaries, wages,
bonuses and benefits for general managers as well as other non-operational
personnel, fees for professional services, rent and other general office
expenses.
Our operating results, including the impact of our acquisitions, are
subject to the seasonality of our resort locations. The peak season for the
Mountain, Desert and southern Florida operations is the first quarter, and the
Beach operations' peak season, other than for southern Florida, is the third
quarter.
For accounting and reporting purposes, Hotel Corporation of the Pacific,
Inc. (commonly referred to as Aston Hotels & Resorts), one of our Founding
Companies, was identified as the accounting acquiror and the remaining Founding
Companies along with ResortQuest were accounted for under the purchase method of
accounting. Since the IPO and the Combinations, we have made three acquisitions
that have been accounted for under the pooling-of-interests method of accounting
and for which our historical financial statements have been restated.
Accordingly, our consolidated financial information for the years ended December
31, 1997, 1998 and 1999 includes the results of Aston Hotels & Resorts and the
pooling acquisitions for the entire periods presented, includes corporate and
the remaining Founding Companies only since May 26, 1998, and includes the
remaining Post-IPO Acquisitions since their respective effective dates of
acquisition.
RESULTS OF CONTINUING
OPERATIONS--CONSOLIDATED
The following sets forth certain historical consolidated financial data, also
stated as a percentage of revenues, for the years ended December 31, 1997, 1998
and 1999.
<TABLE>
<CAPTION>
(in thousands) 1997 1998 1999
<S> <C> <C> <C>
Revenues $26,753 100.0% $55,359 100.0% $127,912 100.0%
Direct operating expenses 13,635 51.0 31,596 57.1 65,804 51.4
General and administrative expenses 7,092 26.5 15,125 27.3 41,669 32.6
Depreciation and amortization 521 1.9 3,148 5.7 6,909 5.4
------------------------------------------------------
Operating income $ 5,505 20.6% $ 5,490 9.9% $ 13,530 10.6%
------------------------------------------------------
</TABLE>
YEAR ENDED DECEMBER 31, 1999
COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues
Revenues increased $72.5 million, or 130.9%, from $55.4 million in 1998 to
$127.9 million in 1999, primarily due to the annualized revenue impact of the
companies acquired in the Combinations and the Post-IPO Acquisitions. Revenues
from the 1999
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acquisitions for the Mountain, Beach and Desert operations were $6.7 million,
$7.5 million and $2.8 million, respectively. We have not made any Post-IPO
Acquisitions in Hawaii.
DIRECT OPERATING EXPENSES
Direct operating expenses increased $34.2 million, or 108.2%, from $31.6 million
in 1998 to $65.8 million in 1999, primarily due to the annualized expense impact
of the companies acquired in the Combinations and the Post-IPO Acquisitions.
Direct operating expenses from the 1999 acquisitions for the Mountain, Beach and
Desert operations were $3.3 million, $4.0 million and $1.0 million,
respectively.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased $26.6 million, or 176.2%, from
$15.1 million in 1998 to $41.7 million in 1999, primarily due to the annualized
expense impact of the companies acquired in the Combinations, the Post-IPO
Acquisitions, incremental public-company expenses, and $3.1 million in unusual
expenses. The unusual expenses primarily represent deferred costs for
acquisitions we no longer plan to pursue, costs associated with a study to
identify alternative funding sources, costs associated with acquisitions during
the year that were accounted for under the pooling-of-interests method of
accounting, costs associated with a common stock offering that was withdrawn
during the year, and a severance accrual for certain members of management.
Depreciation and amortization expense increased due to the goodwill impact of
acquisitions recorded using the purchase method of accounting. General and
administrative expenses, including depreciation and goodwill amortization, from
the 1999 acquisitions for the Mountain, Beach and Desert operations were $2.7
million, $1.4 million and $1.2 million, respectively.
YEAR ENDED DECEMBER 31, 1998
COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Revenues increased $28.6 million, or 106.7%, from $26.8 million in 1997 to $55.4
million in 1998, primarily due to the revenue impact of the companies acquired
in the Combinations and Post-IPO Acquisitions in 1998. Aston Hotels & Resorts'
revenues for 1998 were relatively flat as compared to the prior year despite the
continued pressures from the troubled Asian inbound market. Revenues from the
1998 acquisitions for the Hawaii, Mountain, Beach and Other operations were
$823,000, $5.3 million, $14.5 million and $2.0 million, respectively.
DIRECT OPERATING EXPENSES
Direct operating expenses increased $18.0 million, or 132.4%, from $13.6 million
in 1997 to $31.6 million in 1998, primarily due to the expense impact of the
companies acquired in the Combinations and Post-IPO Acquisitions in 1998. Aston
Hotels & Resorts' direct operating expenses increased $793,000, as compared to
the prior year, primarily due to a $513,000 increase in payments made under
certain guaranteed contracts. Direct operating expense margins increased 6.1
percentage points, from 51.0% in 1997 to 57.1% in 1998. Direct operating
expenses from the 1998 acquisitions for the Hawaii, Mountain, Beach and Other
operations were $200,000, $4.5 million, $7.2 million and $1.1 million,
respectively.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased $8.0 million, or 112.7%, from $7.1
million in 1997 to $15.1 million in 1998, primarily due to the expense impact of
the companies acquired in the Combinations and Post-IPO Acquisitions in 1998 and
incremental public-company expenses. Aston Hotels & Resorts' general and
administrative expenses for 1998 were relatively flat as compared to the prior
year. Depreciation and amortization expense increased due to the goodwill impact
of acquisitions recorded using the purchase method of accounting. General and
administrative expenses, including depreciation and goodwill amortization, from
the 1998 acquisitions for the Hawaii, Mountain, Beach and Other operations were
$462,000, $3.0 million, $2.9 million and $3.1 million, respectively.
15
<PAGE>
RESULTS OF CONTINUING
OPERATIONS--REGIONAL
HAWAIIAN ISLANDS
The following table sets forth certain historical combined financial data for
our Hawaiian island resorts for the years ended December 31, 1997, 1998 and
1999.
<TABLE>
<CAPTION>
(in thousands) 1997 1998 1999
<S> <C> <C> <C>
Revenues $19,554 100.0% $20,303 100.0% $22,448 100.0%
Operating expenses 14,383 73.6 15,752 77.6 16,344 72.8
------------------------------------------------------
Operating income $ 5,171 26.4% $ 4,551 22.4% $ 6,104 27.2%
------------------------------------------------------
</TABLE>
YEAR ENDED DECEMBER 31, 1999
COMPARED TO YEAR ENDED DECEMBER 31, 1998 - HAWAII
REVENUES
Revenues increased $2.1 million, or 10.3%, from $20.3 million in 1998 to $22.4
million in 1999, primarily due to the acquisition consummated as part of the
Combinations. Average daily rate was down 2.6% in 1999 compared to 1998, while
revenue per available unit ("RevPAU") was up 2.7% due to increased occupancy.
OPERATING EXPENSES
Operating expenses increased $592,000, or 3.8%, from $15.8 million in 1998 to
$16.3 million in 1999, primarily due to the acquisition consummated as part of
the Combinations. As a percentage of revenues, operating expenses decreased from
77.6% in 1998 to 72.8% in 1999.
YEAR ENDED DECEMBER 31, 1998
COMPARED TO YEAR ENDED DECEMBER 31, 1997 - HAWAII
REVENUES
Revenues in 1997 include a $677,000 gain from the sale of our interest in a
Hawaiian hotel. Excluding this gain, revenues increased $1.4 million, or 7.4%,
from $18.9 million in 1997 to $20.3 million in 1998, primarily due to $823,000
of revenues from the acquisition consummated as part of the Combinations, as
well as a slight increase in average daily rate that helped maintain RevPAU.
Hawaii overall was impacted in 1998 by the Northwest Airlines strike during
third quarter 1998 and the continued pressures from the troubled Asian inbound
market. Northwest Airlines accounted for approximately 15% of airline passenger
seats into the Hawaiian Islands. Occupancy rates for the overall Hawaiian market
in the third quarter declined compared to the prior year. However, our
operations were not as negatively impacted by the Asian crisis as compared to
the overall market. About one-third of Hawaii`s visitors are from Asia and seem
to prefer Waikiki Beach, which is on the Hawaiian island of Oahu. For several
years, Aston Hotels & Resorts shifted most of its business to United States
mainland wholesalers and increased its inventory of management contracts on the
neighboring islands away from Waikiki Beach.
OPERATING EXPENSES
Operating expenses increased $1.4 million, or 9.7%, from $14.4 million in 1997
to $15.8 million in 1998. As a percentage of revenues, operating expenses
increased from 73.6% in 1997 to 77.6% in 1998, primarily due to the Northwest
Airlines strike in the third quarter of 1998 and the impact from the acquisition
consummated as part of the Combinations.
MOUNTAIN
The following table sets forth certain historical combined financial data for
our mountain resorts for the years ended December 31, 1997, 1998 and 1999. The
mountain resorts' results of operations include our operations in Aspen,
Breckenridge, Crested Butte, Dillon, Snowmass Village and Telluride, Colorado;
Big Sky, Montana; Sunriver, Oregon; The Canyons, Deer Valley, and Park City,
Utah; and Whistler, British Columbia.
<TABLE>
<CAPTION>
(in thousands) 1997 1998 1999
<S> <C> <C> <C>
Revenues $ 3,314 100.0% $ 9,012 100.0% $27,971 100.0%
Operating expenses 3,105 93.7 10,200 113.2 25,127 89.8
------------------------------------------------------
Operating income $ 209 6.3% $(1,188) (13.2)% $ 2,844 10.2%
------------------------------------------------------
</TABLE>
YEAR ENDED DECEMBER 31, 1999
COMPARED TO YEAR ENDED DECEMBER 31, 1998 - MOUNTAIN
REVENUES
Revenues increased $19.0 million, or 211.1%, from $9.0 million in 1998 to $28.0
million in 1999, primarily due to $6.7 million in revenues from our Post-IPO
mountain resort acquisitions and the annualized impact of the acquisitions
consummated as part of the Combinations.
16
<PAGE>
OPERATING EXPENSES
Operating expenses increased $14.9 million, or 146.1%, from $10.2 million in
1998 to $25.1 million in 1999, primarily due to $3.3 million in expenses from
our Post-IPO mountain resort acquisitions and the annualized impact of
acquisitions consummated as part of the Combinations. As a percentage of
revenues, operating expenses decreased from 113.2% in 1998 to 89.8% in 1999,
primarily due to the impact of our Post-IPO 1998 mountain resort acquisitions
acquired after their peak season.
YEAR ENDED DECEMBER 31, 1998
COMPARED TO YEAR ENDED DECEMBER 31, 1997 - MOUNTAIN
REVENUES
Revenues increased $5.7 million, or 172.7%, from $3.3 million in 1997 to $9.0
million in 1998, primarily due to revenues of $5.3 million from our mountain
resort acquisitions consummated as part of the Combinations and a 6.1% increase
in total lodging revenues at our mountain properties.
OPERATING EXPENSES
Operating expenses increased $7.1 million, or 229.0%, from $3.1 million in 1997
to $10.2 million in 1998, primarily due to our mountain resort acquisitions
consummated as part of the Combinations. As a percentage of revenues, operating
expenses increased from 93.7% in 1997 to 113.2% in 1998. Both the increase in
operating expenses and operating expenses as a percentage of revenues were
primarily due to the impact of the 1998 Post-IPO mountain resort acquisitions
acquired after their peak season.
BEACH
The following table sets forth certain historical combined financial data for
our beach resorts (excluding Hawaii) for the years ended December 31, 1997, 1998
and 1999. The beach resorts' results of operations include our operations in
Bethany Beach, Delaware; Gulf Shores, Alabama; Nantucket, Massachusetts; Outer
Banks, North Carolina; Sanibel and Captiva Islands, Orlando, Bonita Springs,
Fort Myers, Fort Myers Beach, Navarre Beach, Beaches of South Walton, Okaloosa
Island, Fort Walton Beach, Marco Island, Naples and Destin, Florida; St. Simons
Island, Georgia; Lake Erie Islands, Ohio; and Hilton Head Island, South
Carolina.
<TABLE>
<CAPTION>
(in thousands) 1997 1998 1999
<S> <C> <C> <C>
Revenues $ 3,885 100.0% $ 23,925 100.0% $71,077 100.0%
Operating expenses 3,760 96.8 19,671 82.2 57,123 80.4
-------------------------------------------------------
Operating income $ 125 3.2% $ 4,254 17.8% $13,954 19.6%
-------------------------------------------------------
</TABLE>
YEAR ENDED DECEMBER 31, 1999
COMPARED TO YEAR ENDED DECEMBER 31, 1998 - BEACH
REVENUES
Revenues increased $47.2 million, or 197.5%, from $23.9 million in 1998 to $71.1
million in 1999, primarily due to the annualized impact from the beach resort
acquisitions consummated as part of the Combinations and our Post-IPO beach
resort acquisitions in 1998. These acquisitions contributed revenue of $59.5
million in 1999 compared to $19.6 million in 1998. Also impacting revenues were
the 1999 Post-IPO beach resort acquisitions that contributed $7.5 million of
revenues.
OPERATING EXPENSES
Operating expenses increased $37.4 million, or 189.9%, from $19.7 million in
1998 to $57.1 million in 1999, primarily due to the annualized expense impact of
the Combinations, the expense impact of the Post-IPO Acquisitions and increased
salaries and wages to service the increased units under management contract.
Year Ended December 31, 1998
Compared to Year Ended December 31, 1997 - Beach
REVENUES
Revenues increased $20.0 million, from $3.9 million in 1997 to $23.9 million in
1998. This increase was primarily due to the impact from the acquisitions
consummated as part of the Combinations, which contributed revenues of $14.5
million, and the acquisition of Abbott Resorts on September 30, 1998, which
contributed revenues of $5.2 million.
17
<PAGE>
OPERATING EXPENSES
Operating expenses increased $15.9 million, or 418.4%, from $3.8 million in 1997
to $19.7 million in 1998. This was primarily due to the impact from the
acquisitions consummated as part of the Combinations, which generated operating
expenses of $9.9 million, and the acquisition of Abbott Resorts, which generated
operating expenses of $5.6 million. As a percentage of revenues, operating
expenses decreased from 96.8% in 1997 to 82.2% in 1998.
DESERT
Our desert resort operations represent a new addition to the geographic
diversity of our portfolio of vacation opportunities in 1999. The combined
results of operations of the desert management companies we acquired in 1999 are
included in the current year but are not reflected in the prior years as these
acquisitions were accounted for under the purchase method of accounting. The
desert resorts' results of operations include our operations in Palm Desert and
Palm Springs, California; and Scottsdale and Tucson, Arizona.
<TABLE>
<CAPTION>
(in thousands) 1999
<S> <C>
Revenues $ 2,774 100.0%
Operating expenses 2,267 81.7
----------------
Operating income $ 507 18.3%
----------------
</TABLE>
OTHER OPERATIONS
The following table sets forth the other combined results of operations for the
years ended December 31, 1998 and 1999, which includes First Resort Software and
corporate.
<TABLE>
<CAPTION>
(in thousands) 1998 1999
<S> <C> <C>
Revenues $ 2,119 100.0% $ 3,642 100.0%
Operating expenses 4,246 200.4 13,521 371.3
------------------------------------------
Operating loss $ (2,127) (100.4)% $ (9,879) (271.3)%
------------------------------------------
</TABLE>
YEAR ENDED DECEMBER 31, 1999
COMPARED TO YEAR ENDED DECEMBER 31, 1998 - OTHER
REVENUES
Revenues increased $1.5 million, or 71.4%, from $2.1 million in 1998 to $3.6
million in 1999, primarily due to the annualized revenue impact of the
acquisition of First Resort Software consummated as part of the Combinations.
OPERATING EXPENSES
Operating expense increased $9.3 million due to the annualized effect of the
acquisition of First Resort Software consummated as part of the Combinations, a
full year of corporate expenses, year 2000 compliance issue costs and certain
unusual expenses and other charges related to pooling transactions, secondary
offering costs, deferred acquisition costs, a severance accrual and expenses
related to a study we initiated to identify alternative funding sources. Total
unusual expenses as described above were approximately $3.1 million.
LIQUIDITY AND CAPITAL RESOURCES
We conduct all of our operations through our operating companies. Accordingly,
the primary sources of our liquidity are the cash flows realized from our
subsidiaries, borrowings under our amended $50 million Credit Facility, the
issuance of $50 million Senior Secured Notes, and the issuance of common stock.
We generated cash flows from operating activities of $13.4 million in 1999
primarily due to income from continuing operations and $6.9 million of non-cash
depreciation and amortization. Cash used in investing activities was
approximately $26.1 million in 1999, primarily due to the cash portions of our
1999 acquisitions. In 1999, cash provided by financing activities totaled $26.7
million, which included $49.0 million in net proceeds from our Senior Secured
Notes and $24.8 million in net repayments under the Credit Facility.
At December 31, 1999, we had approximately $40.2 million in cash and cash
equivalents, of which $29.1 million represents cash held in escrow. The cash
held in escrow is released at varying times in accordance with state
regulations, generally based upon the guest stay or, in the case of real estate
sales deposits, when the property is sold. At December 31, 1999, we had a
working capital deficit of $7.3 million and $38.0 million available under our
Credit Facility. We anticipate that our cash flows from operations will provide
cash in excess of our normal working capital needs, debt service requirements
and planned capital expenditures over the next year. However, future
acquisitions and/or other initiatives,
18
<PAGE>
depending on their size and the method of financing, may affect our liquidity
and capital requirements during that time.
Total capital expenditures for 2000 are currently anticipated to be
between $3.5 million and $4.0 million, of which approximately $1.5 million is
expected to be used for software development and systems integration, with the
balance being applied to building renovations, furniture, fixtures and
equipment.
In connection with our IPO, common stock held by the Founding Companies'
previous owners, the sponsor group partners and senior management became subject
to certain transfer restrictions. These restrictions expired between May 20 and
May 27, 1999. On May 24, 1999, we announced an anticipated earnings shortfall to
analysts' expectations for the second quarter, and we withdrew a planned common
stock offering. Had this offering been completed, the transfer restrictions
would have been extended. In the proposed offering, we would have offered for
sale shares of common stock held by the founding stockholders, as well as
additional shares offered for sale by us. The withdrawn offering and the
expiration of the transfer restrictions resulted in a significant increase in
the number of shares of common stock now publicly tradable and has currently
limited our ability to sell shares of our common stock through a secondary
public offering.
NOTE RECEIVABLES
In connection with the Combinations, Aston Hotels & Resorts formalized its
receivable resulting from cash advances to its primary stockholder with a $4.0
million promissory note. During 1999, we began discussions with the stockholder
to restructure the note in order to provide for additional collateral. In
conjunction with these discussions, certain accrued management fees and accrued
interest of approximately $940,000 were also considered for collateralization.
The stockholder agreed to the formation of two separate notes (the "Notes"), one
for $4.0 million and one for $940,000. The Notes are collateralized by certain
real estate held by the stockholder and bear interest at 1/2% below the prime
rate of interest, but not less than 6% and not more than 10%. The $940,000 note,
plus accrued interest, is due in two equal installments on December 31, 2000 and
July 31, 2001. Interest payments under the $4.0 million note are due every
January and July 1st, with the principal being due in full on May 25, 2008. The
Notes were formally executed on February 16, 2000.
POST-IPO ACQUISITIONS
Since the IPO, we have completed 18 Post-IPO Acquisitions: Goldpoint Lodging in
Breckenridge, Colorado, effective July 15, 1998; Plantation Resort Management,
Inc., located in Gulf Shores, Alabama, effective August 31, 1998; Whistler
Exclusive Properties, Ltd. in Whistler, British Columbia, Canada, effective
September 3, 1998; Abbott Realty Services, Inc. (commonly referred to as "Abbott
Resorts") in Destin, Florida, effective September 30, 1998; Columbine
Management, Inc. in Dillon, Colorado, effective December 1, 1998; Ridgepine
Vacation Rentals, Inc. in Sunriver Oregon, effective January 1, 1999; Cove
Realty Management Services, Inc. in Palm Desert, California, effective January
1, 1999; Ryan's Golden Eagle Management Services, Inc. in Big Sky, Montana,
effective January 5, 1999; Scottsdale Resort Accommodations, Inc. in Scottsdale,
Arizona, effective February 1, 1999; Worthy Rentals, Inc. in Hilton Head Island,
South Carolina, effective February 1, 1999; High Country Management, Inc. in
Crested Butte, Colorado, effective March 31, 1999; Mountain High Management in
Whistler, British Columbia, Canada, effective March 31, 1999; Fischer Villa
Management in Tucson, Arizona, effective June 20, 1999; Shoreline Properties,
Inc.in Port Clinton (i.e., Lake Erie Islands), Ohio, effective June 15, 1999;
Coates, Reid & Waldron, in Aspen, Colorado, effective June 29, 1999; Shoreline
Rentals, Inc. in Hilton Head, South Carolina, effective July 18, 1999; Advantage
Vacation Homes by Styles, Inc. and Styles Estates, Ltd. in Orlando, Florida,
effective August 6, 1999; and Bluebill Vacation Properties, Inc. in Bonita
Beach, Florida, effective October 1, 1999. The acquisitions of Plantation
Resort, Mountain High, and High Country were accounted for under the
pooling-of-interests method of accounting; the remaining Post-IPO Acquisitions
were accounted for under the purchase method of accounting.
19
<PAGE>
Although our strategy moving forward is to focus on internal growth, we
intend to continue to pursue selected acquisition opportunities in strategically
important markets. There can be no assurance that we will be able to identify,
acquire or profitably manage additional businesses or successfully integrate
acquired businesses into our operations without substantial costs, delays or
other operational or financial problems. Increased competition for acquisition
candidates may develop, in which event there may be fewer acquisition
opportunities available to us, as well as higher acquisition prices.
Furthermore, acquisitions involve a number of special risks, including the
failure of acquired companies to achieve anticipated results, diversion of
management's attention, failure to retain key personnel, risks associated with
unanticipated events or liabilities and amortization of acquired intangible
assets. Some or all of these could have a material adverse effect on our
business, financial condition and results of operations.
The timing, size or success of any acquisition effort and the associated
potential capital commitments are unpredictable. We expect to fund future
acquisitions primarily through a combination of cash flows from operations,
borrowings under our Credit Facility, other debt fundings, and the issuance of
common stock. Our ability to fund future acquisitions through borrowings under
the Credit Facility may be limited by certain restrictive covenants of the
facility, the satisfaction of which may be dependent upon our ability to raise
additional equity through either offerings for cash or the issuance of stock as
consideration for acquisitions. Our ability to fund acquisitions through
issuance of common stock may not be feasible at the current stock price.
CREDIT FACILITIES AND LOAN GUARANTEES
On June 16, 1999, we issued $50 million of 9.06% Senior Secured Notes, due June
2004, in connection with a note purchase agreement. The Senior Secured Notes are
secured pari passu to the Credit Facility. The senior note purchase agreement
contains loan covenants substantially similar to those of the credit agreement
under the Credit Facility and has prepayment restrictions in the form of
"make-whole" provisions. Interest is payable semi-annually.
On June 1, 1999, we executed amendment no. 4 to the Credit Facility
agreement to allow for the sharing of credit with the Senior Notes and to reduce
the availability under the Credit Facility to $50 million. On April 16, 1999, we
executed amendment no. 3 to the credit agreement to allow for the refinancing of
existing loans of a subsidiary. The Credit Facility may be used for letters of
credit not to exceed $2.5 million in the aggregate, acquisitions, capital
expenditures, and for general corporate purposes. The credit agreement requires
us to comply with various loan covenants, which include the maintenance of
certain financial ratios, restrictions on additional indebtedness and
restrictions on liens, guarantees, advances, capital expenditures, sale of
assets and dividends. Interest on outstanding balances of the Credit Facility is
computed at our election, on the basis of either the Prime Rate or the
Eurodollar Rate, as defined, plus a margin ranging from 1.25% to 2.00%,
depending on certain financial ratios. Availability fees range from 0.25% to
0.50% per annum depending on certain financial ratios and are payable on the
unused portion of the Credit Facility. At December 31, 1999, there were $12
million of outstanding borrowings under the Credit Facility. The Credit Facility
has a three-year term expiring May 26, 2001 and is secured pari passu to the
Senior Notes by substantially all of our assets, including the stock in the
Founding Companies and any future material subsidiaries, as defined. At December
31, 1999, we were in compliance with all credit agreement and senior note
purchase agreement loan covenants.
Certain of Aston Hotel & Resorts' management agreements contain provisions
for guaranteed levels of returns to owners. These agreements also contain force
majeure clauses to protect us from forces or occurrences beyond the control of
management.
YEAR 2000 COMPLIANCE
During 1999, we took steps to ensure that any significant adverse impact from
the advent of year 2000 would be averted. These steps included evaluation of
property management systems (guest services and back-office accounting);
20
<PAGE>
reservation/inventory management systems; hardware BIOS (software encoded into
hardware components that runs "beneath" the operating system); analysis and/or
management reporting tools; and various non-IT components' embedded control
systems (HVAC, elevator controls, etc.). In addition, we developed contingency
plans including items such as offsite and/or manual reservations/inventory
management, property management (guest services, back-office functions, work
order administration), financial accounting and reporting, and management
reporting. The cost of assessment and remediation of our systems and the
alternative development of contingency plans was approximately $500,000.
Upon the arrival of year 2000 we took additional steps to assess all
systems and determine the actual impact of year 2000, if any. To date, we have
noted no year 2000-related issues which constitute a significant adverse impact
upon our systems and processes, and have discovered no issues which may be
expected to have a significant adverse impact in the future.
SEASONALITY AND QUARTERLY FLUCTUATIONS
OUR BUSINESS IS HIGHLY SEASONAL. OUR RESULTS OF
operations are subject to quarterly fluctuations caused primarily by the
seasonal variations in the vacation rental and property management industry,
with peak seasons dependent on whether the resort is primarily a summer or
winter destination. Our quarterly results of operations may also be subject to
fluctuations as a result of the timing and cost of acquisitions, the timing of
real estate sales, changes in relationships with travel providers, extreme
weather conditions or other factors affecting leisure travel and the vacation
rental and property management industry.
MARKETS
We currently manage condominiums and homes in 40 premier Hawaiian, mountain,
beach and desert resort locations throughout the United States and in Canada.
The table below sets forth the resort locations at which we manage vacation
condominium and home properties and the aggregate number of properties managed
in each of the following states at December 31, 1999.
<TABLE>
<S> <C>
HAWAIIAN RESORTS
Hawaii: Hawaii, Kauai, Maui and Oahu 4,659
MOUNTAIN RESORTS
Colorado: Aspen, Breckenridge, Crested Butte, Dillon,
Snowmass Village and Telluride 1,440
British Columbia: Whistler 701
Utah: The Canyons, Deer Valley and Park City 366
Montana: Big Sky 217
Oregon: Sunriver 140
BEACH RESORTS
Florida: Beaches of South Walton, Bonita Springs, Captiva Island,
Destin, Fort Myers, Fort Myers Beach, Marco Island,
Okaloosa Island, Fort Walton Beach, Orlando, Navarre Beach,
Naples, and Sanibel Island 5,138
Massachusetts: Nantucket 1,200
South Carolina: Hilton Head Island 694
Delaware: Bethany Beach 658
North Carolina: Outer Banks 511
Georgia: St. Simons Island 453
Alabama: Gulf Shores 372
Ohio: Lake Erie Islands 169
DESERT RESORTS
California: Palm Desert and Palm Springs 299
Arizona: Scottsdale and Tucson 284
------
TOTAL 17,301
------
</TABLE>
21
<PAGE>
RISKS ASSOCIATED WITH FORWARD
LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended, which are intended to be covered by the safe harbors
created thereby. Investors are cautioned that all forward-looking statements
involve risks and uncertainties, including but not limited to the risks
associated with: successful integration of the Founding Companies and Post-IPO
Acquisitions, factors affecting internal growth and management of growth, our
acquisition strategy and availability of financing, the travel and tourism
industry, seasonality, quarterly fluctuations and general economic conditions,
dependence on technology, e-commerce and travel providers. Important factors
that could cause actual results to differ materially include, but are not
limited to, those listed in our Report on Form 10-K for the year ended December
31, 1999, expected to be filed with the Securities and Exchange Commission on
March 30, 2000.
Although we believe that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and, therefore, there can be no assurance that the forward-looking
statements included in this filing will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by us or any other person that the objectives and plans will be
achieved.
PERFORMANCE STATISTICS
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1999 Variance
- ------------------------------------------------------------------------
<S> <C> <C> <C>
HAWAII
Lodging Revenues (1) $139,814 $136,788 (2.2)%
Occupancy 72.1% 76.0% 3.9 pts
ADR $ 104.97 $ 102.21 (2.6)%
RevPAU $ 75.66 $ 77.71 2.7 %
Total Units 5,124 4,659 (9.1)%
MOUNTAIN
Lodging Revenues (1) $ 34,720 $ 35,128 1.2 %
Occupancy 35.5% 34.9% (0.6)pts
ADR $ 152.65 $ 160.98 5.5 %
RevPAU $ 54.24 $ 56.19 3.6 %
Total Units 2,052 1,983 (3.4)%
BEACH
Lodging Revenues (1) $104,833 $118,685 13.2 %
Occupancy 54.6% 53.2% (1.4)pts
ADR $ 131.90 $ 139.31 5.6 %
RevPAU $ 72.01 $ 74.04 2.8%
Total Units 5,009 5,308 6.0 %
TOTAL
Lodging Revenues (1) $279,367 $290,601 4.0 %
Occupancy 59.7% 60.4% 0.7 pts
ADR $ 118.67 $ 120.66 1.7 %
RevPAU $ 70.83 $ 72.86 2.9 %
Total Units 12,185 11,950 (1.9)%
</TABLE>
(1) Lodging revenues are in thousands and represent the total rental charged to
property rental customers. Our revenue represents from 3% to over 40% of the
lodging revenues based on the services provided by us.
For better comparability, the above statistics exclude Houston & O'Leary, The
Maury People, Bluebill, Columbine, Ridgepine, Ryan's Golden Eagle, Cove
Management Services, Worthy Rentals, Scottsdale Resorts Accommodations,
Shoreline Properties, Shoreline Rentals, Styles Estates Ltd. and Coates Reid &
Waldron. Also excluded from these statistics are owner use nights and renovation
nights which were approximately 11.4% and 11.9% of gross available nights,
respectively.
22
<PAGE>
RESORTQUEST INTERNATIONAL,INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands, except share amounts) 1998 1999
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Restated)
Current assets
Cash and cash equivalents $ 26,247 $ 40,239
Trade and other receivables, net of allowance 3,929 4,394
Receivables from stockholders 5,209 1,956
Deferred income taxes 1,297 1,237
Other current assets 2,276 5,720
- ----------------------------------------------------------------------------------------------
Total current assets 38,958 53,546
Goodwill, net 130,214 175,167
Property and equipment, net 16,649 20,885
Deferred income taxes 211 --
Note receivables from stockholder -- 4,470
Other assets 2,187 3,607
- ----------------------------------------------------------------------------------------------
Total assets $ 188,219 $ 257,675
- ----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,234 $ 832
Customer deposits, deferred revenue and payable
to property owners 24,639 43,392
Accounts payable and accrued liabilities 13,210 15,149
Payables to stockholders 1,632 197
Other current liabilities 323 1,271
- ----------------------------------------------------------------------------------------------
Total current liabilities 41,038 60,841
Long-term debt, net of current maturities 38,098 68,090
Deferred income taxes -- 734
Other long-term obligations 2,228 2,187
- ----------------------------------------------------------------------------------------------
Total liabilities 81,364 131,852
- ----------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 50,000,000 shares authorized,
17,092,768 and 18,715,447 shares outstanding, respectively 171 187
Additional paid-in capital 136,026 150,941
Excess distributions (29,500) (29,500)
Retained earnings 158 4,195
- ----------------------------------------------------------------------------------------------
Total stockholders' equity 106,855 125,823
- ----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 188,219 $ 257,675
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands, except per share amounts) 1997 1998 1999
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues (Restated) (Restated)
Property management fees $ 13,383 $ 27,022 $ 65,795
Service fees 9,790 15,603 38,608
Other 3,580 12,734 23,509
- ---------------------------------------------------------------------------------
Total revenues 26,753 55,359 127,912
- ---------------------------------------------------------------------------------
Operating expenses
Direct operating 13,635 31,596 65,804
General and administrative 7,092 15,125 41,669
Depreciation and amortization 521 3,148 6,909
- ---------------------------------------------------------------------------------
Total operating expenses 21,248 49,869 114,382
- ---------------------------------------------------------------------------------
Operating income 5,505 5,490 13,530
Other income (expense)
Interest expense, net (763) (403) (4,228)
Other 677 (104) --
- ---------------------------------------------------------------------------------
Income before income taxes 5,419 4,983 9,302
Provision for income taxes 90 1,518 4,873
- ---------------------------------------------------------------------------------
Income from continuing operations 5,329 3,465 4,429
Income (loss) from discontinued operations (1,494) 1,347 --
- ---------------------------------------------------------------------------------
Net income $ 3,835 $ 4,812 $ 4,429
- ---------------------------------------------------------------------------------
Earnings per share
Basic
Continuing operations $ 2.53 $ 0.32 $ 0.25
Discontinued operations (0.70) 0.12 --
- ---------------------------------------------------------------------------------
Net income $ 1.83 $ 0.44 $ 0.25
- ---------------------------------------------------------------------------------
Diluted
Continuing operations $ 2.53 $ 0.32 $ 0.24
Discontinued operations (0.70) 0.12 --
- ---------------------------------------------------------------------------------
Net income $ 1.83 $ 0.44 $ 0.24
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings
------------------- Paid-in Excess (Accumulated
(in thousands, except share amounts) Shares Amount Capital Distributions Deficit) Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 (Restated) 2,101,113 $ 21 $ 209 $ -- $ (284) $ (54)
Net income -- -- -- -- 3,835 3,835
Distributions -- -- -- -- (4,178) (4,178)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 (Restated) 2,101,113 21 209 -- (627) (397)
Net income -- -- -- -- 4,812 4,812
Initial public offering 6,670,000 67 59,954 -- -- 60,021
Distributions -- -- -- (29,500) (4,027) (33,527)
Stock issued in connection with
Combinations 7,545,953 75 68,620 -- -- 68,695
Post-IPO Acquisitions 775,702 8 7,243 -- -- 7,251
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 (Restated) 17,092,768 171 136,026 (29,500) 158 106,855
Net income -- -- -- -- 4,429 4,429
Distributions -- -- -- -- (392) (392)
Stock issued in connection with
Exercise of employee stock options 3,436 -- 37 -- -- 37
Post-IPO Acquisitions 1,619,243 16 14,878 -- -- 14,894
- -----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 18,715,447 $ 187 $ 150,941 $ (29,500) $ 4,195 $ 125,823
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1997 1998 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities (Restated) (Restated)
Net income $ 3,835 $ 4,812 $ 4,429
(Income) loss from discontinued operations 1,494 (1,347) --
- -------------------------------------------------------------------------------------------------------
Income from continuing operations 5,329 3,465 4,429
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities
Depreciation and amortization 521 3,148 6,909
Changes in operating assets and liabilities
Trade and other receivables 126 1,631 468
Customer deposits, deferred revenue and payable to
property owners 115 10,471 3,370
Accounts payable and accrued liabilities 1,217 (3,288) (192)
Deferred income taxes -- 503 1,005
Other (101) (2,566) (2,546)
- -------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 7,207 13,364 13,443
Cash flows used in discontinued operations (17) (56) --
- -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 7,190 13,308 13,443
- -------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Cash portion of acquisitions, net -- (35,518) (20,079)
Purchases of property and equipment (380) (4,021) (5,280)
Other 402 -- (769)
- -------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 22 (39,539) (26,128)
- -------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from issuance of Senior Notes -- -- 48,986
Net Credit Facility borrowings (repayments) -- 32,000 (24,813)
Proceeds from issuance of secured mortgage notes -- -- 5,734
Payment of other long-term obligations (906) (10,380) (2,412)
Distributions to stockholders (4,178) (33,527) (392)
Net proceeds from public stock issuance -- 60,021 --
Other (2,601) (274) (426)
- -------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (7,685) 47,840 26,677
- -------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (473) 21,609 13,992
Cash and cash equivalents, beginning of period 5,111 4,638 26,247
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 4,638 $ 26,247 $ 40,239
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
In these footnotes, the words "Company," "ResortQuest," "we," "our" and "us"
refer to ResortQuest International, Inc., a Delaware corporation, and its
wholly-owned subsidiaries, unless otherwise stated or the context requires
otherwise.
NOTE 1 - BASIS OF PRESENTATION
FORMATION
ResortQuest is the first company to offer vacation condominium and home rentals,
sales and management under a national brand name and is a leading provider of
vacation rentals in premier destination resorts located in the continental
United States, Hawaii and Canada. Effective with the closing of our initial
public offering on May 26, 1998 (the "IPO"), we acquired 12 vacation rental and
property management companies and one leading vacation rental and property
management software company (collectively the "Founding Companies") (the
"Combinations"). However, for accounting and reporting purposes, Hotel
Corporation of the Pacific, Inc. (commonly referred to as "Aston Hotels &
Resorts") was identified as the accounting acquiror and the remaining Founding
Companies along with ResortQuest corporate were accounted for under the purchase
method of accounting.
Subsequent to the IPO, we executed five acquisitions through the end of
1998, one of which was accounted for under the pooling-of-interests method of
accounting. During 1999, we executed an additional 13 acquisitions, two of which
were accounted for under the pooling-of-interests method of accounting. The
remaining acquisitions were accounted for under the purchase method of
accounting. These acquisitions are collectively referred to as the "Post-IPO
Acquisitions".
Costs incurred in the course of our evaluation of acquisition candidates
and the ultimate consummation of acquisitions consist primarily of attorneys'
fees, accounting fees and other costs incurred by us in identifying and closing
transactions. All costs incurred are deferred until the related transaction is
either consummated or terminated. Similar treatment is followed in recording
costs incurred by us in the course of generating additional debt or equity
financing.
POOLING RESTATEMENTS
We have retroactively restated our historical consolidated financial statements
for the pooling-of-interests acquisitions. Our results of operations for the
separate companies and the restated combined results presented in the
accompanying consolidated financial statements are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1997 1998
- --------------------------------------------------------------
<S> <C> <C>
Revenues
ResortQuest, as previously reported $19,554 $49,524
Pooled companies 7,199 5,835
- --------------------------------------------------------------
Combined Revenues, as restated $26,753 $55,359
- --------------------------------------------------------------
Net income
ResortQuest, as previously reported $ 3,591 $ 4,416
Pooled companies 244 396
- --------------------------------------------------------------
Combined Net income, as restated $ 3,835 $ 4,812
- --------------------------------------------------------------
</TABLE>
In connection with the pooling-of-interests acquisitions, we recorded total
expense of $716,000 in 1999 and $134,000 in 1998 related to transaction costs.
Accordingly, the restated historical consolidated financial statements
include the financial results of Aston Hotels & Resorts and the three pooling
acquisitions for all periods presented, ResortQuest and the Founding Companies
only since May 26, 1998, and the remaining Post-IPO Acquisitions from their
respective effective dates of acquisition.
PRO FORMA FINANCIAL INFORMATION
Subsequent to the IPO, we executed five acquisitions through the end of 1998 for
a total cost of $45.8 million with 22.5% of the consideration paid in the form
of common stock with an aggregate value of $10.3 million and $35.5 million of
cash consideration.
27
<PAGE>
During 1999, we executed an additional 13 acquisitions for a total cost of $39.3
million, with 48.9% of the consideration paid in the form of common stock with
an aggregate value of $19.2 million and $20.1 million of cash consideration, two
of which were accounted for under the pooling-of-interests method of accounting;
the remaining 11 1999 acquisitions were accounted for under the purchase method
of accounting. The purchase price allocations for certain of the 1999
acquisitions have been made on a preliminary basis and are subject to the
completion of certain intangible asset valuations. The aggregate impact of these
acquisitions is material to our financial statements and we noted the following
pro forma results assuming these combinations had occurred on January 1, 1998:
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands, unaudited) 1998 1999
- --------------------------------------------------------------
<S> <C> <C>
Revenues
ResortQuest, as restated $ 55,359 $127,912
Combinations 34,938 16,865
- --------------------------------------------------------------
Pro forma Combined Revenues $ 90,297 $144,777
- --------------------------------------------------------------
Net income
ResortQuest, as restated $ 4,812 $ 4,429
Combinations 3,020 2,390
- --------------------------------------------------------------
Pro forma Combined Net income $ 7,832 $ 6,819
- --------------------------------------------------------------
</TABLE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
PROPERTY MANAGEMENT FEES
At December 31, 1999, ResortQuest has entered into 15,971 exclusive and 1,330
non-exclusive rental and management agreements with owners of condominiums and
homes in 40 resort locations throughout the United States and in Canada. The
exclusive agreements entitle ResortQuest to receive a fee for renting and
maintaining these properties. ResortQuest requires certain minimum deposits as
reservations are booked. These deposits are generally non-refundable and
recorded as a component of customer deposits, deferred revenue and payable to
owners. ResortQuest recognizes revenue from property rental and management fees
ratably over the term of guest stays. ResortQuest records revenue for
cancellations upon occurrence.
SERVICE FEES
ResortQuest internally provides or arranges through third parties certain
services for property owners or guests. Service fees include reservations,
housekeeping, long-distance telephone, ski rentals, lift tickets, beach
equipment and pool cleaning. Internally provided services are recognized as
service fee revenue when the service is provided. Services provided by third
parties are generally billed directly to property owners and are not included in
the accompanying consolidated financial statements.
OTHER
ResortQuest recognizes other revenues primarily related to real estate broker
commissions, food & beverage sales and software and maintenance sales.
ResortQuest has real estate broker sales operations in the following locations:
Aspen and Snowmass Village, Colorado; Bethany Beach, Delaware; Islands of
Captiva and Sanibel, Naples, Fort Myers, Fort Walton Beaches and Destin,
Florida; Outer Banks, North Carolina; St. Simons, Georgia; Gulf Shores, Alabama;
and the Island of Nantucket, Massachusetts. ResortQuest recognizes revenues on
real estate sales when such transactions are complete and such revenue is
recorded net of the related agent commissions. ResortQuest also manages food &
beverage outlets in connection with the management of larger condominium
complexes, primarily in Hawaii and Florida. First Resort Software, Inc., one of
the Founding Companies, ("First Resort") sells a fully integrated software
package specifically designed for the property rental business, along with
ongoing service contracts. First Resort recognizes software and maintenance
revenues when the systems are installed and ratably over the service period,
respectively. Other revenues were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1997 1998 1999
- --------------------------------------------------------------------
<S> <C> <C> <C>
Real estate brokerage commissions, net $ -- $ 4,858 $13,282
Food & beverage 2,271 2,265 4,067
Software sales and service -- 1,954 3,448
Other 1,309 3,657 2,711
- --------------------------------------------------------------------
$ 3,580 $12,734 $23,508
- --------------------------------------------------------------------
</TABLE>
28
<PAGE>
DIRECT OPERATING EXPENSES
Direct operating expenses include expenses related to housekeeping, maintenance,
reservations, marketing and advertising, and other costs associated with rental
and management. Direct operating expenses also include food & beverage cost of
sales and operating expenses as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1997 1998 1999
- ---------------------------------------------------
<S> <C> <C> <C>
Rental and management $11,683 $29,362 $62,149
Food & beverage 1,952 2,234 3,655
- ---------------------------------------------------
$13,635 $31,596 $65,804
- ---------------------------------------------------
</TABLE>
GOODWILL
Goodwill is the excess of the purchase price over fair value of identified net
assets acquired in business combinations accounted for under the purchase method
of accounting. Goodwill is being amortized on a straight-line basis over 40
years, other than that associated with the acquisition of First Resort, which is
being amortized over 15 years, representing the approximate remaining useful
life of acquired assets. ResortQuest recognized goodwill amortization of $1.8
million and $4.4 million in 1998 and 1999, respectively.
INCOME TAXES
Prior to the IPO, Aston Hotels & Resorts had elected S Corporation status as
defined by the Internal Revenue Code and state tax statutes. Under S Corporation
status, the former stockholders reported their share of ResortQuest's taxable
earnings or losses in their personal tax returns for the periods prior to the
Combinations.
In conjunction with the Combinations, Aston Hotels & Resorts changed from
an S Corporation to a C Corporation for federal and state income tax reporting
purposes, which requires ResortQuest to recognize the tax consequences of
operations in its consolidated statements of income.
Under the asset and liability method of accounting for income taxes,
deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets, including net operating loss carryforwards,
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period when the new rate is enacted.
CASH AND CASH EQUIVALENTS
For the purposes of the consolidated balance sheets and statements of cash
flows, ResortQuest considers all investments with original maturities of three
months or less to be cash equivalents. At December 31, 1998 and 1999, cash and
cash equivalents include $15.1 million and $29.1 million, respectively, of cash
held in escrow for prepaid rentals and pending real estate sales transactions.
INVENTORIES
Inventories consist primarily of food and beverage items and are stated at the
lower of cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost or, in the case of equipment acquired
under capital leases, the present value of future lease payments. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets or the lease terms.
In accordance with the Accounting Standards Executive Committee Statement
of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," certain costs related to the
development of software for internal use must be capitalized. ResortQuest has
capitalized internal development costs, primarily related to outside
professional fees and internal payroll and related benefits, as prescribed by
SOP No. 98-1. These costs are being amortized on a straight-line basis over the
estimated useful lives of the related projects not to exceed five years.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of
29
<PAGE>
property and equipment, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is recognized in the
consolidated statements of income.
FINANCIAL INSTRUMENTS
The carrying values of all financial instruments approximate their estimated
fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CONCENTRATION OF RISK
Prior to the Combinations, ResortQuest's operations were exclusively located in
the state of Hawaii and were subject to negative events that affect travel
patterns of vacationers. The two primary concentrations of vacationers now
include Hawaii and Florida. For the year ended December 31, 1999, Hawaii and
Florida accounted for 18% and 33%, respectively, of ResortQuest's consolidated
revenues.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1999
presentation.
NOTE 3 - NOTE RECEIVABLES FROM STOCKHOLDER
In connection with the Combinations, Aston Hotels & Resorts formalized its
receivable resulting from cash advances to its primary stockholder with a $4.0
million promissory note. During 1999, ResortQuest began discussions with the
stockholder to restructure the note in order to provide for additional
collateral. In conjunction with these discussions, certain management fees and
accrued interest of approximately $940,000 were also considered for
collateralization. During these discussions, the stockholder agreed to the
formation of two separate notes (the "Notes"), one for $4.0 million and one for
$940,000. The Notes are collateralized by certain real estate held by the
stockholder and bear interest at 1/2% below the prime rate of interest, but not
less than 6% and not more than 10%. The $940,000 note, plus accrued interest, is
due in two equal installments on December 31, 2000 and July 31, 2001. Interest
payments under the $4.0 million note are due every January and July 1st, with
the principal being due in full on May 25, 2008. The Notes were formally
executed on February 16, 2000.
NOTE 4 - DISCONTINUED OPERATIONS
ResortQuest decided in 1998 that it would no longer enter into leasing
arrangements for lodging facilities. Accordingly, for all periods presented in
the accompanying consolidated financial statements, the financial position,
results of operations and cash flows of the leased assets are reflected as
discontinued operations. Concurrent with the Combinations, Aston Hotels &
Resorts assigned such leases to AST Holdings, Inc., a corporation owned by Aston
Hotels & Resorts' principal stockholder. On May 27, 1998, ResortQuest entered
into a contract with AST Holdings to manage these facilities for a fee. Net
assets (liabilities) of discontinued operations were as follows:
<TABLE>
<CAPTION>
December 31,
(in thousands) 1997
- ---------------------------------------------------------
<S> <C>
Current assets $ 2,955
Advances to affiliates 1
Other assets 193
Property and equipment 197
- ---------------------------------------------------------
Total assets 3,346
Current liabilities (4,119)
Capital lease obligations (53)
Other long-term obligations (577)
- ---------------------------------------------------------
Net liabilities of discontinued operations $(1,403)
- ---------------------------------------------------------
</TABLE>
30
<PAGE>
Income (loss) from discontinued operations is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1997 1998
- --------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 30,848 $ 14,304
Operating expenses 24,826 10,120
General and administrative expenses 7,317 2,839
- --------------------------------------------------------------------------
Operating income (loss) (1,295) 1,345
Other (expense) income (33) 2
- --------------------------------------------------------------------------
Net income (loss) from discontinued operations $ (1,328) $ 1,347
- --------------------------------------------------------------------------
</TABLE>
In addition to the loss from discontinued operations, ResortQuest's
operating results for the year ended December 31, 1997 include a charge of
$166,000 for an expected loss resulting from the disposal of discontinued
operations.
NOTE 5 - UNUSUAL EXPENSES AND OTHER CHARGES
During 1999, general and administrative expenses include $3.1 million of items
that management considers as unusual expenses and other charges. These charges
include $906,000 related to a study to explore alternate funding sources;
$734,000 in accrued severance payments to three former members of management;
$716,000 in transaction costs for two of ResortQuest's 1999 acquisitions
accounted for under the pooling-of-interests method, which requires transaction
costs related to the acquisitions to be expensed; $471,000 related to an
indefinitely suspended secondary offering filed during the second quarter of
1999; and $321,ooo in costs related to acquisition candidates no longer being
pursued due to management changing its acquisition strategy during the year.
NOTE 6 - SUPPLEMENTAL FINANCIAL INFORMATION
Trade and other receivables consisted of the following:
<TABLE>
<CAPTION>
December 31,
(in thousands) 1998 1999
- -----------------------------------------------------------
<S> <C> <C>
Receivable from managed properties $ 1,073 $ 1,437
Other 2,912 3,109
- -----------------------------------------------------------
Total 3,985 4,546
Less - allowance for doubtful accounts (56) (152)
- -----------------------------------------------------------
$ 3,929 $ 4,394
- -----------------------------------------------------------
</TABLE>
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
Estimated Useful December 31,
(in thousands) Life in Years 1998 1999
- -------------------------------------------------------------------
<S> <C> <C> <C>
Land and improvements $ 3,448 $ 2,249
Building and improvements 15-30 4,929 7,984
Furniture, fixtures and equipment 3-10 8,298 12,539
Software development 3-5 367 1,496
Leased property 3-7 2,369 1,935
- -------------------------------------------------------------------
19,411 26,203
Less - accumulated depreciation
and amortization (2,762) (5,318)
- -------------------------------------------------------------------
$ 16,649 $ 20,885
- -------------------------------------------------------------------
</TABLE>
Accounts payable and accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31,
(in thousands) 1998 1999
- ---------------------------------------------
<S> <C> <C>
Accounts payable $ 8,427 $ 9,387
Accrued payroll 986 3,370
Other accrued liabilities 3,797 2,392
- ---------------------------------------------
$13,210 $15,149
- ---------------------------------------------
</TABLE>
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1997 1998 1999
- --------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosure of cash
flow information
Cash paid for interest $ 654 $ 658 $ 5,292
- --------------------------------------------------------------
Cash paid for income taxes $ -- $ 721 $ 6,823
- --------------------------------------------------------------
Supplemental disclosure of
non-cash flow information
Capital lease obligations $ 940 $ 83 $ 595
- --------------------------------------------------------------
Common stock portion
of Combinations $ -- $68,695 $ --
- --------------------------------------------------------------
Common stock portion of
Post-IPO Acquisitions $ -- $ 7,251 $14,894
- --------------------------------------------------------------
</TABLE>
31
<PAGE>
NOTE 7 - LONG-TERM DEBT
On June 16, 1999, we issued $50 million of 9.06% Senior Secured Notes ("Senior
Notes"), due June 2004, in connection with a note purchase agreement. The Senior
Notes are secured pari passu to our $50 million credit facility ("Credit
Facility"). The note purchase agreement contains loan covenants substantially
similar to those of the credit agreement under the Credit Facility and has
prepayment restrictions in the form of "make-whole" provisions. Interest is
payable semi-annually.
On June 1, 1999, we executed amendment no. 4 to the credit agreement to
allow for the sharing of credit with the Senior Notes and to reduce the
availability under the Credit Facility to $50 million. On April 16, 1999, we
executed amendment no. 3 to the credit agreement to allow for the refinancing of
existing loans of a subsidiary. The Credit Facility may be used for letters of
credit not to exceed $2.5 million in the aggregate, acquisitions, capital
expenditures and for general corporate purposes. The credit agreement requires
us to comply with various loan covenants, which include maintenance of certain
financial ratios, restrictions on additional indebtedness and restrictions on
liens, guarantees, advances, capital expenditures, sale of assets and dividends.
Interest on outstanding balances of the Credit Facility is computed at our
election, on the basis of either the Prime Rate or the Eurodollar Rate, as
defined, plus a margin ranging from 1.25% to 2.00%, depending on certain
financial ratios. Availability fees range from 0.25% to 0.50% per annum
depending on certain financial ratios and are payable on the unused portion of
the Credit Facility. At December 31, 1999, there were $12 million of outstanding
borrowings under the Credit Facility. The Credit Facility has a three-year term
expiring May 26, 2001 and is secured pari passu to the Senior Notes by
substantially all of our assets, including the stock in the Founding Companies
and any future material subsidiaries, as defined. At December 31, 1999, we were
in compliance with all credit agreement and note purchase agreement loan
covenants.
At December 31, 1998 and 1999, long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
(in thousands) 1998 1999
- -------------------------------------------------------------------
<S> <C> <C>
Senior Notes $ - $50,000
Credit Facility 32,000 12,000
Various notes with banks,
secured by certain assets, at
interest rates ranging from
7.14% to 9%, due between March
2000 through May 2012 5,246 5,593
Other notes 361 --
Long-term capital lease obligations 1,725 1,329
- -------------------------------------------------------------------
Total 39,332 68,922
Less - current maturities (1,234) (832)
- -------------------------------------------------------------------
Long-term debt, net of current maturities $38,098 $68,090
- -------------------------------------------------------------------
</TABLE>
Annual maturities of long-term debt are: 2000, $832,000; 2001, $12.8 million;
2002, $740,000; 2003, $442,000; 2004, $54.1 million.
NOTE 8 - OPERATING LEASES
ResortQuest has entered into non-cancelable poerating leases for equipment,
operating space, office space, hotel properties and individual condominium
units within its managed properties. At December 31, 1999, future minimum
lease commitments under non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
(in thousands) December 31,
- ----------------------------------------
<S> <C>
2000 $ 3,578
2001 3,480
2002 2,633
2003 1,956
2004 1,398
Thereafter 5,975
- ----------------------------------------
$19,020
- ----------------------------------------
</TABLE>
Under terms of the leases, ResortQuest is generally required to pay all
taxes, insurance and maintenance. Rent expense for 1997, 1998 and 1999
aggregated approximately $5.6 million, $5.0 million and $6.1 million,
respectively.
In conjunction with the Combinations and Post-IPO Acquisitions, ResortQuest
entered into several lease agreements with certain former owners for the use of
office space and facilities. Lease
32
<PAGE>
payments made to former owners, who are also significant stockholders and
directors, during 1997, 1998 and 1999 were approximately $110,000, $548,000 and
$407,000, respectively.
As an accommodation to certain of the managed properties, the Company
assists in obtaining leases of operating equipment. In some instances, this
assistance includes entering into the leases as the technical lessee. The
managed properties perform all obligations under the leases, including making
lease payments and providing insurance coverage. ResortQuest is contingently
liable under the leases until completion of the lease terms. Because ResortQuest
undertakes the role of a technical lessee simply as an accommodation to the
managed properties and because the leased equipment is used only for and by the
managed properties, these leases have not been recorded on the Company's books.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
GUARANTEES
Certain of Aston Hotels & Resorts' management agreements contain provisions for
guaranteed levels of returns to owners. These agreements also contain force
majeure clauses to protect the Company from forces or occurrences beyond the
control of management. During 1997, 1998 and 1999, ResortQuest made payments in
excess of the management fees earned on these guaranteed agreements of $327,000,
$840,000 and $133,000, respectively.
ACQUISITION INDEMNIFICATION
Subject to certain limitations, pursuant to the Agreement and Plan of
Organization entered into by and between each of the Founding Companies and
ResortQuest (each an "Agreement"), the stockholders of the Founding Companies
and Post-IPO Acquisitions have indemnified ResortQuest against losses, claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses as a result of or arising from any breach of the representations
and warranties in the Agreement, any liability under the 1933 Act, the 1934 Act
or other federal or state law or regulation arising out of or based upon any
untrue statement of a material fact relating solely to the Founding Company,
Post-IPO Acquisitions or the stockholders and certain other identified claims or
litigation.
In addition, pursuant to each Agreement and subject to certain limitations,
ResortQuest agreed to indemnify the stockholders against losses, claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses incurred by the stockholders as a result of or arising from any
breach by ResortQuest or of its representations and warranties in the Agreement,
any liability under the 1933 Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating to ResortQuest
or any of the other Founding Companies and Post-IPO Acquisitions contained in
certain filings with the Securities and Exchange Commission or the matters
described in the schedules to the Agreement relating to guarantees.
ResortQuest is not aware of any events that have or could have caused any
party to such indemnification under any of the Agreements during the periods
presented in the accompanying consolidated financial statements.
LITIGATION
ResortQuest and its subsidiaries are involved in various legal actions arising
in the ordinary course of business. We do not believe that the outcome of such
legal actions will have a material adverse effect on the Company's consolidated
financial position or results of operations.
INSURANCE
ResortQuest carries a broad range of insurance coverage, including general and
business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the periods presented in the
accompanying consolidated financial statements.
33
<PAGE>
BENEFIT PLANS
At December 31, 1999, ResortQuest had 26 401(k) profit sharing plans, which
existed prior to the IPO and the acquisition of the Founding Companies or the
Post-IPO Acquisitions. On April 1, 1999, ResortQuest established a new 401(k)
profit sharing plan, which will cover all domestic employees. Under the plans
currently in place, employees may defer from 1% to 20% of eligible earnings,
company matching contributions range from 0% to 50% of the first 4% to 16% of
employee contributions, and employee vesting in company matching contributions
varies from immediate vesting in some plans to seven or more years in other
plans. ResortQuest is in the process of merging existing plans into the new
401(k) profit sharing plan.
EMPLOYMENT AGREEMENTS
Effective with the Combinations and the Post-IPO Acquisitions, ResortQuest
entered into employment agreements with all senior corporate officers and
several key employees. Among other things, these agreements allow for severance
payments and some include acceleration of stock option awards upon a change in
control of ResortQuest, as defined under the agreements. At December 31, 1999,
the maximum amount of compensation that would be payable under all agreements if
a change in control occurred without prior written notice would be approximately
$8.9 million.
NOTE 10 - STOCKHOLDERS' EQUITY
COMMON STOCK
On May 26, 1998, ResortQuest issued an aggregate of 9,254,286 shares of common
stock in connection with the Combinations (1,708,333 shares to Aston Hotels &
Resorts' stockholders and 7,545,953 shares to the remaining stockholders
involved with the Combinations) and 6,670,000 shares of common stock in
connection with the IPO. Shares issued in the IPO were sold at a price to the
public of $11.00 per share. The net proceeds to ResortQuest from the IPO (after
deducting underwriting discounts, commissions and offering expenses) were
approximately $60.0 million. Subsequent to the IPO, ResortQuest issued 2,787,725
shares of common stock in connection with the Post-IPO Acquisitions (392,780
shares in the pooling-of-interests acquisitions and 2,394,945 shares in the
purchase acquisitions). At December 31, 1999, ResortQuest had 18,715,447 shares
of common stock issued and outstanding (15,733,845 shares of common stock and
2,981,602 shares of restricted common stock). The common stock and restricted
common stock are identical except that the holders of restricted common stock
are only entitled to one-half of one vote for each share on all matters.
On June 25, 1998, ResortQuest registered 3.0 million shares of common stock
pursuant to a shelf registration statement. On July 16, 1999, ResortQuest
registered an additional 5.0 million shares of common stock pursuant to a shelf
registration statement. As with our initial shelf registration statement, the
shares covered by this statement are available to be used for future
acquisitions. At December 31, 1999, 2,791,161 of the shares covered by these
shelf registration statements have been issued in connection with Post-IPO
Acquisitions.
PREFERRED STOCK
ResortQuest's authorized capital includes 10.0 million shares of undesignated
preferred stock with a $0.01 par value.
On February 25, 1999, our Board of Directors adopted a stockholder rights
plan designed to protect our stockholders in the event of takeover action that
would deny them the full value of their investment. Under this plan, a dividend
distribution of one right for each share of common stock was declared to holders
of record at the close of business on March 15, 1999. The rights will also
attach to common stock issued after March 15, 1999. The rights will become
exercisable only in the event, with certain exceptions, an acquiring party
accumulates 15% or more of our voting stock, or if a party announces an offer to
acquire 15% or more of our voting stock. The rights will expire on March 15,
2009. Each right will entitle the holder to buy one one-hundredth of a share of
a new series of preferred stock at a price of $87.00. In addition, upon the
occurrence of certain events,
34
<PAGE>
holders of the rights will be entitled to purchase either our stock or shares in
an "acquiring entity" at half of the then current market value of our common
stock. We generally will be entitled to redeem the rights at $0.01 per right at
any time until the date on which a 15% position in our voting stock is acquired
by any person or group.
NOTE 11 - STOCK OPTIONS
In March 1998, ResortQuest's Board of Directors and stockholders approved the
1998 Long-Term Incentive Plan ("Incentive Plan"). The options granted under the
Incentive Plan vest annually and ratably over a period from three to four years
after the date of grant and expire five to ten years after the grant date.
ResortQuest has reserved 2,810,753 shares of common stock for use in connection
with the Incentive Plan. In connection with the IPO, options in the form of
non-qualified stock options to purchase a total of 1,695,000 shares of common
stock of the Company at $11.00 per share were granted to management of the
Founding Companies, corporate management, certain stockholders and non-employee
directors. Subsequent to the IPO, 871,775 non-qualified stock options have been
granted to new employees at the then ResortQuest common stock market value
(ranging from $4.94 to $16.88). The Incentive Plan also provides for the
issuance of stock appreciation rights, restricted or deferred stock, dividend
equivalents, bonus shares and awards in lieu of ResortQuest obligations to pay
cash compensation, non-employee directors' deferred shares or other awards. The
value of the options is based in whole or in part upon the value of the common
stock.
ResortQuest applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its stock option plan. Accordingly, no compensation cost has been recognized in
the consolidated statements of income for the Incentive Plan. In accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation," ResortQuest has
estimated the fair value of each option grant using the Black-Scholes
Option-Pricing Model. Had compensation cost for awards under the Incentive Plan
been determined based on the fair value at the grant dates, ResortQuest's net
income and earnings per share would have been reduced to the pro forma amounts
indicated in the following table:
<TABLE>
<CAPTION>
(in thousands, except per share amounts) 1997 1998 1999
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Net income
As reported $ 3,835 $ 4,812 $ 4,429
Pro forma 3,835 4,136 3,139
Basic earnings per share
As reported $ 1.83 $ 0.44 $ 0.25
Pro forma 1.83 0.38 0.17
Diluted earnings per share
As reported $ 1.83 $ 0.44 $ 0.24
Pro forma 1.83 0.38 0.17
</TABLE>
A summary of ResortQuest's stock option transactions, from May 26, 1998, through
December 31, 1999, is as follows:
<TABLE>
<CAPTION>
Options Outstanding
- --------------------------------------------------------------------------------
Weighted Common
Average Stock
Exercise Available
Price Number For Grant
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
IPO - May 26, 1998 n/a -- 1,910,914
Approval of new options n/a -- 116,117
Granted $ 10.90 1,874,351 (1,874,351)
- --------------------------------------------------------------------------------
Balance -- December 31, 1998 $ 10.90 1,874,351 152,680
- --------------------------------------------------------------------------------
Approval of new options n/a -- 783,722
Granted $ 8.71 707,102 (707,102)
Exercised 10.68 (3,436) --
Cancelled 10.83 (168,405) 168,405
- --------------------------------------------------------------------------------
Balance - December 31, 1999 $ 10.26 2,409,612 397,705
- --------------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted by ResortQuest for 1998
and 1999 was $4.13 and $3.16, respectively. Assumptions included an average
risk-free interest rate ranging from 4.7% to 6.1%; an average expected life of
2.6 to 3.6 years; a volatility factor of 40.4% to 54.6%; and no dividends. At
December 31, 1999, there were 2,409,612 stock options outstanding with an
exercise price that ranges from $4.94 to $16.88 with a weighted average exercise
price of $10.26 and a weighted average remaining contractual life of 7.4 years.
35
<PAGE>
NOTE 12 - INCOME TAXES
Income tax expense attributable to income from continuing operations consisted
of the following:
<TABLE>
<CAPTION>
(in thousands) 1997 1998 1999
- ----------------------------------------
<S> <C> <C> <C>
Current
Federal $ 81 $ 909 $3,240
State 9 106 966
Deferred
Federal -- 448 593
State -- 55 74
- ----------------------------------------
Total $ 90 $1,518 $4,873
- ----------------------------------------
</TABLE>
The difference between the statutory federal income tax rate and the
effective income tax rate expressed as a percentage of income from continuing
operations before income taxes was as follows:
<TABLE>
<CAPTION>
1997 1998 1999
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 35.0%
State income taxes, net of federal benefit 4.4 4.2 4.4
Goodwill and other permanent items -- 44.9 20.8
Pre-acquisition earnings not taxable (36.7) (52.6) (7.8)
- ----------------------------------------------------------------------------
Effective income tax rate 1.7% 30.5% 52.4%
- ----------------------------------------------------------------------------
</TABLE>
As a result of the Combinations and the Post-IPO Acquisitions, the
allocation of the purchase price to the assets and liabilities for financial
reporting purposes significantly exceeds the tax basis carried over from the
predecessor entities. Accordingly, the acquisitions created significant
nondeductible goodwill and other temporary differences. The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and liabilities are as follows at December 31:
<TABLE>
<CAPTION>
(in thousands) 1998 1999
- --------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Claims and other reserves $ 977 $ 757
Section 481 adjustment: Cash to accrual 671 441
State net operating losses 310 318
Other 45 126
- --------------------------------------------------------------------
Total deferred tax assets $ 2,003 $ 1,642
- --------------------------------------------------------------------
Deferred tax liabilities
Deductible goodwill amortization $ -- $ (470)
Basis difference on fixed assets (342) (219)
Other (153) (450)
- --------------------------------------------------------------------
Total deferred tax liabilities (495) (1,139)
- --------------------------------------------------------------------
$ 1,508 $ 503
- --------------------------------------------------------------------
</TABLE>
NOTE 13 - EARNINGS PER SHARE
ACTUAL RESULTS
Earnings per share included in the consolidated statements of income for the
periods presented includes the results of Aston Hotels & Resorts and the pooling
acquisitions for the entire periods presented, includes corporate and the
remaining Founding Companies only since May 26, 1998, and includes the remaining
Post-IPO Acquisitions since their respective effective dates of acquisition.
Accordingly, the 1,708,333 shares of common stock issued to the former
stockholders of Aston Hotels & Resorts in connection with the Combinations and
the 392,780 shares issued in connection with the three pooling acquisitions are
considered outstanding for all periods presented. Shares issued in connection
with the IPO and all other Post-IPO Acquisitions are considered outstanding at
date of issuance. The following table reflects our weighted average common
shares outstanding and the impact of its primary common share equivalents:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1998 1999
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Basic weighted average common
shares outstanding 2,101,113 10,826,000 18,005,426
Effect of dilutive securities -
stock options -- 139,421 170,337
- -----------------------------------------------------------------------
Diluted weighted average common
shares outstanding 2,101,113 10,965,421 18,175,763
- -----------------------------------------------------------------------
</TABLE>
NOTE 14 - SEGMENT REPORTING
On January 1, 1998, ResortQuest adopted the provisions of SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information." Under
SFAS No. 131, ResortQuest has one operating segment, property management, which
is managed as one business unit. The accounting policies of this segment are the
same as those described in the summary of significant accounting policies. The
all other segment includes First Resort and corporate. At December 31, 1998 and
1999, approximately 79% and 76%, respectively, of the all other segment assets
36
<PAGE>
represents goodwill recorded for First Resort and corporate. The following table
presents the revenues, operating income and assets of ResortQuest's reportable
segment:
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1997 1998 1999
- ------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Property management $ 26,753 $ 53,405 $ 124,215
All other -- 1,954 3,697
- ------------------------------------------------------------------
$ 26,753 $ 55,359 $ 127,912
- ------------------------------------------------------------------
Operating income
Property management $ 5,505 $ 7,782 $ 23,355
All other -- (2,292) (9,825)
- ------------------------------------------------------------------
$ 5,505 $ 5,490 $ 13,530
- ------------------------------------------------------------------
Assets
Property management $ 19,072 $ 149,883 $ 218,742
All other -- 38,336 38,933
- ------------------------------------------------------------------
$ 19,072 $ 188,219 $ 257,675
- ------------------------------------------------------------------
</TABLE>
NOTE 15 - RELATED-PARTY TRANSACTIONS
ResortQuest has unwritten and written consulting and management agreements with
certain directors and significant stockholders that were former owners of the
Founding Companies and Post-IPO Acquisitions. Consulting services include
assistance in operations, identifying acquisitions and involvement in local and
governmental affairs. During 1997, 1998 and 1999, the Company incurred $232,000,
$287,000 and $126,000 respectively, relative to these consulting agreements.
ResortQuest receives sales commissions for selling properties developed by
certain companies and partnerships owned or co-owned by directors and
significant stockholders that were by former owners of the Founding Companies
and Post-IPO Acquisitions. These net commissions approximated $1.9 million
during 1998 and $2.0 million during 1999 and the Company had approximately
$414,000 and $(159,000) in receivables (payables) at December 31, 1998 and 1999,
related to these commissions.
ResortQuest entered into numerous transactions with the former owner of
Aston Hotels & Resorts ("Former Owner") who is now a director and stockholder of
the Company. ResortQuest provides management and centralized services
(cooperative sales and marketing, reservations, accounting services and other
reimbursements) for four hotels, two of which are owned by the Former Owner and
two are managed for an affiliate of the Former Owner.
The management fees charged to these hotels approximated $506,000, $1.5 million
and $1.3 million in 1997, 1998 and 1999, respectively. Prior to May 26, 1998,
ResortQuest paid HCP, Inc., a company that is wholly-owned by the Former Owner,
$476,000 and $158,000 in 1997 and 1998, respectively, for sales representation
and related accounting services. Beginning in 1997, ResortQuest provides
administrative services to AST International LLC, which is controlled by the
Former Owner. Related to these services, the Company recognized $272,000 and
$78,000 of revenue during 1998 and 1999, respectively.
ResortQuest provides various management and consulting services for certain
companies and partnerships owned or co-owned by former owners of the Founding
Companies and Post-IPO Acquisitions. ResortQuest received approximately $275,000
and $323,000 for these services during 1998 and 1999, respectively.
ResortQuest also manages vacation properties pursuant to its standard
management agreement that are owned or co-owned by certain directors and
employees of the Company.
37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of ResortQuest International, Inc.:
We have audited the accompanying consolidated balance sheets of ResortQuest
International, Inc., (a Delaware corporation) and subsidiaries (the "Company"),
as of December 31, 1999 and 1998, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for each of the three
years ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ResortQuest International, Inc. and subsidiaries, as of December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Anderson LLP
Memphis, Tennessee,
February 21, 2000.
MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
ResortQuest International, Inc. ("ResortQuest") is responsible for preparing the
consolidated financial statements and related information appearing in this
report. Management believes that the consolidated financial statements present
fairly ResortQuest's consolidated financial position, results of operations and
cash flows in conformity with accounting principles generally accepted in the
United States. In preparing its consolidated financial statements, ResortQuest
is required to include amounts based on estimates and judgements which it
believes are reasonable under the circumstances.
ResortQuest maintains accounting and other control systems designed to
provide reasonable assurance that financial records are reliable for purposes of
preparing consolidated financial statements and that assets are properly
accounted for and safeguarded. Limitations exist in any internal control system,
recognizing that the system's cost should not exceed the benefits derived.
The Board of Directors pursues its responsibility for ResortQuest's
consolidated financial statements through its Audit Committee, which is composed
solely of directors who are not officers or employees of ResortQuest. The Audit
Committee meets from time to time with the independent public accountants and
management.
/s/ David L. Levine
David L. Levine
President and Chief Executive Officer
/s/ J.M. Collins
J. Mitchell Collins
Senior Vice President and Chief Financial Officer
38
<PAGE>
Quarterly Results of Operations
(unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands, except share amounts) Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 ACTUAL
Revenues $ 31,656 $ 30,989 $ 42,059 $ 23,207
Operating income (loss) 6,192 4,020 11,749 (8,431)
Net income (loss) 3,040 1,692 5,663 (5,966)
Basic earnings (loss) per share (a) 0.18 0.10 0.31 (0.32)
Basic weighted average shares
outstanding 17,354 17,487 18,462 18,680
Diluted earnings (loss) per share (a) 0.17 0.10 0.31 (0.32)
Diluted weighted average shares
outstanding 17,786 17,742 18,479 18,691
1998 ACTUAL (b)
Revenues $ 8,666 $ 9,721 $ 17,554 $ 19,418
Operating income (loss) 2,526 819 2,959 (814)
Net income (loss) (c) 2,265 588 1,546 (934)
Basic earnings (loss) per share (a) 1.08 0.08 0.10 (0.05)
Basic weighted average shares
outstanding 2,101 7,569 16,194 17,081
Diluted earnings (loss) per share (a) 1.08 0.08 0.09 (0.05)
Diluted weighted average shares
outstanding 2,101 7,683 16,382 17,090
1997 ACTUAL (b)
Revenues $ 7,689 $ 5,897 $ 6,871 $ 6,296
Operating income 2,434 82 1,966 1,023
Net income (loss) (c) 2,226 (82) 1,737 1,448
Basic earnings per share (a) 1.06 (0.04) 0.83 0.69
Basic weighted average shares
outstanding 2,101 2,101 2,101 2,101
Diluted earnings (loss) per share (a) 1.06 (0.04) 0.83 0.69
Diluted weighted average shares
outstanding 2,101 2,101 2,101 2,101
- -----------------------------------------------------------------------------------
</TABLE>
(a) The sum of the quarterly amounts may not equal the annual amount reported,
as per share amounts are computed independently for each quarter while the full
year is based on the annual weighted average shares outstanding.
(b) Years have been restated to reflect acquisitions accounted for under the
pooling-of-interests method of accounting.
(c) Net income is representative of income from continuing operations and does
not include the effects of certain discontinued operations.
Stock Price
<TABLE>
<CAPTION>
1999 High Low
- ------------------------------------------
<S> <C> <C>
Fourth Quarter 9 1/4 3 3/4
Third Quarter 9 7/8 8 5/8
Second Quarter 17 7 5/8
First Quarter 22 9/16 13 15/16
1998 High Low
- ------------------------------------------
Fourth Quarter 14 3/4 6 9/16
Third Quarter 17 1/8 8 13/16
Second Quarter 17 3/4 14
First Quarter n/a n/a
</TABLE>
SELECTED FINANCIAL DATA
(unaudited)
<TABLE>
<CAPTION>
Years Ended December 31,
(in thousands) 1995(a) 1996(a) 1997(a) 1998(a) 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statements of Income Data
Revenues $ 24,031 $ 25,670 $ 26,753 $ 55,359 $ 127,912
Operating expenses 12,482 14,860 13,635 31,596 65,804
General and administrative
expenses, including
depreciation and amortization 8,171 6,840 7,613 18,273 48,578
- -------------------------------------------------------------------------------------------------------------
Income from operations 3,378 3,970 5,505 5,490 13,530
Interest and other expense, net 728 342 86 507 4,228
Provision for income taxes - -- 90 90 1,518 4,873
- -------------------------------------------------------------------------------------------------------------
Income from continuing
operations $ 2,650 $ 3,538 $ 5,329 $ 3,465 $ 4,429
- -------------------------------------------------------------------------------------------------------------
Working capital deficit $ (3,384) $ (1,940) $ (4,579) $ (2,080) $ (7,295)
Total assets 15,760 16,658 19,072 188,219 257,675
Long-term debt,
net of current maturities 2,378 3,060 4,122 38,098 68,090
Stockholder's (deficit) equity 268 (54) (397) 106,855 125,823
</TABLE>
(a) Years have been restated to reflect acquisitions accounted for under the
pooling-of-interests method of accounting.
39
<PAGE>
REGISTRAR AND STOCK TRANSFER AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
100 Peabody Place, Suite 1100
Memphis, Tennessee 38103
STOCKHOLDER INQUIRIES
For information about ResortQuest International, Inc. and its subsidiaries,
including copies of its annual report on Form 10-K and quarter reports on Form
10-Q, please submit a written request to:
Investor Relations
ResortQuest International, Inc.
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
ANNUAL MEETING DATE
ResortQuest International will hold its annual meeting of stockholders on May
11, 2000, at nine o'clock am at the Embassy Suites, 1022 S. Shady Grove,
Memphis, Tennessee.
FORWARD-LOOKING STATEMENTS
Certain statements in this annual report include "forward-looking statements"
within the meaning of the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
and are qualified by cautionary statements contained herein and in ResortQuest
International, Inc. filings with the Securities and Exchange Commission.
A SPECIAL THANK YOU TO...
DAVID C. SULLIVAN
TWO YEARS AGO, RESORTQUEST WAS ONLY A SEED OF AN IDEA WHEN
DAVID SULLIVAN BECAME ITS CHAIRMAN AND CHIEF EXECUTIVE OFFICER.
UNDER HIS LEADERSHIP, RESORTQUEST HAS EXPERIENCED PHENOMENAL
GROWTH AND REINVENTED THE VACATION RENTAL INDUSTRY.
THE FUTURE OFFERS RESORTQUEST ENDLESS POTENTIAL THANKS TO
MR. SULLIVAN'S VISION AND PASSION FOR EXCELLENCE.
MR. SULLIVAN WILL BE STEPPING DOWN AS CHAIRMAN ON MAY 11, 2000
AT THE ANNUAL MEETING, BUT WILL REMAIN A KEY CONTRIBUTOR TO THE
COMPANY AS A RESORTQUEST DIRECTOR. THE COMPANY'S PRESIDENT AND
CHIEF EXECUTIVE OFFICER, DAVID L. LEVINE, WILL ASSUME THE
POSITION OF BOARD CHAIRMAN.
THANK YOU, MR. SULLIVAN, FOR THE COMPANY YOU CREATED, THE FOUNDATION
YOU BUILT, AND POSITIONING RESORTQUEST FOR A BRIGHT, SUCCESSFUL FUTURE.
40
<PAGE>
CORPORATE INFORMATION
EXECUTIVE OFFICERS
David C. Sullivan
Chairman of the Board
David L. Levine
President and Chief Executive Officer
James S. Olin
Chief Operating Officer
J. Mitchell Collins
Senior Vice President and Chief Financial Officer
Frederick L. Farmer
Senior Vice President and Chief Information Officer
Paul N. Manteris
Senior Vice President, Homeowner Relations and Operations Support
W. Michael Murphy
Senior Vice President and Chief Development Officer
CORPORATE OFFICERS
S. Mark Aldy
Vice President, Controller
Park Brady
Regional Vice President
Douglas R. Brindley
Vice President and Integration Manager
Gary Keirce
Vice President, Human Resources
David K. Selberg
Vice President, Finance
BOARD OF DIRECTORS
David C. Sullivan
Chairman of the Board
David L. Levine
President and Chief Executive Officer
William W. Abbott, Jr.
Former Vice Chairman, Abbott Realty Services, Inc.
Elan J. Blutinger
Managing Director, Alpine Consolidated II, LLC
D. Fraser Bullock
Chief Operating Officer and Chief Financial Officer, Salt Lake Organizing
Committee for the Olympic Games
Joshua M. Freeman
Former President and Managing Member, Coastal Resorts Realty, LLC
Heidi Houston
President, Houston & O'Leary Company, Inc.
Michael D. Rose
Former Chairman, Promus Hotel Corporation
Andre S. Tatibouet
President, Hotel Corporation of the Pacific, Inc., dba Aston Hotels & Resorts
Joseph V. Vittoria
Chairman and Chief Executive Officer, Travel Services International, Inc.
Theodore L. Weise
Former President and Chief
Executive Officer, Federal
Express Corporation
EXECUTIVE OFFICES
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
Telephone: (901) 762-0600
Fax: (901) 762-0678
INTERNET COMMUNICATIONS
RESORTQUEST.COM is the first nationally branded online booking resource in
the vacation rental industry. At RESORTQUEST.COM, travelers can obtain
information on more than 17,000 vacation rentals in 40 resort destinations,
as well as view photographs and floor plans, take virtual tours, access rates
and availability, and make reservations. In addition, investors can obtain an
overview of the company's financial condition and operating philosophy.
STOCK LISTING
The company's stock is traded on the New York Stock Exchange under the symbol
RZT.
<PAGE>
EXHIBIT 21
RESORTQUEST INTERNATIONAL, INC.
(A DELAWARE CORPORATION)
SUBSIDIARIES
(AS OF MARCH 10, 2000)
<TABLE>
<CAPTION>
STATE/COUNTRY
ENTITY OF FORMATION
<S> <C>
460954 B. C. Ltd. British Columbia, Canada
570667 British Columbia, Ltd. British Columbia, Canada
Abbott & Andrews Realty, Inc. Florida
Abbott Realty Services, Inc. Florida
Abbott Resorts, Inc. Florida
Accommodations Center, Inc. Colorado
Advantage Vacation Homes By Styles, Inc. Delaware
B & B on the Beach, Inc. Delaware
Bluebill Properties, Inc. Delaware
Bluebill Vacation Properties, Inc. Delaware
Brindley & Brindley Realty & Development, Inc. North Carolina
CRW Property Management, Inc. Delaware
Coastal Resorts Management, Inc. Delaware
Coastal Resorts Realty, L.L.C. Delaware
Coates, Reid & Waldron, Inc. Delaware
Collection of Fine Properties, Inc. Colorado
Columbine Management Company, Inc. Colorado
Cove Management Services, Inc. California
Dunhill Real Estate Services, Ltd. British Columbia, Canada
First Resort Software, Inc. Colorado
High Country Resorts, Inc. Delaware
Hotel Corporation of the Pacific, Inc. Hawaii
Houston & O'Leary Company Colorado
Howey Acquisition, Inc. Florida
Maui Condominium & Home Realty, Inc. Hawaii
Mountain High Management, Inc. British Columbia, Canada
Outer Beaches Merger Co. Delaware
Plantation Resort Management, Inc. Delaware
Priscilla Murphy Realty, Inc. Florida
REP Holdings, Inc. Hawaii
Realty Consultants, Inc. Florida
Resort Property Management, Inc. Utah
Ridgepine, Inc. Oregon
Ryan's Golden Eagle Management, Inc. Montana
S.I.I.K., Inc. Florida
SP Ohio, Inc. Delaware
Scottsdale Resort Accommodations, Inc. Delaware
Shoreline Rentals, Inc. Delaware
Styles Estates, Inc. Delaware
Telluride Resort Accommodations, Inc. Colorado
Ten Mile Holdings, Ltd. Colorado
The Management Company, Inc. Georgia
The Maury People, Inc. Massachusetts
Tops'l Club of NW Florida, Inc. Florida
The Tops'l Group, Inc. Florida
Trupp-Hodnett Enterprises, Inc. Georgia
Whistler Chalets Holding Corp Whistler, British Columbia, Canada
Whistler Chalets Ltd. Whistler, British Columbia, Canada
Whistler Exclusive Property Management, Ltd. Whistler, British Columbia, Canada
Worthy Owner Rental Group, Inc. South Carolina
</TABLE>
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 21, 2000, included in this annual report on Form
10-K, into the Company's previously filed registration statements (File Nos.
333-83059,333-79027, 333-79021) and to all reference to our Firm included
herein.
/s/ Arthur Andersen LLP
- -----------------------
ARTHUR ANDERSEN LLP
Memphis, Tennessee
March 28, 2000.
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