AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CENDANT CORPORATION,
GRAND SLAM ACQUISITION CORP.
AND
FAIRFIELD COMMUNITIES, INC.
DATED AS OF NOVEMBER 1, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER....................................................................2
SECTION 1.1 The Merger.........................................................2
SECTION 1.2 Closing............................................................2
SECTION 1.3 Effective Time.....................................................2
SECTION 1.4 Effects of the Merger..............................................3
SECTION 1.5 Certificate of Incorporation and By-laws of the
Surviving Corporation..............................................3
SECTION 1.6 Directors and Officers.............................................3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES............................3
SECTION 2.1 Effect on Capital Stock............................................3
(a) Capital Stock of Merger Sub.....................................3
(b) Cancellation of Treasury Stock..................................3
(c) Conversion of Company Common Stock; Proration...................4
SECTION 2.2 Election Procedure.................................................6
SECTION 2.3 Certain Adjustments...............................................10
SECTION 2.4 Shares of Dissenting Stockholders.................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES.................................................11
SECTION 3.1 Representations and Warranties of the Company.....................11
(a) Organization, Standing and Corporate Power.....................11
(b) Subsidiaries...................................................11
(c) Capital Structure..............................................12
(d) Authority; Noncontravention....................................13
(e) Company Documents; Undisclosed Liabilities.....................14
(f) Certain Contracts..............................................16
(g) VOIs...........................................................17
(h) Resorts........................................................19
(i) Condominium Associations.......................................21
(j) FairShare Plus Program.........................................22
(k) Absence of Certain Changes or Events...........................23
(l) Compliance with Applicable Laws; Litigation....................24
(m) Taxes..........................................................25
(n) Employee Benefit Plans.........................................27
(o) Labor Matters..................................................31
(p) Environmental Liability........................................31
(q) Intellectual Property..........................................34
(r) Insurance Matters..............................................35
(s) Information Supplied...........................................35
(t) Rights Agreement...............................................35
(u) Transactions with Affiliates...................................36
(v) Voting Requirements............................................36
(w) Opinions of Financial Advisor..................................36
(x) State Takeover Statutes........................................36
(y) Brokers........................................................36
(z) Takeover Laws..................................................36
(aa)No Other Agreement.............................................37
SECTION 3.2 Representations and Warranties of Parent..........................37
(a) Organization, Standing and Corporate Power.....................37
(b) Capital Structure..............................................37
(c) Authority; Noncontravention....................................39
(d) Parent Documents...............................................40
(e) Information Supplied...........................................40
(f) Brokers........................................................41
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS....................................41
SECTION 4.1 Conduct of Business by the Company................................41
SECTION 4.2 Advice of Changes.................................................44
SECTION 4.3 No Solicitation by the Company....................................45
ARTICLE V ADDITIONAL AGREEMENTS........................................................47
SECTION 5.1 Preparation of the Form S-4, Proxy Statement and Form 10;
Stockholders Meeting..............................................47
SECTION 5.2 Letter of the Company's Accountants...............................49
SECTION 5.3 Letter of Parent's Accountants....................................49
SECTION 5.4 Access to Information; Confidentiality............................49
SECTION 5.5 Reasonable Efforts................................................50
SECTION 5.6 Company Equity-Based Incentives...................................51
SECTION 5.7 Indemnification, Exculpation and Insurance........................53
SECTION 5.8 Fees and Expenses.................................................54
SECTION 5.9 Public Announcements..............................................55
SECTION 5.10 Affiliates........................................................56
SECTION 5.11 Stock Exchange Listing............................................56
SECTION 5.12 Stockholder Litigation............................................56
SECTION 5.13 DevCo. Distribution...............................................56
SECTION 5.14 Rights Agreement..................................................57
SECTION 5.15 Standstill Agreements; Confidentiality Agreements.................58
SECTION 5.16 Conveyance Taxes..................................................58
SECTION 5.17 Employee Benefits.................................................58
SECTION 5.18 Resignation and Appointment of the Directors of the Trustee.......59
ARTICLE VI CONDITIONS PRECEDENT.........................................................59
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger........59
(a) Stockholder Approval...........................................59
(b) HSR Act........................................................59
(c) Governmental and Regulatory Approvals..........................59
(d) Third Party Consents...........................................59
(e) No Injunctions or Restraints...................................60
(f) Form S-4.......................................................60
(g) Stock Exchange Listing.........................................60
SECTION 6.2 Conditions to Obligations of Parent...............................60
(a) Representations and Warranties.................................60
(b) Performance of Obligations of the Company......................60
(c) Regulatory Condition...........................................60
(d) Resignation and Appointment of the Directors of the Trustee....61
SECTION 6.3 Conditions to Obligations of the Company..........................61
(a) Representations and Warranties.................................61
(b) Performance of Obligations of Parent...........................61
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..............................................61
SECTION 7.1 Termination.......................................................61
SECTION 7.2 Effect of Termination.............................................62
SECTION 7.3 Amendment.........................................................62
SECTION 7.4 Extension; Waiver.................................................63
SECTION 7.5 Procedure for Termination.........................................63
ARTICLE VIII GENERAL PROVISIONS............................................................63
SECTION 8.1 Nonsurvival of Representations and Warranties....................63
SECTION 8.2 Notices...........................................................63
SECTION 8.3 Definitions.......................................................64
SECTION 8.4 Interpretation....................................................65
SECTION 8.5 Counterparts......................................................66
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries....................66
SECTION 8.7 Governing Law.....................................................66
SECTION 8.8 Assignment........................................................66
SECTION 8.9 Consent to Jurisdiction...........................................67
SECTION 8.10 Headings..........................................................67
SECTION 8.11 Severability......................................................67
SECTION 8.12 Enforcement. .....................................................67
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Exhibit A - Terms and Provisions of the DevCo. Distribution
Exhibit B - Bonuses Arrangements and Plans
Exhibit 5.10(a) - Form of Affiliate Agreement
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November 1, 2000, by and among CENDANT CORPORATION, a Delaware corporation
("Parent"), FAIRFIELD COMMUNITIES, INC., a Delaware corporation (the
"Company"), and GRAND SLAM ACQUISITION CORP., a Delaware corporation and a
subsidiary of Parent ("Merger Sub").
WHEREAS, the respective Board of Directors of Parent and the
Company have determined that the Merger (as defined below) and the other
transactions contemplated under this Agreement are in the best interest of
Parent and the Company;
WHEREAS, each of Parent, Merger Sub and the Company desire
to enter into a transaction whereby Merger Sub will merge with and into the
Company (the "Merger"), with the Company being the surviving corporation,
upon the terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of common stock, par value $0.01
per share, of the Company (together with the rights associated with such
shares issued pursuant to the Rights Agreement, dated as of September 1,
1992, as amended, between the Company and The First National Bank of Boston
(as successor to Society National Bank), as Rights Agent (the "Rights
Agreement"), "Company Common Stock"), will be converted into the right to
receive the Merger Consideration (as defined in Section 2.1(c));
WHEREAS, the respective Boards of Directors of Parent and
the Company have each approved the possible transfer of certain assets and
liabilities related to the resort and vacation ownership interest
development business currently operated by the Company to a newly formed
corporation ("DevCo.") and the distribution of DevCo. common stock, on a
pro rata basis, to stockholders of the Company or the transfer of such
common stock to a third party immediately prior to the Effective Time (as
defined in Section 1.3), in accordance with the terms and provisions set
forth on Exhibit A attached hereto (each, a "DevCo. Distribution");
WHEREAS, the respective Boards of Directors of Parent,
Merger Sub and the Company have each approved and adopted this Agreement
and approved the Merger in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), and Parent has approved this Agreement
and the Merger as the parent of Merger Sub;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger;
WHEREAS, concurrently with the execution of this Agreement,
and as an inducement to Parent and Merger Sub to enter into this Agreement,
Parent and certain stockholders of the Company have entered into a Voting
Agreement, dated as of the date hereof (the "Voting Agreement"), providing,
among other things, that such stockholders will vote, or cause to be voted,
at the meeting of the Company's stockholders for the purpose of voting on
the adoption of this Agreement (the "Company Stockholders Meeting") all of
the shares of Company Common Stock owned by them in favor of the Merger;
and
WHEREAS, concurrently with the execution of this Agreement,
Parent and the Company have entered into a Stock Option Agreement , dated
as of the date hereof, providing, among other things, that the Company
grants to Parent an option to purchased shares of Company Common Stock (the
"Stock Option Agreement").
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL,
Merger Sub shall be merged with and into the Company at the Effective Time.
Following the Effective Time, the Company shall be the surviving
corporation (the "Surviving Corporation"), shall become a subsidiary of
Parent and shall succeed to and assume all the rights and obligations of
Merger Sub in accordance with the DGCL.
SECTION 1.2 Closing. Subject to the satisfaction or waiver
of all the conditions to closing contained in Article VI hereof, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date"), which shall be no
later than the second day after satisfaction or waiver of the conditions
set forth in Article VI (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions; provided, that if the DevCo. Distribution shall
be scheduled to occur within 15 business days after satisfaction or waiver
of the conditions set forth in Article VI (other than the Company
Stockholders Meeting), the closing shall take place upon written election
of Parent, delivered to the Company prior to 5:00 p.m., New York City time,
on the date of such satisfaction or waiver (the "Closing Extension Notice")
on (subject to the satisfaction or waiver of all of the conditions set
forth in Article VI) the earlier of (i) the date of the DevCo. Distribution
and (ii) the 15th business day after the date of the Closing Extension
Notice, unless another time or date is agreed to by the parties hereto).
The Closing will be held at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, Four Times Square, New York, New York 10036 or at such other
location as is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of
this Agreement, as soon as practicable following the Closing, the parties
shall cause the Merger to be consummated by filing a certificate of merger
(the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings
required under the DGCL to effectuate the Merger. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such subsequent date or
time as Parent and the Company shall agree and specify in the Certificate
of Merger (the time the Merger becomes effective being hereinafter referred
to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.5 Certificate of Incorporation and By-laws of the
Surviving Corporation. The certificate of incorporation and the by-laws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation and the by-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law, except that the first article of the certificate of
incorporation of the Merger Sub shall be amended as of the Effective Time
to read in its entirety as follows: "The name of the corporation is
Fairfield Communities, Inc."
SECTION 1.6 Directors and Officers. The directors of Merger
Sub shall, from and after the Effective Time, become the directors of the
Surviving Corporation until their successors shall have been duly elected,
appointed or qualified or until their earlier death, resignation or removal
in accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation. The officers of Merger Sub shall, from and after the
Effective Time, become the officers of the Surviving Corporation until
their successors shall have been duly elected, appointed or qualified or
until their earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the
holder of any shares of Company Common Stock:
(a) Capital Stock of Merger Sub. Each issued and
outstanding share of the common stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of
Company Common Stock that is owned by the Company, Parent, Merger Sub or
any of their respective wholly owned subsidiaries shall automatically be
cancelled and retired and shall cease to exist, and no consideration shall
be delivered in exchange therefor.
(c) Conversion of Company Common Stock; Proration.
Subject to Section 2.2 hereof, each issued and outstanding share of Company
Common Stock, other than shares to be cancelled and retired in accordance
with Section 2.1(b) and Dissenting Shares (as defined in Section 2.4),
shall be converted, at the election of the holder thereof, in accordance
with the procedures set forth in Section 2.2 below, into the following (the
"Merger Consideration"):
(i) For each share of Company Common Stock
with respect to which an election to receive shares of common
stock, par value $0.01 per share, of Parent, designated as CD
common stock ("Parent Common Stock"), has been effectively made and
not revoked pursuant to Section 2.2 ("Stock Election") and for each
Non-Electing Share (as defined in subsection (iv) below), the right
to receive 1.2500 (the "Initial Exchange Ratio" and as adjusted
pursuant to Section 2.3 and this subsection (i), the "Exchange
Ratio") fully paid and nonassessable shares of Parent Common Stock
(as may be adjusted pursuant to the remainder of this subsection
(i), the "Stock Election Consideration"); provided, however, that
(x) if the Average Trading Price (as defined below) is between
$12.0 and $13.5960, then the Exchange Ratio shall be equal to the
sum of (a) the Initial Exchange Ratio divided by two, and (b) the
quotient of $7.5 divided by the Average Trading Price, (y) if the
Average Trading Price is equal to, or greater than, $13.5960, then
the Exchange Ratio shall be equal to the quotient of $16 divided by
the Average Trading Price and (z) if the Average Trading Price is
below $12.0, then the Exchange Ratio shall be equal to the quotient
of $15 divided by the Average Trading Price; provided, further,
that if the Average Trading Price of Parent Common Stock is $7.00
or less, the Exchange Ratio will be 2.1428. As used herein, the
"Average Trading Price" shall mean the arithmetic average of the
4:00 p.m. Eastern Time closing sales prices of Parent Common Stock
reported on the New York Stock Exchange ("NYSE") Composite Tape for
the 20 consecutive NYSE trading days (each, a "Trading Day") ending
on (and including) the Trading Day immediately prior to the date of
the Company Stockholders Meeting (as defined herein).
(ii) For each share of Company Common Stock
with respect to which an election to receive cash has been
effectively made and not revoked pursuant to Section 2.2 ("Cash
Election"), the right to receive $15 in cash, subject to proration
pursuant to subsection (iii) below (the "Cash Election
Consideration"); provided, however, that in the event that the
Average Trading Price is greater than $12.0, for each share of
Company Common Stock with respect to which a Cash Election was made
and not subject to proration, in addition to the Cash Election
Consideration received with respect to such share, there shall be a
right to receive a fraction of a share of Parent Common Stock which
shall equal the value, based on the Average Trading Price, of the
Stock Election Consideration minus $15 (the "Additional Stock
Consideration"); provided, further, that the Additional Stock
Consideration shall not exceed $1.
(iii) The manner in which each share of
Company Common Stock (other than shares of Company Common Stock to
be cancelled as set forth in Section 2.1(b) and Dissenting Shares)
for which a Cash Election has been made shall be converted into the
right to receive either the Cash Election Consideration and
Additional Stock Consideration, if any, or the Stock Election
Consideration on the Effective Date shall be as set forth in this
subsection (iii). All references to "outstanding" shares of Company
Common Stock in this subsection (iii) shall mean all shares of
Company Common Stock issued and outstanding immediately prior to
the Effective Time.
(A) As is more fully set forth below
and except as provided in Section 2.1(c)(v), the aggregate
amount of cash which Parent shall be obligated to pay in the
Merger pursuant to this Agreement (other than in respect of
Dissenting Shares) shall not be more than the product of
multiplying $7.5 by the number of outstanding shares of the
Company's Common Stock (the "Total Cash Actual"). "Total
Cash Potential" shall mean the sum of (1) the aggregate Cash
Election Consideration elected by stockholders of the
Company, and (2) a cash amount equal to the number of
Dissenting Shares multiplied by the value, based on the
Average Trading Price, of the Stock Election Consideration.
(B) If the Total Cash Potential is
equal to or less than the Total Cash Actual, each share of
Company Common Stock covered by a Cash Election shall be
converted in the Merger into the right to receive the Cash
Election Consideration and the Additional Stock
Consideration, if any.
(C) If the Total Cash Potential is
greater than the Total Cash Actual, each share of Company
Common Stock covered by a Cash Election shall be converted
in the Merger into the right to receive the Cash Election
Consideration and the Stock Election Consideration in the
following manner:
(a) The Exchange Agent (as
defined in Section 2.2(d) below) will distribute with
respect to each share of Company Common Stock as to which a
Cash Election has been made the Cash Election Consideration
multiplied by a fraction, (x) the numerator of which shall
be the product of multiplying (A) $15 by (B) 50.0% of the
number of outstanding shares of Company Common Stock minus
the product of multiplying (C) the number of Dissenting
Shares by (D) the value, based on the Average Trading Price,
of the Stock Election Consideration, and (y) the denominator
of which shall be the aggregate Cash Election Consideration
elected by stockholders of the Company; and
(b) Each share of Company
Common Stock covered by a Cash Election and not fully
converted into the right to receive the Cash Election
Consideration as set forth in clause (a) above shall be
converted in the Merger into the right to receive a fraction
of a share of Parent Common Stock which shall equal the
value, based on the Average Trading Price, of the sum of (x)
the product of multiplying (A) the Stock Election
Consideration by (B) a fraction equal to 1.0 minus the
fraction set forth in clause (a) above plus (y) the product
of multiplying (A) the value, based on the Average Trading
Price, of the Additional Stock Consideration, if any, by (B)
the fraction set forth in clause (a) above, subject to
subsection (v) below.
(iv) Each share of Company Common Stock for
which a valid Stock Election has been received and each share of
Company Common Stock for which an Election (as defined in Section
2.2 below) is not in effect at the Election Deadline (a
"Non-Electing Share"), shall be converted into the right to receive
the Stock Election Consideration in the Merger, subject to
subsection (v) below. If Parent and the Company shall determine
that any Election is not properly made with respect to any shares
of Company Common Stock, such Election shall be deemed to be not in
effect, and the shares of Company Common Stock covered by such
Election shall, for purposes hereof, be deemed to be Non- Electing
Shares.
(v) Notwithstanding subsections (i) through
(iv) above, Parent shall have the right, exercisable at any time at
least two business days prior to the Closing, at Parent's sole
discretion, to pay in cash for any shares for which an Election (as
defined below) was made and to substitute on a pro rata basis a
payment of cash in an amount equal to the Average Trading Price
multiplied by the Exchange Ratio for any or all shares of Company
Common Stock for which the Stock Election has been made or which
would otherwise be converted into Parent Common Stock pursuant to
Section 2.1(c)(iii)(C); provided, that prior to making such
substitution, Parent shall first have paid in cash for all shares
for which a Cash Election has been made and which were not fully
converted into the right to receive the Cash Election
Consideration.
SECTION 2.2 Election Procedure. Each holder of shares of
Company Common Stock (other than Dissenting Shares) shall have the right,
subject to the limitations set forth in this Article II, to submit an
Election (as defined below) in accordance with the following procedures (as
used in this Section 2.2, "holder" shall mean "record holder"):
(a) Each holder of shares of Company Common Stock may
specify in a request made in accordance with the provisions of this Section
(herein called an "Election") (A) the number of shares of Company Common
Stock owned by such holder with respect to which such holder desires to
make a Stock Election and (B) the number of shares of Company Common Stock
owned by such holder with respect to which such holder desires to make a
Cash Election.
(b) Parent shall prepare a form reasonably acceptable
to the Company (the "Form of Election") which shall be mailed to the
Company's stockholders entitled to vote at the Company Stockholders Meeting
so as to permit the Company's stockholders to exercise their right to make
an Election prior to the Election Deadline (as defined in subsection (d)).
(c) Parent shall use all reasonable efforts to make
the Form of Election initially available to all stockholders of the Company
at least twenty business days prior to the Election Deadline and shall use
all reasonable efforts to make available as promptly as possible a Form of
Election to any stockholder of the Company who requests such Form of
Election following the initial mailing of the Forms of Election and prior
to the Election Deadline.
(d) Any Election shall have been made properly only
if the person authorized to receive Elections and to act as exchange agent
under this Agreement, which person shall be designated by Parent (the
"Exchange Agent"), shall have received, by 5:00 p.m. local time in the city
in which the principal office of such Exchange Agent is located, on the
date of the Election Deadline, a Form of Election properly completed and
signed and accompanied by certificates of the shares of Company Common
Stock (the "Company Stock Certificates") to which such Form of Election
relates or by an appropriate guarantee of delivery of such certificates, as
set forth in such Form of Election, from a member of any registered
national securities exchange or a commercial bank or trust company in the
United States; provided, that such certificates are in fact delivered to
the Exchange Agent by the time required in such guarantee of delivery.
Failure to deliver shares of Company Common Stock covered by such a
guarantee of delivery within the time set forth on such guarantee shall be
deemed to invalidate any otherwise properly made Election. As used herein,
"Election Deadline" means the date on which the Effective Time occurs.
(e) Any Company stockholder may at any time prior to
the Election Deadline change his or her Election by written notice received
by the Exchange Agent prior to the Election Deadline accompanied by a
properly completed and signed, revised Form of Election.
(f) Any Company stockholder may, at any time prior to
the Election Deadline, revoke his or her Election by written notice
received by the Exchange Agent prior to the Election Deadline or by
withdrawal prior to the Election Deadline of his or her Company Stock
Certificate, or of the guarantee of delivery of such certificates,
previously deposited with the Exchange Agent. All Elections shall be
revoked automatically if the Exchange Agent is notified in writing by
Parent or the Company that this Agreement has been terminated in accordance
with Article VII.
(g) If any portion of the Merger Consideration is to
be paid to a person other than the person in whose name a Company Stock
Certificate so surrendered is registered, it shall be a condition to such
payment that such Company Stock Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such
payment shall pay to the Exchange Agent any transfer or other Taxes (as
defined in Section 3.1(m)) required as a result of such payment to a person
other than the registered holder of such Company Stock Certificate, or
establish to the satisfaction of the Exchange Agent that such Tax has been
paid or is not payable.
(h) After the Effective Time there shall be no
further registration of transfers of shares of Company Common Stock. If
after the Effective Time, Company Stock Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration in accordance with the procedures set forth in this Article
II.
(i) At any time following the first anniversary of
the Effective Time, the Surviving Corporation shall be entitled to require
the Exchange Agent to deliver to it any remaining portion of the Merger
Consideration not distributed to holders of shares of Company Common Stock
that was deposited with the Exchange Agent at the Effective Time (the
"Exchange Fund") (including any interest received with respect thereto and
other income resulting from investments by the Exchange Agent, as directed
by Parent), and holders shall be entitled to look only to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws)
with respect to the Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock and any dividends or other distributions with
respect to Parent Common Stock payable upon due surrender of their Company
Stock Certificates, without any interest thereon. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Exchange Agent shall
be liable to any holder of a Company Stock Certificate for Merger
Consideration (or dividends or distributions with respect thereto) or cash
from the Exchange Fund in each case delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(j) In the event any Company Stock Certificates shall
have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Company Stock Certificate(s) to be
lost, stolen or destroyed and, if required by Parent, the posting by such
person of a bond in such sum as Parent may reasonably direct as indemnity
against any claim that may be made against it or the Surviving Corporation
with respect to such Company Stock Certificate(s), the Exchange Agent will
issue the Merger Consideration deliverable in respect of the shares of
Company Common Stock represented by such lost, stolen or destroyed Company
Stock Certificates.
(k) No dividends or other distributions with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to subsection (l) below, and all such dividends, other
distributions and cash in lieu of fractional shares of Parent Common Stock
shall be paid by Parent to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such Company Stock
Certificate in accordance with subsection (l) below. Subject to the effect
of applicable abandoned property, escheat or similar laws, following
surrender of any such Company Stock Certificate there shall be paid to the
holder of a certificate for Parent Common Stock (a "Parent Stock
Certificate") representing whole shares of Parent Common Stock issued in
exchange therefore, without interest, (i) at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
subsection (l), and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
Parent shall make available to the Exchange Agent cash for these purposes,
if necessary.
(l) No Parent Stock Certificates representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Company Stock Certificates; no dividend or distribution by
Parent shall relate to such fractional share interests; and such fractional
share interests will not entitle the owner thereof to vote or to any rights
as a shareholder of Parent. In lieu of any such fractional shares, each
holder of a Company Stock Certificate who would otherwise have been
entitled to receive a fractional share interest in exchange for such
Company Stock Certificate shall receive from the Exchange Agent an amount
in cash equal to the product obtained by multiplying (A) the fractional
share interest to which such holder (after taking into account all shares
of Company Common Stock held by such holder at the Effective Time) would
otherwise be entitled by (B) the Average Trading Price. Parent shall
provide the Exchange Agent the aggregate amount of cash payable pursuant to
this subsection (l) promptly following the Effective Time.
(m) Parent shall have the right to make rules, not
inconsistent with the terms of this Agreement, governing (A) the validity
of the Forms of Election, (B) the manner and extent to which Elections are
to be taken into account in making the determinations prescribed by Section
2.1, (C) the issuance and delivery of Parent Stock Certificates into which
shares of Company Common Stock are converted in the Merger and (D) the
method of payment of cash for shares of Company Common Stock converted into
the right to receive the Cash Election Consideration.
(n) Promptly after the Effective Time, Parent will
deposit with the Exchange Agent an amount of cash and shares of Parent
Common Stock sufficient to pay in a timely manner, and the Parent shall
instruct the Exchange Agent to timely pay, the aggregate Cash Election
Consideration and cash in lieu of fractional shares of Parent Common Stock
and the aggregate Additional Stock Consideration and Stock Election
Consideration. Upon surrender to the Exchange Agent of its Company Stock
Certificate or Company Stock Certificates, accompanied by a properly
completed Form of Election, a holder of Company Common Stock will be
entitled to receive promptly after the Election Deadline the Merger
Consideration (elected or deemed elected by it, subject to Sections 1.2 and
2.1) in respect of the shares of Company Common Stock represented by its
Company Stock Certificate. Until so surrendered, each such Company Stock
Certificate shall represent after the Effective Time, for all purposes,
only the right to receive the Merger Consideration.
SECTION 2.3 Certain Adjustments. If after the date hereof
and on or prior to the Effective Time the outstanding shares of Parent
Common Stock or Company Common Stock shall be changed into a different
number of shares by reason of any reclassification, recapitalization,
combination or any similar event shall occur (including an extraordinary
dividend, the record date for payment of which occurs during the Election
Period) (any such action, an "Adjustment Event"), the Exchange Ratio shall
be adjusted accordingly to provide to the holders of Company Common Stock
whose shares of Company Common Stock have been converted into the right to
receive either Stock Election Consideration or Additional Stock
Consideration the same economic effect as contemplated by this Agreement
prior to such reclassification, recapitalization, combination or similar
event.
SECTION 2.4 Shares of Dissenting Stockholders.
Notwithstanding anything in this Agreement to the contrary, any shares of
Company Common Stock that are issued and outstanding as of the Effective
Time and that are held by a stockholder who has properly exercised his
appraisal rights under the DGCL (the "Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration unless and
until the holder shall have failed to perfect, or shall have effectively
withdrawn or lost, his right to dissent from the Merger under the DGCL and
to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to and subject to the requirements of
the DGCL. If any such holder shall have so failed to perfect or have
effectively withdrawn or lost such right, each share of such holder's
Company Common Stock shall thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without
any interest thereon, the Stock Election Consideration or the Cash Election
Consideration or a combination thereof as determined by Parent in its sole
discretion. The Company shall give Parent (i) prompt notice of any notice
or demands for appraisal or payment for shares of Company Common Stock
received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands or
notices. The Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.
Except as set forth on the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") and making reference to the particular subsection of this
Agreement to which exception is being taken (regardless of whether such
subsection refers to the Company Disclosure Schedule), the Company
represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of the Company and its subsidiaries
(as defined in Section 8.3) is a corporation or other legal entity
duly organized, validly existing and in good standing (with respect
to jurisdictions which recognize such concept) under the laws of
the jurisdiction in which it is organized and has the requisite
corporate or other power, as the case may be, and authority to
carry on its business as now being conducted. Each of the Company
and its subsidiaries is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of
its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except
for those jurisdictions where the failure to be so qualified or
licensed or to be in good standing individually or in the aggregate
would not reasonably be expected to have a material adverse effect
on the Company or the applicable subsidiary.
(ii) The Company has delivered or provided to
Parent prior to the execution of this Agreement complete and
correct copies of its certificate of incorporation and by-laws, as
amended to date.
(iii) In all material respects, the minute
books of the Company contain accurate records of all meetings and
accurately reflect all other actions taken by the stockholders, the
Board of Directors and all committees of the Board of Directors of
the Company since January 1, 1997.
(b) Subsidiaries. Section 3.1(b) of the Company
Disclosure Schedule lists all the subsidiaries of the Company, whether
consolidated or unconsolidated as of the end of the most recently completed
fiscal year. All outstanding shares of capital stock of, or other equity
interests in, each such subsidiary (i) have been validly issued and are
fully paid and nonassessable; (ii) are owned directly or indirectly by the
Company, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"); and (iii) are free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests) that would prevent the
operation by the Surviving Corporation of such subsidiary's business as
currently conducted.
(c) Capital Structure. The authorized capital stock
of the Company consists of 100,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock, par value $.01 per share, of the
Company ("Company Authorized Preferred Stock"), of which 1,000,000 shares
have been designated as Company Series A Junior Participating Preferred
Stock ("Company Preferred Stock") and no other shares of Company Authorized
Preferred Stock have been designated. At the close of business on October
29, 2000: (i) 42,382,655 shares of Company Common Stock were issued and
outstanding; (ii) 10,376,039 shares of Company Common Stock were held by
the Company in its treasury (such shares, "Company Treasury Stock") and no
shares of Company Common Stock were held by subsidiaries of the Company;
(iii) no shares of Company Preferred Stock were issued and outstanding and
1,000,000 shares of Company Preferred Stock were reserved for issuance
pursuant to the Rights Agreement; (iv) no shares of Company Preferred Stock
were held by the Company in its treasury or were held by any subsidiary of
the Company; and (v) 5,987,587 shares of Company Common Stock were reserved
for issuance pursuant to the Company's 1992 Warrant Plan, Vacation Break
U.S.A., Inc. 1995 Stock Option Plan, 1997 Stock Option Plan, 2000 Incentive
Stock Plan, Vacation Break U.S.A. Inc. Directors' Plan, as amended, Warrant
Agreements dated December 27, 1995, Warrant Agreements dated May 22, 1997
and Employee Stock Purchase Plan (the "Company Stock Plans"), of which
3,628,956 shares are subject to outstanding employee and non-employee
director stock options (the "Company Stock Options"), 1,745,510 shares are
subject to employee warrants (the "Company Warrants"), 230,322 shares are
subject to awards of restricted Company Common Stock (collectively with
Company Stock Options, Company Warrants and the awards described in Section
5.6(b), the "Company Awards"). All outstanding shares of capital stock of
the Company are, and all shares thereof which may be issued prior to the
Closing will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except as set forth
in this Section 3.1(c) and except for changes since October 31, 2000
resulting from the issuance of shares of Company Common Stock pursuant to
and in accordance with Company Awards and other rights referred to above in
this Section 3.1(c), outstanding prior to October 31, 2000 (x) there are
not issued, reserved for issuance or outstanding (A) any shares of capital
stock or voting securities or other ownership interests of the Company, (B)
any securities of the Company or any Company subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities or other ownership interests of the Company, or (C) any
warrants, calls, options or other rights to acquire from the Company or any
Company subsidiary, or any obligation of the Company or any of its
subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or securities convertible into or exchangeable or
exercisable for, capital stock or voting securities or other ownership
interests of the Company, and (y) there are no outstanding obligations of
the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be
issued, delivered or sold, any such securities. There are no outstanding
(A) securities of the Company or any of its subsidiaries convertible into
or exchangeable or exercisable for shares of capital stock or voting
securities or other ownership interests in any subsidiary of the Company,
(B) warrants, calls, options or other rights to acquire from the Company or
any of its subsidiaries, or any obligation of the Company or any of its
subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable
or exercisable for, any capital stock, voting securities or other ownership
interests in, any subsidiary of the Company or (C) obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any such outstanding securities of subsidiaries of the Company or
to issue, deliver or sell, or cause to be issued, delivered or sold, any
such securities. To the Company's knowledge, neither the Company nor any of
its subsidiaries is a party to any agreement restricting the transfer of,
relating to the voting of, requiring registration of, or granting any
preemptive or antidilutive rights with respect to any of the securities of
the Company or any of its subsidiaries. To the knowledge of the Company,
there are no voting trusts or other agreements or understandings to which
the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the subsidiaries.
(d) Authority; Noncontravention. The Company has all
requisite corporate power and authority to enter into this Agreement, the
Stock Option Agreement and, subject, in the case of the Merger, to the
Company Stockholder Approval (as defined in Section 3.1(v)) to consummate
the transactions contemplated hereby and thereby, including with respect to
the "spin-off" of DevCo., the requisite corporate power to declare the
DevCo. Distribution as presently described in Exhibit A. The execution and
delivery of this Agreement and the Stock Option Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby
and thereby (other than the DevCo. Distribution) have been duly authorized
by all necessary corporate action on the part of the Company, subject, in
the case of the Merger, to the Company Stockholder Approval. This Agreement
and the Stock Option Agreement have been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms, except that (i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or hereafter in effect
affecting creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunction or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be
brought. The execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated
hereby and thereby (other than the DevCo. Distribution) and compliance with
the provisions of this Agreement and the Stock Option Agreement will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its subsidiaries under, (i)
the certificate of incorporation or by-laws of the Company, (ii) the
certificate of incorporation or by-laws or the comparable organizational
documents of any of its subsidiaries, (iii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license or similar authorization applicable
to the Company or any of its subsidiaries or their respective properties or
assets or (iv) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other
than, in the case of clauses (iii) and (iv), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not reasonably be expected to have a material business
impact on the Company or that relate to or arise as a result of the DevCo.
Distribution, provided, however, that the failure to list on Section 3.1(d)
of the Company Disclosure Schedule a conflict, violation, default, right,
loss or Lien with respect to an agreement, instrument, permit, concession,
franchise, license or similar authorization specified in clause (iii) that
is cured by the time of the Closing by obtaining the consent of the other
party to such agreement, instrument, permit, concession, franchise, license
or similar authorization shall not be considered a violation of the
representation in Section 3.1(d)(iii). No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration
or filing with, any federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or
authority or any non- governmental self-regulatory agency, commission or
authority (a "Governmental Entity") is required by or with respect to the
Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement and the Stock Option Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby,
except for (1) the filing of a pre-merger notification and report form by
the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"); (2) the filings with the Securities and
Exchange Commission (the "SEC") of (A) a proxy statement relating to the
Company Stockholders Meeting (such proxy statement, as amended or
supplemented from time to time, the "Proxy Statement") and a registration
statement on Form S-4 to be prepared and filed in connection with the
issuance of Parent Common Stock in the Merger (the "Form S-4"), and (B)
such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement; (3) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware
and such filings with Governmental Entities to satisfy the applicable
requirements of the laws of states in which the Company and its
subsidiaries are qualified or licensed to do business or state securities
or "blue sky" laws; (4) such registrations and amendments thereto set forth
on Section 3.1(d) of the Company Disclosure Schedule and the related
consents, approvals or exemptions under state timeshare registration laws
or, in states that do not have specific timeshare laws, related real estate
or securities registration laws (the "VOI Registrations"); and (5) such
other filings and consents as may be required to effect the DevCo.
Distribution.
(e) Company Documents; Undisclosed Liabilities.
(i) Since January 1, 1997, the Company and its
subsidiaries have filed all required reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC (the "Company SEC
Documents"). As of their respective filing dates, (i) the Company
SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable
to such Company SEC Documents, and (ii) no Company SEC Document
when filed (or when amended and restated or as supplemented by a
subsequently filed Company SEC Document) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company
and its subsidiaries included in Company SEC Documents complied as
to form, as of their respective dates of filing with the SEC, in
all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted
accounting principles in the United States ("GAAP") (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of the
Company and its subsidiaries, as the case may be, as of the dates
thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to other
adjustments described in the notes to such unaudited statements).
Except (A) as reflected in the Company's unaudited balance sheet as
of June 30, 2000, (B) for liabilities incurred in connection with
this Agreement or the transactions contemplated hereby, (C) for
liabilities incurred in the ordinary course of business consistent
with past practice since June 30, 2000 or (D) for liabilities
incurred after the date hereof that would not reasonably be
expected to have a material adverse effect on the Company, neither
the Company nor any of its subsidiaries has any liabilities or
obligations of any nature other than liabilities or obligations
that are immaterial and that were incurred in the ordinary course
of business consistent with past practice.
(ii) Neither the Company nor any of its
subsidiaries has any continuing obligations (other than obligations
of confidentiality under the Letter Agreement dated December 21,
1999, between the Company and Carnival Corporation ("Carnival"))
incurred in connection with the Letter of Intent, dated as of
January 23, 2000, between the Company and Carnival or the
transactions contemplated thereby or pursuant to any other
agreements with Carnival.
(iii) The Company has provided or made
available to Parent true and complete copies of the audited
financial statements for the years ended December 31, 1998 and 1999
and the unaudited financial statements for the quarter ended June
30, 2000 for Fairfield Receivable Corporation and Fairfield Funding
Corporation, II (the "Company Unconsolidated Subsidiaries")
(collectively, the "Unconsolidated Subsidiaries Statements"). The
Unconsolidated Subsidiaries Statements were prepared in conformity
with GAAP for the periods covered thereby, except as may be noted
therein, and present in all material respects the financial
position of the Company Unconsolidated Subsidiaries as at the
respective dates thereof and the results of operations of such
subsidiaries for the respective periods then ended. The Company
Unconsolidated Subsidiaries are not required to be consolidated
with the Company's financial statements under GAAP.
(iv) The Company has provided to Parent true
and complete copies of the audited financial statements for the
years ended December 31, 1998 and 1999 for The FairShare Vacation
Plan Use Management Trust (the "Trust") (the "Trust Financial
Statements"). The Trust Financial Statements were prepared in
conformity with GAAP for the periods covered thereby and present in
all material respects the financial position of the Trust as at the
respective dates thereof and the results of operations of the Trust
for the respective periods then ended.
(f) Certain Contracts.
(i) Neither the Company nor any of its
subsidiaries is a party to or bound by (i) any agreement relating
to the incurring of indebtedness, (ii) any "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC), (iii) any non-competition agreement or any other agreement or
obligation which purports to limit in any material respect the
manner in which, or the localities in which, all or any substantial
portion of the business of the Company and its subsidiaries, taken
as a whole, is or would be conducted, (iv) any agreement providing
for the indemnification by the Company or a subsidiary of the
Company of any person, except an agreement entered into in the
ordinary course of business, (v) any joint venture, partnership or
similar document or agreement, (vi) any agreement that limits or
purports to limit the ability of the Company or any of its
subsidiaries to own, operate, sell, transfer, pledge or otherwise
dispose of any assets having an aggregate value in excess of
$1,000,000 (other than in connection with securitization or
financing transactions), (vii) any contract or agreement providing
for future payments that are conditioned, in whole or in part, on a
change of control of the Company or any of its subsidiaries, (viii)
any collective bargaining agreement, (ix) employment agreement or
any agreement or arrangement that contains any severance pay or
post-employment liabilities or obligations to a Key Employee (as
defined herein), other than as required under law, (x) any resort
affiliation agreement, (xi) any agreement that contains a "most
favored nation" clause, (xii) any management agreement between the
Company and each Association (as defined in Section 3.1(i) herein),
(xiii) any marketing alliance agreement involving a strategic
corporate relationship that requires payment of at least $1,000,000
thereunder by the Company or any of its subsidiaries or which is
not cancellable by either party thereto on 30 days' notice or (xiv)
any contract or other agreement not made in the ordinary course of
business which is material to the Company and its subsidiaries
taken as a whole or which would prohibit or delay the consummation
of the Merger or any of the transactions contemplated by this
Agreement and the Stock Option Agreement (the agreements, contracts
and obligations of the type described in clauses (i) through (xiii)
being referred to herein as "Company Material Contracts"). Each
Company Material Contract is valid and binding on the Company (or,
to the extent a subsidiary of the Company is a party, such
subsidiary) and is in full force and effect. Neither the Company
nor any of its subsidiaries is in a material breach or default
under any Company Material Contract. Neither the Company nor any
subsidiary of the Company knows of, or has received notice of, any
material violation or default under (nor, to the knowledge of the
Company, does there exist any condition which with the passage of
time or the giving of notice or both would result in such a
violation or default under) any Company Material Contract by the
other party thereto.
(ii) There is no agreement (noncompete or
otherwise), commitment, judgment, injunction, order or decree to
which the Company or any of its subsidiaries or affiliates is a
party or which is otherwise binding upon the Company or any of its
subsidiaries or affiliates which has or reasonably would be
expected to have the effect of prohibiting or impairing any
business practice of the Company or any of its subsidiaries or
affiliates, any acquisition of property (tangible or intangible) by
the Company or any of its subsidiaries.
(g) VOIs.
(i) Accounts Receivable.
(A) The VOI Receivables (as defined
below) owned by each of the Company and its subsidiaries
reflected in the unaudited financial statements of the
Company for the quarter ended June 30, 2000 included in the
Company SEC Documents and in the Unconsolidated Subsidiaries
Statements, are (except to the extent reserved against in
such financial statements, which reserves have been
determined based upon actual prior and current experience
and are consistent with prior practices) valid, genuine and
subsisting, arise out of bona fide sales of VOIs, goods,
performance of services or other business transactions
relating to the sale of VOIs and are not subject to
defenses, setoffs, counterclaims or rights of rescission
that would reasonably be expected to have a material
business impact on the Company. All VOI Receivables owned by
the Company and its subsidiaries are owned free and clear of
all Liens for funded indebtedness. "VOI Receivables" shall
mean, with respect to the Company and its subsidiaries, any
contracts for deed, deeds of trust, promissory notes,
installment notes, mortgages or similar security instruments
and all related documents and instruments (including,
without limitation, any security agreements entered into in
connection with or a part of any purchase agreement or any
installment sales contract relating to the sale of a VOI)
creating a first and prior lien on a VOI and securing a
purchase money loan to acquire a VOI (collectively, the
"Mortgages") or any installment sales contract creating a
purchaser's beneficial or equitable interest in a VOI
(collectively with the Mortgages, the "Debt Instruments").
For purposes of this Agreement, "VOI" shall mean a fee
simple or leasehold ownership interest in a condominium unit
or an entire timeshare resort developed or acquired by the
Company or a subsidiary of the Company, coupled with the
right to use and occupy one or more residential
accommodations at such timeshare resort in accordance with
the terms, provisions, and conditions of the applicable
declaration of condominium, master deed and all other
documents and instruments that govern the use and occupancy
of such resort's accommodations and facilities. The term
"VOI" shall further include all rights, benefits,
privileges, obligations and liabilities granted to or
imposed upon the owner of a VOI with respect to the
Company's FairShare Plus Program (the "Program"), pursuant
to the Amended and Restated FairShare Vacation Plan Use
Management Trust Agreement dated as of January 1, 1996, as
amended (the "Trust Agreement") or under applicable VOI
Laws.
(B) Section 3.1(g) of the Company
Disclosure Schedule sets forth certain reports (the
"Reports") routinely prepared by the Company or any of its
subsidiaries that identify, as of the date indicated in the
Reports, (i) the aggregate amount of VOI Receivables owned
or pledged as security by each of the Company or its
subsidiaries identified in the Reports and (ii) the weighted
average maturity of such VOI Receivables. The Reports are
true, accurate and complete in all material respects.
(ii) Registrations. Set forth on Section
3.1(g) of the Company Disclosure Schedule are all the resorts where
each of the Company or any of its subsidiaries owns VOIs and each
jurisdiction in which each of those resorts is registered, other
than an inadvertent omission of a jurisdiction, for (i) the
ownership of any VOI or real estate or (ii) the advertising,
marketing or selling of VOIs by the Company or its subsidiaries or
the soliciting of consumers to visit a resort or a sales office by
the Company or its subsidiaries.
(iii) Debt Instruments.
(A) Each form that is underlying or
related to a Debt Instrument securing or creating an
equitable interest in a VOI Receivable reflected in the
financial statements described in subsection (i)(A) above
and that is routinely used by the Company and its
subsidiaries or is permitted by the Company or its
subsidiaries to be used by others in connection with the
sale of VOIs, meets all material requirements of applicable
VOI Laws.
(B) The Debt Instruments contain
customary and enforceable provisions such as to render the
rights and remedies of the holders thereof adequate for the
practical realization against the related property of the
principal benefits of the security or property interest
intended to be provided thereby.
(C) Each Mortgage which requires
recordation to perfect the related VOI interest has been
properly recorded or is in the process of being recorded in
the appropriate jurisdiction and is in material compliance
with all applicable laws of the jurisdiction in which the
related VOI is located, and all costs, fees, and expenses,
including where applicable, recording fees, documentary
stamps and intangible taxes, due in connection with the
filing of each Mortgage that has been filed have been paid,
except for any failures to pay costs, fees and expenses that
would not reasonably be expected to have a material business
impact on the Company.
(h) Resorts.
(i) Section 3.1(h) of the Company Disclosure
Schedule contains a list of each resort where (A) the VOIs
owned or otherwise controlled by the Company or its
subsidiaries consist of more than 5% of the total VOI
inventory at such resort and (B) the Company or any of its
subsidiaries owns, has an option or contract for or
otherwise controls the real estate that is intended to
accommodate the development of VOIs in the future (the
"Resorts"), indicating whether each Resort is owned, under
option or contract or otherwise controlled by the Company or
any of its subsidiaries.
(ii) The Company or one of its subsidiaries,
as the case may be, has good and marketable title in fee
simple or a leasehold interest to all VOIs and other real
estate owned by the Company free and clear of all Liens,
except for Permitted Encumbrances. As used in this
Agreement, "Permitted Encumbrances" means (i) Liens imposed
by law for Taxes, assessments or charges of any Governmental
Entity that are not yet due and payable or are being
contested in good faith by proper proceedings (and in each
case as to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP);
(ii) carriers', warehousemen's, mechanics, landlords',
materialmen's, repairmen's or other like Liens arising in
the ordinary course of business in respect of obligations
that are not yet due or that are bonded or that are being
contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained in
accordance with GAAP; (iii) Liens incurred in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security
benefits or to secure the performance of tenders, bids,
leases, contracts, statutory obligations and other similar
obligations; (iv) easements (including, without limitation,
reciprocal easement agreements and utility agreements),
rights-of-way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions,
charges, or encumbrances (whether or not recorded) which do
not interfere materially with the ordinary conduct of the
business of the Company and which do not detract materially
from the property to which they attach or impair materially
the use thereof by the Company; (v) the encumbrances set
forth on title policies or title commitments provided to or
made available to Parent; and (vi) extensions, renewals or
replacements of any Lien referred to in clauses (i) through
(v) above.
(iii) The current use of the Resorts by the
Company and its subsidiaries does not violate any instrument
or agreement of record affecting the Resorts or any
applicable local zoning or similar land use laws, except for
violations that would not have a material business impact on
the Company. To the knowledge of the Company, none of the
occupiable structures on the Resorts encroaches upon real
property of another person and no occupiable structure of
any other person encroaches upon any part of a Resort,
except for encroachments that would not have a material
business impact on the Company.
(iv) To the knowledge of the Company, each
Resort has sufficient vehicular access for its purposes.
(v) There are no leases, subleases, licenses,
concessions or other agreements between the Company or any
of its subsidiaries to a third party that grants the right
of use or occupancy of any material portion of the real
estate, accommodations or facilities owned by the Company or
any of its subsidiaries at the Resorts and there are no
outstanding options or rights of first refusal to purchase
any material portion of the real estate, accommodations or
facilities owned by the Company or any of its subsidiaries
at the Resorts other than rights held by the related
property owners associations at the Resorts, and except for
agreements with VOI owners or for such leases, subleases,
licenses, concessions or other agreements entered into by
the Company or any of its subsidiaries in the ordinary
course of business.
(vi) Each timeshare plan related to a Resort
that is required to be filed in the real estate records of
the county in which the Resort is located has been properly
filed and recorded with the appropriate county office in
which the respective Resort is located, except for a failure
to file or record a timeshare plan that would not have a
material business impact on the Company.
(vii) Each of the Company and its subsidiaries
has delivered or made available to Parent complete and
correct copies of all surveys, engineering reports,
appraisals, certificates of occupancy and recorded plats
relating to a Resort in the possession of the Company and
its subsidiaries. The Company has delivered or made
available to Parent complete and correct copies of the title
insurance policies that are in the possession of the Company
and its subsidiaries which insure the Company or a
subsidiary of the Company of good and marketable title, or
as otherwise described therein, at the time of the
acquisition of the properties described therein.
(i) Condominium Associations.
(i) Each condominium, timeshare or other form
of owner's association organized by the Company or any of
its subsidiaries has been duly organized. Each condominium,
timeshare or other form of owner's association managed by
the Company or any of its subsidiaries in existence with
respect to a Resort (each, an "Association"), is duly
organized, legally existing, and in good standing under the
laws of the state of its incorporation, except where the
failure to be so qualified would not have a material adverse
effect on an Association. The books and records of each
Association are correct and complete in all material
respects and all funds collected from VOI owners and others
on behalf of the Associations have been properly accounted
for in all material respects and expended in all material
respects for such purposes as are authorized under the
articles of incorporation or by-laws of the applicable
Association. For purposes of this Agreement, an Association
is managed by the Company or any of its subsidiaries if (i)
it has the statutory right to elect or appoint a majority of
the members of the Association's board of directors or other
governing body and (ii) it is party to a management contract
with the Association.
(ii) Correct and complete copies of the most
recent audited financial statements and interim unaudited
financial statements of each Association have been delivered
or made available to Parent. Such financial statements
adequately reflect in all material respects the financial
condition of each Association as of the dates indicated, and
there have been no changes to the Association's financial
conditions since the date of its most recent financial
statements which would have a material adverse effect on the
Association.
(iii) Each Association maintains adequate
reserves for deferred maintenance and capital improvements
as set forth in the budget approved by such Association, in
accordance with the articles of incorporation or by-laws of
each Association and applicable VOI Laws.
(iv) The Tax Returns of each Association have
been timely filed (giving effect to all extensions) and are
true, correct and complete in all material respects, and
copies of such Tax Returns for the most recent tax year have
been delivered or will be delivered, as promptly as
practicable following the date hereof to Parent.
(j) FairShare Plus Program.
(i) The Trust is in compliance in all material
respects with all applicable VOI Laws. The Program, the
Program Manager (as defined in the Trust Agreement) and
FairShare Vacation Owners Association, Inc. (the "Trustee")
are in compliance in all material respects with all
applicable VOI Laws.
(ii) The Trustee is a nonprofit corporation
duly organized, validly existing and in good standing under
the laws of the State of Arkansas. The Trustee is duly
qualified as a foreign corporation in each jurisdiction in
which its assets or the conduct of its business require such
qualification, except where the failure to qualify would not
reasonably be expected to have a material adverse effect on
the Trustee. The Trustee has the full power and authority to
perform all duties and obligations imposed upon it by the
Trust Agreement and, to the Company's knowledge, has acted
in good faith and used commercially reasonable efforts with
respect to the performance of such duties and obligations.
The fees paid and payable to the Trustee and to the Program
Manager for services rendered during the fiscal year ended
December 31, 1999 and the eight month period ended August
31, 2000 in connection with the Program are set forth on
Section 3.1(j) of the Company Disclosure Schedule.
(iii) The consummation of the transactions
contemplated hereby will not, conflict with, or result in
any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation
or loss of a benefit (i) of the Trustee under the
certificate of incorporation or by-laws of the Trustee and
(ii) of the Trustee or the Trust under any material
contracts or agreements to which either the Trustee or the
Trust is a party, as applicable, other than any conflict,
violation, default or termination, cancellation or
acceleration that would not reasonably be expected to have a
material adverse effect on the Trust or the Trustee. All
contracts or agreements material to the operation of the
Trust to which either the Trustee or the Trust is a party
have been delivered or made available to Parent.
(iv) All VOIs and the use and occupancy rights
that correspond to the VOIs that have been subjected to the
terms, provisions, and conditions of the Trust Agreement
have been so subjected in compliance in all material
respects with the requirements of the Trust Agreement and
all applicable VOI Laws.
(v) All of the Accommodations (as such term is
defined in the Trust Agreement) are substantially furnished
and ready for occupancy, and all furnishings are
substantially paid for. None of the VOIs subjected to the
Program (and/or beneficial use rights appertaining thereto)
consist of a limited duration contractual right, lease,
license or right-to-use timeshare interest in a Program
Resort (as defined in the Trust Agreement).
(vi) The Trust conducts and operates its
business in material compliance with Section 4.02 of the
Trust Agreement and all applicable VOI Laws.
(vii) The marketing and sales by the Company
and its subsidiaries of VOIs in the Program have been
conducted in material compliance with all applicable VOI
Laws.
(viii) The Program's reservation system is
fully operational for its intended purpose subject to normal
maintenance. Such reservation system, including all related
computer hardware and software, is owned, leased or licensed
by the Company, free and clear of any Liens, except for
Liens arising in the ordinary course of business of the
Trust or the acquisition of such hardware and software.
(ix) The Company has delivered or made
available to Parent complete and correct copies of (A) the
Trust Agreement, including all exhibits, attachments or
amendments thereto and (B) the forms of (1) the FairShare
Plus Program Summary and Acknowledgment of Receipt; (2) the
Ernst & Young Report dated May 30, 2000 and (3) the
Destinations FairShare Plus Exchange Program Summary used in
connection with the sale of VOIs, together with such other
documents executed ancillary thereto and all such documents
meet in all material respects the requirements of applicable
VOI Laws.
(x) The Trust Agreement does not violate
Arkansas' Rule Against Perpetuities.
(k) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, since January 1, 2000, the Company and its
subsidiaries have conducted their respective businesses only in the
ordinary course, and there has not been (i) the occurrence of an event that
could reasonably be expected to result in any material adverse effect on
the Company, except for an effect due to changes affecting the economy or
financial markets generally other than such changes which affect the
Company in a manner which is not proportionate with the effect of such
changes on similarly situated companies, (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company's capital stock,
(iii) any split, combination or reclassification of any of the Company's
capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
the Company's capital stock, except for issuances of Company Common Stock
upon the exercise of Company Stock Options or Company Warrants, in each
case awarded prior to the date hereof in accordance with their present
terms, (iv) prior to the date hereof (A) any granting by the Company or any
of its subsidiaries to any current or former director, executive officer or
other Key Employee of the Company or its subsidiaries of any increase in
compensation, bonus or other benefits, except for increases in the ordinary
course of business, (B) any granting by the Company or any of its
subsidiaries to any such current or former director, executive officer or
Key Employee of any increase in severance or termination pay, or (C) any
entry by the Company or any of its subsidiaries into, or any amendment of,
any employment, deferred compensation, consulting, severance, termination
or indemnification agreement with any such current or former director,
executive officer or Key Employee, (v) except insofar as may have been
disclosed in Company SEC Documents or required by a change in GAAP, any
material change in accounting methods (or underlying assumptions),
principles or practices by the Company affecting its assets, liabilities or
business, including, without limitation, any reserving, renewal or residual
method, or estimate of practice or policy, (vi) any tax election by the
Company or its subsidiaries or any settlement or compromise of any income
tax liability by the Company or its subsidiaries, except as would not be
required to be disclosed in the Company SEC Documents, (vii) any material
insurance transaction other than in the ordinary course of business
consistent with past practice, (viii) any transaction or commitment, or
series of related transactions or commitments, to acquire real estate for
VOI development in excess of $1,000,000 (ix) any material labor trouble or
claim of wrongful discharge or other unlawful labor practice or action, (x)
any improper subjection of VOI inventory by the Company to the FairShare
Program or (xi) any agreement or commitment (contingent or otherwise) to do
any of the foregoing.
(l) Compliance with Applicable Laws; Litigation.
(i) The Company, its subsidiaries and
employees hold all permits, licenses, variances, exemptions,
orders, registrations and approvals of all Governmental Entities
which are required for the operation of the businesses of the
Company and its subsidiaries (the "Company Permits") as presently
conducted, except for any failure that would not reasonably be
expected to result in a material business impact on the Company.
The Company and its subsidiaries are in compliance in all respects
with the terms of the Company Permits and all applicable statutes,
laws, ordinances, rules and regulations (including the VOI Laws (as
defined in Section 8.3)), except for a failure to comply that does
not have individually or in the aggregate a material business
impact on the Company. Except as set forth in Section 3.1(l) of the
Company Disclosure Schedule, which contains a true, complete and
current description of any pending and, to the Company's knowledge,
threatened litigation, action, suit, proceeding or investigation,
the forum, the parties thereto, the subject matter thereof and the
amount of damages claimed or other remedies requested as of
September 30, 2000, no action, demand, charge, requirement or
investigation by any Governmental Entity and no litigation, suit,
action, proceeding or arbitration by any person or Governmental
Entity, in each case with respect to the Company or any of its
subsidiaries or any of their respective properties, is pending or,
to the knowledge of the Company, threatened, except for any
litigation, suit, action, demand, charge, requirement,
investigation, proceeding or arbitration that would not reasonably
be expected to have a material business impact on the Company.
(ii) No Company Permit issued in connection
with any construction of any accommodations and facilities, other
improvements and the purchase of any fixtures or equipment,
inventory, furnishings or other personalty located in, at, or on
accommodations or facilities developed by the Company and its
subsidiaries has been suspended or canceled (or is threatened to be
canceled, suspended or materially modified) or has expired, except
where the failure to hold such Company Permit would not
individually or in the aggregate, reasonably be expected to have a
material business impact on the Company, and, with respect to any
such Company Permit expiring prior to March 31, 2001, the Company
has no reason to believe that such Company Permits will not be
renewed or extended.
(m) Taxes.
(i) Each of the Company and its subsidiaries
has (A) duly filed (or there have been filed on its behalf) with
the appropriate Governmental Entities all material Tax Returns (as
defined below) required to be filed by it (giving effect to all
extensions) and such Tax Returns are true, correct and complete in
all material respects; (B) duly paid in full (or there has been
paid on its behalf) all material Taxes required to be paid by it;
and (C) made provision in accordance with GAAP (or provision has
been made on its behalf) for all accrued Taxes not yet due; and
(ii) There are no material Liens for Taxes
upon any property or assets of the Company or any subsidiary of the
Company, except for Liens for Taxes not yet due or for Taxes which
are being contested in good faith, which are set forth in Section
3.1(m) of the Company Disclosure Schedule.
(iii) Each of the Company and its subsidiaries
has complied in all material respects with all applicable laws,
rules and regulations relating to the payment and withholding of
Taxes (or similar provisions under any foreign laws) and has,
within the time and the manner prescribed by law, withheld and paid
over to the proper Governmental Entities all material amounts
required to be so withheld and paid over under applicable laws.
(iv) No federal, state, local or foreign
audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of the
Company or any of its subsidiaries, and neither the Company nor any
subsidiary of the Company has received a written notice of any
pending audits or proceedings.
(v) Neither the Company nor any of its
subsidiaries has granted in writing any power of attorney which is
currently in force with respect to any Taxes or Tax Returns.
(vi) Neither the Company nor any of its
subsidiaries has requested an extension of time within which to
file any Tax Return in respect of a taxable year which has not
since been filed and no outstanding waivers or comparable consents
regarding the application of the statute of limitations with
respect to Taxes or Tax Returns has been given by or on behalf of
the Company or any of its subsidiaries.
(vii) Neither the Company nor any of its
subsidiaries is a party to any agreement providing for the
allocation or sharing of Taxes.
(viii) The federal income Tax Returns of the
Company and of its subsidiaries have been examined by the
applicable taxing authorities (or the applicable statutes of
limitation for the assessment of Taxes for such periods have
expired) for all periods through and including 1996, and no
material deficiencies were asserted as a result of such
examinations which have not been resolved and fully paid.
(ix) Neither the Company nor any of its
subsidiaries has been included in any "consolidated," "unitary" or
"combined" Tax Return (other than Tax Returns which include only
the Company and any of its subsidiaries) provided for under the
laws of the United States, any foreign jurisdiction or any state or
locality with respect to Taxes.
(x) No election under Section 341(f) of the
Code has been made to treat the Company or any of its subsidiaries
as a consenting corporation, as defined in Section 341 of the Code.
(xi) To the knowledge of the Company, no claim
has been made by any Governmental Entities in a jurisdiction where
the Company or any of its subsidiaries does not file Tax Returns
that any such entity is, or may be, subject to taxation by that
jurisdiction.
(xii) Each of the Company and its subsidiaries
have made available to Parent correct and complete copies of (i)
all of their Tax Returns, (ii) all audit reports, letter rulings,
technical advice memoranda and similar documents issued by a
governmental authority relating to the United States federal,
state, local or foreign Taxes due from or with respect to the
Company and each of its subsidiaries, and (iii) any closing
agreements entered into by the Company and each of its subsidiaries
with any Governmental Entities with respect to Taxes, in each case
from 1995.
(xiii) For purposes of this Agreement (A)
"Taxes" shall mean any and all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding,
social security, occupation, use, service, service use, license,
net worth, payroll, franchise, transfer and recording taxes, fees
and charges, imposed by the IRS or any taxing authority (whether
domestic or foreign including, without limitation, any state,
county, local or foreign government or any subdivision or taxing
agency thereof (including a United States possession)), whether
computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest, fines,
penalties or additional amounts attributable to, or imposed upon,
or with respect to, any such amounts, and (B) "Tax Return" shall
mean any report, return, document, declaration or other information
or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any documents
with respect to or accompanying payments of estimated Taxes, or
with respect to or accompanying requests for the extension of time
in which to file any such report, return, document, declaration or
other information.
(n) Employee Benefit Plans.
(i) Section 3.1(n) of the Company Disclosure
Schedule contains a true and complete list of each deferred
compensation and each bonus or other incentive compensation, stock
purchase, stock option and other equity compensation plan, program,
agreement or arrangement; each severance or termination pay,
medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of Section 3(1)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); each profit-sharing, stock bonus or other "pension"
plan, fund or program (within the meaning of Section 3(2) of
ERISA); each employment, termination or severance agreement or
arrangement with any director or executive officer and any other
employee whose base salary is $100,000 or more, excluding site
sales vice presidents (the "Key Employees"); and each other
employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company or by any trade or
business, whether or not incorporated, that together with the
Company would be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA (an "ERISA Affiliate"), or to which the
Company or an ERISA Affiliate is party, whether written or oral,
for the benefit of any director, employee or former employee of the
Company or any of its subsidiaries (the "Plans"). Section 3.1(n) of
the Company Disclosure Schedule identifies each of the Plans that
is subject to Section 302 or Title IV of ERISA or Section 412 of
the Code (the "Title IV Plans"). Neither the Company, any
subsidiary of the Company nor any ERISA Affiliate has any
commitment or formal plan, whether legally binding or not, to
create any additional employee benefit plan or modify or change any
existing Plan other than as may be required by the terms of such
Plan.
(ii) With respect to each Plan, the Company
has heretofore delivered or made available to Parent true and
complete copies of each of the following documents:
(A) a copy of the Plan and any
amendments thereto (or if the Plan is not a written Plan, a
description thereof);
(B) a copy of the two most recent
annual reports and actuarial reports, if required under
ERISA, and the most recent report prepared with respect
thereto in accordance with Statement of Financial Accounting
Standards No. 87;
(C) a copy of the most recent Summary
Plan Description required under ERISA with respect thereto;
(D) if the Plan is funded through a
trust or any third party funding vehicle, a copy of the
trust or other funding agreement and the latest financial
statements thereof; and
(E) the most recent determination
letter received from the Internal Revenue Service with
respect to each Plan intended to qualify under section 401
of the Code.
(iii) No liability under Title IV or Section
302 of ERISA has been incurred by the Company or any ERISA
Affiliate that has not been satisfied in full or accrued on the
Company's financial statements in accordance with GAAP, and no
condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty Corporation
("PBGC") (which premiums have been paid when due). Insofar as the
representation made in this Section 3.1(n) applies to Sections
4064, 4069 or 4204 of Title IV of ERISA, it is made with respect to
any employee benefit plan, program, agreement or arrangement
subject to Title IV of ERISA to which the Company or any ERISA
Affiliate made, or was required to make, contributions during the
five (5)-year period ending on the last day of the most recent plan
year ended prior to the Closing Date.
(iv) The PBGC has not instituted proceedings
to terminate any Title IV Plan and no condition exists that
presents a material risk that such proceedings will be instituted.
(v) No Plan is, or ever has been, a Title IV
Plan.
(vi) No Title IV Plan or any trust established
thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal
year of each Title IV Plan ended prior to the Closing Date.
(vii) All contributions required to be made
with respect to any Plan on or prior to the Closing Date have been
timely made or are reflected on the balance sheet of the Company
filed with the Company SEC Documents. There has been no amendment
to, written interpretation of or announcement (whether or not
written) by the Company or any affiliate or the Company or any
subsidiary of the Company relating to, or change in employee
participation or coverage under, any Plan that would increase
materially the expense of maintaining such Plan above the level or
expense incurred in respect thereof for the most recent fiscal year
ended prior to the date hereof.
(viii) Neither the Company nor any ERISA
Affiliate contributes to, or is obligated, or has ever been
obligated, to contribute to a "multiemployer pension plan," as
defined in Section 3(37) of ERISA, nor is any Title IV Plan a plan
described in Section 4063(a) of ERISA.
(ix) Neither the Company or any subsidiary of
the Company, any Plan, any trust created thereunder, nor, to the
knowledge of the Company, any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or
any subsidiary of the Company, any Plan, any such trust, or any
trustee or administrator thereof, or any party dealing with any
Plan or any such trust could be subject to either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code.
(x) Each Plan has been operated and
administered in accordance with its terms and applicable law in all
material respects, including but not limited to ERISA and the Code.
(xi) Each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified
and the trusts maintained thereunder are exempt from taxation under
Section 501(a) of the Code. Each Plan intended to satisfy the
requirements of Section 501(c)(9) of the Code has satisfied such
requirements in all material respects.
(xii) No Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured)
for employees or former employees of the Company or any subsidiary
of the Company for periods extending beyond their retirement or
other termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or
former employee (or his beneficiary).
(xiii) No amounts payable under the Plans will
fail to be deductible for federal income tax purposes by virtue of
Section 162(m) of the Code.
(xiv) No condition exists that would prevent
the Company or any subsidiaries of the Company from amending or
terminating any Plan providing health or medical benefits in
respect of any active employee of the Company or any subsidiary of
the Company without material liability.
(xv) The consummation of the transactions
contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former
employee or officer of the Company or any ERISA Affiliate to
severance pay, except as expressly provided in this Agreement, or
(ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
(xvi) There has been no material failure of a
Plan that is a group health plan (as defined in Section 5000(b)(1)
of the Code) to meet the requirements of Section 4980B(f) of the
Code with respect to a qualified beneficiary (as defined in Section
4980B(g) of the Code). Neither the Company nor any subsidiary of
the Company has contributed to a nonconforming group health plan
(as defined in Section 5000(a) of the Code) and no ERISA Affiliate
of the Company or any subsidiary of the Company has incurred a tax
under Section 5000(a) of the Code which is or could become a
material liability of the Company or a subsidiary of the Company.
(xvii) None of the Company or any subsidiary
of the Company is a party to any employment, consulting,
non-competition, severance, or indemnification agreement still in
effect with any current or former Key Employee or director of the
Company or any subsidiary of the Company.
(xviii)There are no pending or, to the
knowledge of the Company, threatened or anticipated claims by or on
behalf of any Plan by any employee or beneficiary covered under any
such Plan, or otherwise involving any such Plan (other than routine
claims for benefits).
(xix) Neither the Company nor any of its
subsidiaries is a party to any agreement, contract or arrangement
that could result, separately or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section
280G of the Code.
(o) Labor Matters. There are no labor or collective
bargaining agreements to which the Company or any subsidiary of the Company
is a party. There is no union organizing effort pending or, to the
knowledge of the Company, threatened against the Company or any subsidiary
of the Company. There is no labor strike, labor dispute (other than routine
employee grievances that are not related to union employees), work
slowdown, stoppage or lockout pending or, to the knowledge of the Company,
threatened against or affecting the Company or any subsidiary of the
Company. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company
or any subsidiary of the Company (other than routine employee grievances).
The Company and its subsidiaries are in compliance in all material respects
with all applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and are not engaged
in any unfair labor practice.
(p) Environmental Liability.
(i) Each of the Company and its subsidiaries
is in compliance with all applicable Environmental Laws (as defined
below), which compliance includes the possession by the Company and
its subsidiaries of all Permits and other governmental
authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, except for such
noncompliance that would not reasonably be expected to have,
individually or in the aggregate, a material business impact on the
Company. Neither the Company nor any of its subsidiaries has
received any communication or written notice, whether from a
Governmental Entity, citizens group, employee or otherwise, that
alleges that the Company or any of its subsidiaries is not in
compliance in all material respects. All Permits and other
governmental authorizations currently held by the Company or any of
its subsidiaries pursuant to the Environmental Laws that are
material to the business of the Company are identified in Section
3.1(p) of the Company Disclosure Schedule.
(ii) There are no Environmental Claims (as
defined below) pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental
Claim has or may have retained or assumed either contractually or
by operation of law.
(iii) There are no present or past actions,
activities, circumstances, conditions, events or incidents taken or
caused by the Company or, to the knowledge of the Company, there
are no present or past actions, activities, circumstances,
conditions, events or incidents taken or caused by a third party,
including the Release (as defined below) of any Hazardous Materials
(as defined below) that could reasonably be expected to form the
basis of any Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for
any Environmental Claim the Company or any of its subsidiaries has
or may have retained or assumed either contractually or by
operation of law that would reasonably be expected to result in a
material adverse effect on the Company.
(iv) Without in any way limiting the
generality of the foregoing, (i) all on-site and, to the knowledge
of the Company, off-site locations, where the Company or any of its
subsidiaries has stored, disposed or arranged for the disposal of
Hazardous Materials, are in accordance with applicable
Environmental Laws, (ii) all underground storage tanks, and the
capacity and contents of such tanks, located on property owned,
operated, or leased by the Company or any of its subsidiaries are
identified in Section 3.1(p) of the Company Disclosure Schedule,
(iii) there is no asbestos contained in or forming part of any
building, building component, structure or office space owned or
leased by the Company or any of its subsidiaries, (iv) no
polychlorinated biphenyls (PCB's) are used or stored at any
property owned or leased by the Company or any of its subsidiaries
and (v) all underground storage tanks owned, operated, or leased by
the Company or any of its subsidiaries and which are subject to
regulation under the federal Resource Conservation and Recovery Act
(or equivalent state or local law regulating underground storage
tanks) meet the technical standards prescribed at Title 40 Code of
Federal Regulations Part 280 which became effective December 22,
1998 (or any applicable state or local law requirements which are
more stringent than such technical standards or which became
effective before such date).
(v) The Company has provided or made available
to Parent true and correct copies of all assessments, reports and
investigations or audits in the possession of the Company or its
subsidiaries regarding environmental matters pertaining to, or the
environmental condition of, the Company Real Properties (as defined
below) and the businesses of the Company and its subsidiaries, or
the compliance (or noncompliance) by the Company or any of its
subsidiaries with any Environmental Laws.
(vi) For purposes of this Agreement:
(A) "Environmental Claim" means any
claim, action, cause of action, investigation or notice
(written or oral) by any person or entity alleging potential
liability (including potential liability for investigatory
costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (a)
the presence, or Release into the environment, of any
Hazardous Materials at any location, whether or not owned or
operated by the Company or any of its subsidiaries or (b)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(B) "Environmental Laws" means all
federal, interstate, state, local and foreign laws and
regulations relating to pollution or protection of human
health (excluding the federal Occupational Safety and Health
Act and similar laws affecting workers safety) or the
environment (including ambient air, surface water, ground
water, land surface or subsurface strata) and all laws and
regulations relating to emissions, discharges, releases or
threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Hazardous Materials.
(C) "Hazardous Materials" means (1)
those materials, pollutants and/or substances defined in or
regulated under the following federal statutes and their
state counterparts, as each may be amended from time to
time, and all regulations thereunder: the Hazardous
Materials Transportation Act of 1980, the Resource
Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the
Clean Water Act, the Safe Drinking Water Act, the Atomic
Energy Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Toxic Substances Control Act and the
Clean Air Act; (2) petroleum and petroleum products
including crude oil and any fractions thereof; (3) natural
gas, synthetic gas and any mixtures thereof; (4) radon; (5)
any other contaminant; and (6) any materials, pollutants
and/or substance with respect to which any Governmental
Entity requires environmental investigation, monitoring,
reporting or remediation.
(D) "Release" shall mean releasing,
spilling, leaking, pumping, pouring, emitting, emptying,
discharging, escaping, leaching, disposing or dumping.
(q) Intellectual Property.
(i) The Company and its subsidiaries own or
have a valid and enforceable license to use all trademarks, service
marks, trade names, patents, Internet domains and copyrights
(including any registrations or applications for registration of
any of the foregoing) (collectively, "Company Intellectual
Property"), in each case, free and clear of any material Liens or
other material limitations or restrictions (including any
settlements, agreements, consents or judgments), necessary to carry
on its business substantially as currently conducted, and the
consummation of the Merger and the other transactions contemplated
hereby will not result in the loss of any such rights (or require
the payment of any material additional fees or royalties in order
to maintain such rights). Section 3.1(q) of the Company Disclosure
Schedule sets forth a true and correct list of all of the material
Company Intellectual Property and indicates those items which the
Company owns (distinguishing between exclusive and non-exclusive
ownership and indicating any licenses granted to other persons) or
has the exclusive right to use or license. Neither the Company nor
any of its subsidiaries has received any notice of infringement of
or conflict with and, to the knowledge of the Company, there are no
infringements of or conflicts with the rights of others with
respect to the use of, or the rights by others with respect to, any
Company Intellectual Property. To the knowledge of the Company, no
third party is infringing or otherwise violating any Intellectual
Property owned by the Company or by any of its subsidiaries.
(ii) The Company and its subsidiaries own or
have a valid and enforceable license to use all computer and
telecommunication software including source and object code and
documentation and any other media (including, without limitation,
manuals, journals and reference books) (in each case, free and
clear of any material Liens or other material limitations or
restrictions) (collectively, "Company Software") necessary to carry
on its business substantially as currently conducted and the other
transactions contemplated hereby will not result in the loss of any
such rights (or require the payment of any material additional fees
or royalties in order to maintain such rights). Neither the Company
nor any of its subsidiaries has received any notice of infringement
of or conflict with and, to the Company's knowledge, there are no
infringements of or conflicts with the rights of others with
respect to the use of, or the rights by others with respect to, any
Company Software.
(r) Insurance Matters. Section 3.1(r) of the Company
Disclosure Schedule describes all material primary, excess and umbrella
policies of general liability, fire, workers' compensation, products
liability, completed operations, employers, liability, health, bonds and
other forms of insurance providing insurance coverage to the Company or any
of its subsidiaries. The Company has heretofore made available to Parent
true, complete and correct copies of all such policies. All such policies
are sufficient for compliance in all material respects with all
requirements of law and of all contracts or leases to which the Company is
a party. The Company has not failed to give any notice or to present any
material claim under any such policy in a due and timely fashion. There are
no outstanding unpaid claims under any such policies or binders for which
adequate reserves have not been established. Such policies provide
insurance coverage that is customary in amount and scope for other
companies in the industry in which the Company operates, are in full force
and effect on the date hereof and shall be kept in full force and effect by
the Company through the Effective Time. With respect to all such policies,
all premiums currently payable or previously due and payable with respect
to all periods up to and including the Effective Time have been paid and no
notice of cancellation or termination has been received with respect to
such policy.
(s) Information Supplied. The Form S-4, the Proxy
Statement and a registration statement on Form 10, under the Exchange Act,
relating to the equity securities of DevCo. (the "Form 10") to be filed
with the SEC will not, at the time the Form S-4 becomes effective under the
Securities Act, at the date the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Company Stockholders Meeting,
and at the time the Form 10 becomes effective under the Securities Act,
respectively, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that no
representation is made by the Company with respect to statements made
therein based on information concerning, supplied or incorporated by
reference by Parent or Merger Sub for inclusion in the Form S-4, the Proxy
Statement and the Form 10. None of the information supplied by the Company
for inclusion or incorporation by reference in the Form S-4 will, at the
date it becomes effective and at the time of the Company Stockholders
Meeting, contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. Subject to the provisions set
forth in the second preceding sentence, the Form S-4, the Proxy Statement
and the Form 10 will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act, as appropriate,
and the rules and regulations thereunder.
(t) Rights Agreement. As of the date of this
Agreement, the Company or the Board of Directors of the Company, as the
case may be, (i) has taken all necessary actions so that the execution and
delivery of this Agreement, the Stock Option Agreement and the consummation
of the transactions contemplated hereby and thereby will not result in a
"Distribution Date" (as defined in the Rights Agreement) and (ii) has
amended the Rights Agreement to render it inapplicable to this Agreement,
the Stock Option Agreement and the Voting Agreement and the transactions
contemplated hereby and thereby.
(u) Transactions with Affiliates. As of the date
hereof, (i) there are no outstanding amounts payable to or receivable from,
or advances by the Company or any of its subsidiaries to, and neither the
Company nor any of its subsidiaries is otherwise a creditor or debtor to,
any stockholder, officer, director, employee or affiliate of the Company or
any of its subsidiaries, other than as part of the normal and customary
terms of such persons' employment with the Company or any of its
subsidiaries, and (ii) neither the Company nor any subsidiary of the
Company whose board is controlled by the Company is a party to any
transaction agreement, arrangement or understanding with any stockholder,
officer, director or employee of the Company or any of its subsidiaries.
(v) Voting Requirements. The affirmative vote at the
Company Stockholders Meeting (the "Company Stockholder Approval") of a
majority of the number of outstanding shares of Company Common Stock to
approve and adopt this Agreement is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve and
adopt this Agreement and the transactions contemplated hereby, including
the Merger.
(w) Opinions of Financial Advisor. The Company has
received the opinion of Stephens Inc. and Bear, Stearns & Co. Inc., dated
the date hereof, to the effect that, as of such dates, the Merger
Consideration is fair from a financial point of view to the stockholders of
the Company.
(x) State Takeover Statutes. To the knowledge of the
Company, no state takeover statute is applicable to the Merger or the other
transactions contemplated hereby.
(y) Brokers. Except for Stephens Inc. and Bear,
Stearns & Co. Inc., no broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Company. The Company has delivered to Parent complete and correct
copies of such arrangements which are set forth as part of the Company
Disclosure Schedule.
(z) Takeover Laws. The approval of this Agreement and
the Merger and the Stock Option Agreement by the Board of Directors of the
Company constitutes approval of this Agreement and the Merger and the Stock
Option Agreement and the transactions contemplated hereby and thereby for
purposes of Section 203 of the DGCL. Except for Section 203 of the DGCL
(which has been rendered inapplicable), no "moratorium", "control share",
"fair price" or other antitakeover laws and regulations of any state are
applicable to the Merger or other transactions contemplated by this
Agreement and the Stock Option Agreement.
(aa) No Other Agreement. Except as contemplated
hereby, the Company has no legal obligation, absolute or contingent, as the
date hereof, to any other person or entity to sell any material portion of
the assets of the Company, to sell the capital stock of the Company, to
effect any merger, consolidation or reorganization of the Company, or to
enter into any agreement with respect thereto.
SECTION 3.2 Representations and Warranties of Parent. Except
as set forth on the Disclosure Schedule delivered by Parent to the Company
prior to the execution of this Agreement (the "Parent Disclosure Schedule")
and making reference to the particular subsection of this Agreement to
which exception is being taken (regardless of whether such subsection
refers to the Parent Disclosure Schedule), Parent represents and warrants
to the Company as follows:
(a) Organization, Standing and Corporate Power.
(i) Each of Parent, its subsidiaries (as
defined in Rule 1-02 of Regulation S-X, promulgated pursuant to the
Securities Act by the SEC ("significant subsidiaries")) and Merger
Sub is a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which
it is organized and has the requisite corporate or other power, as
the case may be, and authority to carry on its business as now
being conducted. Each of Parent and its subsidiaries is duly
qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or
to be in good standing, individually or in the aggregate, would not
have a material adverse effect on Parent.
(ii) Parent has delivered or provided to the
Company prior to the execution of this Agreement complete and
correct copies of the certificate of incorporation and by-laws of
Parent and Merger Sub, each as amended to date.
(iii) Merger Sub is a newly formed corporation
with no assets or liabilities, except for liabilities arising under
this Agreement. Merger Sub will not conduct any business or
activities other than the issuance of its stock to Parent prior to
the Merger.
(b) Capital Structure. As of September 30, 2000, the
authorized capital stock of Parent consists of 2,500,000,000 shares of
common stock, par value $0.01 per share, of which 2,000,000,000 shares are
Parent Common Stock and 500,000,000 shares are designated as move.com
common stock ("move.com Common Stock"), 10,000,000 shares of preferred
stock, par value $.01 per share, of Parent ("Parent Authorized Preferred
Stock"). At the close of business on September 30, 2000: (i) 728,703,667
shares of Parent common stock and 3,742,286 shares of move.com Common Stock
were issued and outstanding; (ii) 179,003,833 shares of Parent Common Stock
were held by Parent in its treasury; (iii) no shares of Parent Authorized
Preferred Stock were issued and outstanding; (iv) 238,428,979 shares of
Parent Common Stock and 10,993,642 shares of move.com Common Stock were
reserved for issuance pursuant to the stock-based plans identified in
Section 3.2(b) of the Parent Disclosure Schedule (such plans, collectively,
the "Parent Stock Plans"), of which approximately 188,175,715 shares of
Parent Common Stock and 6,282,196 shares of move.com Common Stock are
subject to outstanding employee stock options or other rights to purchase
or receive Parent Common Stock granted under the Parent Stock Plans
(collectively, "Parent Employee Stock Options"); and (vi) 30,997,000 shares
of Parent Common Stock and 1,586,000 shares of move.com Common Stock are
subject to warrants (collectively, "Parent Warrants"). All outstanding
shares of capital stock of Parent are, and all shares thereof which may be
issued pursuant to this Agreement or otherwise will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except (i) as set forth in this Section 3.2(b), (ii) for
the 3% Convertible Subordinated Notes, (iii) for the 34,000,000 PRIDES, of
which 32,000,000 have been designated as Income PRIDES and 2,000,000 have
been designated as Growth PRIDES, and (iv) for changes since September 30,
2000 resulting from the issuance of shares of Parent Common Stock pursuant
to the Parent Stock Plans or Parent Employee Stock Options or Parent
Warrants and other rights referred to in this Section 3.2(b), as of the
date hereof, (x) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of Parent, (B)
any securities of Parent or any Parent subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities of Parent, (C) any warrants, calls, options or other rights to
acquire from Parent or any Parent subsidiary, and any obligation of Parent
or any Parent subsidiary to issue, any capital stock, voting securities or
securities convertible into or exchangeable or exercisable for capital
stock or voting securities of Parent or other ownership interests of
Parent, and (y) there are no outstanding obligations of Parent or any
Parent subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. As of the date hereof, there are no
outstanding (A) securities of Parent or any Parent subsidiary convertible
into or exchangeable or exercisable for shares of capital stock or other
voting securities or other ownership interests in any Parent subsidiary,
(B) warrants, calls, options or other rights to acquire from Parent or any
Parent subsidiary, and any obligation of Parent or any Parent subsidiary to
issue, any capital stock, voting securities or other ownership interests
in, or any securities convertible into or exchangeable or exercisable for
any capital stock, voting securities or ownership interests in, any Parent
subsidiary or (C) obligations of Parent or any Parent subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Parent subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. To Parent's knowledge, neither
Parent nor any Parent subsidiary is a party to any agreement restricting
the transfer of, relating to the voting of, requiring registration of, or
granting any preemptive or, except as provided by the terms of Parent Stock
Plans, antidilutive rights with respect to, any securities of the type
referred to in the two preceding sentences.
(c) Authority; Noncontravention. Each of Parent and
Merger Sub has all requisite corporate power and authority to enter into
this Agreement, the Stock Option Agreement (to which is a party) and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate and
shareholder action on the part of Parent and Merger Sub, respectively. This
Agreement and the Stock Option Agreement have been duly executed and
delivered by each of Parent and Merger Sub, and, assuming the due
authorization, execution and delivery by the Company, constitutes the
legal, valid and binding obligations of Parent and Merger Sub,
respectively, enforceable against Parent and Merger Sub, respectively, in
accordance with their terms except that (i) such enforceability may be
subject to applicable bankruptcy, insolvency or other similar laws now or
hereafter in effect affecting creditors' rights generally and (ii) the
availability of the remedy of specific performance or injunction or other
forms of equitable relief may be subject to equitable defenses and would be
subject to the discretion of the courts for which any proceeding therefor
may be brought. The execution and delivery of this Agreement and the Stock
Option Agreement do not, and the consummation of the transactions
contemplated hereby and thereby (other than the DevCo. Distribution) and
compliance with the provisions of this Agreement and the Stock Option
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Parent or any of its
subsidiaries under, (i) the certificate of incorporation or by-laws of
Parent, (ii) the certificate of incorporation or by-laws of the comparable
organizational documents of any of its significant subsidiaries or Merger
Sub, (iii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise,
license or similar authorization applicable to Parent or any of its
subsidiaries or their respective properties or assets or (iv) subject to
the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii),
(iii) and (iv), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on Parent or (y) reasonably be expected to impair or delay
the ability of Parent or Merger Sub to perform its obligations under this
Agreement. To the knowledge of Parent, no consent, approval, order or
authorization of, action by, or in respect of, or registration, declaration
or filing with, any Governmental Entity is required by or with respect to
Parent or any of its subsidiaries in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated by this Agreement,
except for (1) the filing of a pre-merger notification and report form by
Parent under the HSR Act; (2) the filing with the SEC of (A) the Form S-4
and the Proxy Statement and (B) such reports under the Exchange Act as may
be required in connection with this Agreement and the transactions
contemplated hereby; (3) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of the laws of
states in which Parent and its subsidiaries are qualified or licensed to do
business or state securities or "blue sky" laws; (4) such VOI
Registrations; (5) such filings with and approvals of the NYSE to permit
the shares of Parent Common Stock to be issued in the Merger and under the
Company Stock Plan to be listed on the NYSE; and (6) such other filings and
consents as may be required to effect the DevCo. Distribution.
(d) Parent Documents. Since January 1, 2000, Parent
has filed all required reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated
therein) with the SEC (the "Parent SEC Documents"). As of their respective
filing dates, (i) the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Documents, and (ii) none of the
Parent SEC Documents when filed (or when amended and restated and as
supplemented by subsequently filed Parent SEC Document) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents complied as to form, as of their respective dates of filing with
the SEC, in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the
consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to other
adjustments described in the notes to such unaudited statements).
(e) Information Supplied. The Form S-4, the Proxy
Statement and the Form 10 to be filed with the SEC will not, at the time
the Form S-4 becomes effective under the Securities Act, at the date the
Proxy Statement is first mailed to the Company's stockholders or at the
time of the Company Stockholders Meeting, and at the time the Form 10
becomes effective under the Securities Act, respectively, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that no representation is made by Parent
with respect to statements made therein based on information supplied or
incorporated by reference by the Company for inclusion in the Form S-4, the
Proxy Statement and the Form 10. None of the information supplied by Parent
for inclusion or incorporation by reference in the Proxy Statement and Form
10 will, at the date mailed to the Company's stockholders and at the time
of the Company Stockholders Meeting, and at the date it becomes effective,
respectively, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statement therein not misleading. Subject to the provisions set
forth in the second preceding sentence, the Form S-4 will comply as to form
in all material respects with the requirements of the Exchange Act and the
Securities Act, as appropriate, and the rules and regulations thereunder.
(f) Brokers. Except for Banc of America Securities,
no broker, investment broker, financial advisor or other person is entitled
to a broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by the Company. Except as
consented to by Parent in writing, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company shall and shall cause its
subsidiaries to carry on their respective business in the usual, regular
and ordinary course consistent with past practice and in compliance in all
material respects with all applicable laws and regulations and to pay its
debts and Taxes when due, to pay or perform other obligations when due,
and, to use best reasonable efforts to preserve intact their current
business organizations, to keep available the services of their current
officers and employees and preserve their relationships with those persons
having business dealings with them, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time.
Without limiting the generality of the foregoing, senior officers of Parent
and the Company shall meet on a regular basis to review the financial and
operational affairs of the Company and its subsidiaries, in accordance with
applicable law, and the Company shall promptly notify Parent of any event
or occurrence or emergency not in the ordinary course of its business, and
any material event involving or adversely affecting the Company or its
business. Except as expressly contemplated by this Agreement, the Company
shall not, and shall not permit any of its subsidiaries to:
(i) other than between subsidiaries or as
between the Company and any wholly owned subsidiary, declare, set
aside or pay any dividends on, make any other distributions in
respect of, or enter into any agreement with respect to its capital
stock, (y) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of its capital
stock, except upon the exercise of Company Stock Options or Company
Warrants that are, in each case, outstanding as of the date hereof
in accordance with their present terms, or which are issued prior
to the Effective Time in the ordinary course, pursuant to the
Company's Second Amended and Restated Employee Stock Purchase Plan
("ESPP") or (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries, other
securities thereof or any rights, warrants or options to acquire
any such shares or other securities (other than the issuance of
Company Common Stock upon the exercise of Company Stock Options and
Company Warrants that are, in each case, outstanding as of the date
hereof in accordance with their present terms);
(ii) issue, deliver, sell, pledge or otherwise
encumber or subject to any Lien any shares of its capital stock,
any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of
Company Common Stock upon the exercise of Company Stock Options and
Company Warrants that are, in each case, outstanding as of the date
hereof in accordance with their present terms or which are issued
in the ordinary course prior to the Effective Time, pursuant to the
ESPP, or in connection with financing arrangements permitted under
Section 4.1(vi));
(iii) amend its certificate of incorporation,
by-laws or other comparable organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or any equity
securities of, or by any other manner, any business or any person,
or otherwise acquire or agree to acquire any assets for
consideration in excess of $500,000 (other than financing
transactions involving transfers of assets solely among
subsidiaries and other than for construction in the ordinary course
of business, consistent with past practice);
(v) sell, lease, license, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of
any of its properties or assets other than in the ordinary course
of business and consistent with past practices, including but not
limited to the performance of obligations under contractual
arrangements listed on the Company Disclosure Schedule existing as
of the date hereof, or create any security interest in such assets
or properties;
(vi) except for borrowings under existing
credit facilities or lines of credit or refinancing of indebtedness
outstanding on the date hereof, incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse,
or otherwise become responsible for the obligations of any person,
or make any loans, advances or capital contributions to, or
investments in, any person other than its wholly owned subsidiaries
and as a result of ordinary advances and reimbursements to
employees and endorsements of banking instruments;
(vii) change its accounting methods (or
underlying assumptions), principles or practices affecting its
assets, liabilities or business, including without limitation, any
reserving, renewal or residual method, practice or policy, in each
case, in effect at December 31, 1999, except as required by changes
in GAAP, or change any of its methods of reporting income and
deductions for federal income tax purposes from those employed in
the preparation of the federal income tax returns of the Company
for the taxable year ending December 31, 1999, except as required
by material changes in law or regulation;
(viii) make any tax elections, or settle or
compromise any liability with respect to Taxes or agree to any
adjustment of any Tax attribute, unless required by applicable law
or made in the ordinary course of business consistent with past
practices;
(ix) enter into any agreement, commitment or
transaction to acquire or sell real estate for VOI development in
excess of $200,000 (other than pursuant to previously existing
agreements set forth in the Company Disclosure Schedule);
(x) other than in accordance with the
Company's operating budget for fiscal year 2000 which is attached
to the Company Disclosure Schedule, enter into any agreement
obligating the Company to spend more than $250,000 or any
commitment or transaction of the type described in Section 3.1(f)
of the Company Disclosure Schedule hereof not in the ordinary
course of business;
(xi) other than as set forth in the Company's
operating budget for fiscal year 2000, amend or otherwise modify,
except in the ordinary course of business, or violate the terms of,
any of the material agreements or contracts or other binding
obligations of the Company or its subsidiaries;
(xii) alter, or enter into any commitment to
alter, its interest in any corporation, association, joint venture,
partnership or business entity in which the Company directly or
indirectly holds any interest on the date hereof;
(xiii) (A) grant to any current or former
director, executive officer or other Key Employee of the Company or
its subsidiaries any increase in compensation, bonus or other
benefits, except for (i) salary, wage or benefit increases in the
ordinary course of business and (ii) bonuses under the arrangements
specifically set forth on Exhibit B hereto, and payable to the
persons and in the amounts specifically set forth on such Exhibit B
hereto; (B) grant to any such current or former director, executive
officer or other Key Employee of the Company any increase in
severance or termination pay, (C) enter into, or amend, any
employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or
former director, executive officer or Key Employee or (D) modify
any existing equity-based compensation agreement or arrangement
with any director, employee, consultant or independent contractor
to provide for acceleration of the vesting or payments of benefits
thereunder;
(xiv) except pursuant to agreements or
arrangements in effect on the date hereof and disclosed in writing
and provided or made available to Parent, pay, loan or advance any
amount to, or sell, transfer or lease any properties or assets
(real, personal or mixed, tangible or intangible) to, or enter into
any agreement or arrangement with, any of its officers or directors
or any affiliate or the immediate family members or associates of
any of its officers or directors other than compensation in the
ordinary course of business consistent with past practice;
(xv) agree or consent to any material
agreements or material modifications of existing agreements with
any Governmental Entity in respect of the operations of its
business, except (i) as required by law to renew Permits or
agreements in the ordinary course consistent with past practice, or
(ii) to effect the consummation of the transactions contemplated
hereby;
(xvi) pay, discharge, settle, compromise or
satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), including taking
any action to settle or compromise any litigation; other than any
such payment, discharge, settlement, compromise or satisfaction in
the ordinary course of business in an amount not to exceed $20,000
or any reserve established in respect of a claim as set forth in
the Company's unaudited balance sheet dated June 30, 2000;
(xvii) amend the Rights Agreement or redeem
the Rights (as defined in the Rights Agreement);
(xviii)cancel, materially amend or renew any
insurance policy other than in the ordinary course of business;
(xix) authorize, or commit or agree to take,
any of the foregoing actions or any other action that would prevent
the Company from performing or cause the Company not to perform its
covenants hereunder;
(xx) issue any communication of a general
nature to the employees of the Company without the prior written
approval of Parent (which will not be unreasonably delayed or
withheld), except for communications in the ordinary course of
business that do not relate to the Merger or other transactions
contemplated hereby; or
(xxi) take any action or fail to take any
action which would result in any of the representations and
warranties set forth in Section 3.1 failing to be true and correct.
SECTION 4.2 Advice of Changes. Except to the extent
prohibited by applicable law or regulation, the Company, Parent and Merger
Sub shall promptly advise the other party orally and in writing to the
extent it has knowledge of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty
that is not so qualified becoming untrue or inaccurate in any material
respect, (ii) the failure by it to comply in any material respect with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement and (iii) any change
or event having, or which, insofar as can reasonably be foreseen, could
reasonably be expected to have a material adverse effect on such party or
on the truth of their respective representations and warranties or the
ability of the conditions set forth in Article VI to be satisfied;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or
remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
SECTION 4.3 No Solicitation by the Company. (a)
Except as otherwise provided in this Section 4.3, until the earlier of the
Effective Time and the date of termination of this Agreement, neither the
Company, nor any of its subsidiaries or any of the officers, directors,
stockholders, agents, representatives or affiliates of it or its
subsidiaries (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) shall (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes a Company Takeover Proposal (as defined below), (ii)
participate in any discussions or negotiations regarding any Company
Takeover Proposal, (iii) enter into any agreement regarding any Company
Takeover Proposal or (iv) make or authorize any statement, recommendation
or solicitation in support of any Company Takeover Proposal. If and only to
the extent that (i) the Company Stockholders Meeting shall not have
occurred, (ii) the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do
so in order to act in a manner consistent with its fiduciary duties to the
Company's stockholders under applicable law, (iii) the Company's Board of
Directors concludes in good faith that such Company Takeover Proposal
constitutes a Company Superior Proposal (as defined below), (iv) such
Company Takeover Proposal was not solicited by it and did not otherwise
result from a breach of this Section 4.3(a), and (v) the Company provides
prior written notice to Parent of its decision to take such action, the
Company shall be permitted to (A) furnish information with respect to the
Company and any of its subsidiaries to such person pursuant to a customary
confidentiality agreement, (B) participate in discussions and negotiations
with such person, (C) subject to first complying with the provisions of
Section 5.8(b) hereof, enter into a Company Acquisition Agreement and (D)
effect a Change in the Company Recommendation (as defined below); provided,
that at least three business days prior to taking any actions set forth in
clause (C) or (D) above, the Company's Board of Directors provides Parent
written notice advising Parent that the Company's Board of Directors is
prepared to conclude that such Company Takeover Proposal constitutes a
Company Superior Proposal and during such three business day period the
Company and its advisors shall have negotiated in good faith with Parent to
make adjustments in the terms and conditions of this Agreement such that
such Company Takeover Proposal would no longer constitute a Company
Superior Proposal and the Company's Board of Directors concludes in good
faith that such Company Takeover Proposal is reasonably likely to result in
a Company Superior Proposal. The Company, its subsidiaries and their
representatives immediately shall cease and cause to be terminated any
existing activities, discussions or negotiations with any parties with
respect to any Company Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal"
means any inquiry, proposal or offer from any person relating to any direct
or indirect acquisition or purchase of a business that constitutes 20% or
more of the net revenues, net income or assets of the Company and its
subsidiaries, taken as a whole, or 20% or more of any class of equity
securities of the Company, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of
any class of any equity securities of the Company, or any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company (or any subsidiary
of the Company whose business constitutes 20% or more of the net revenues,
net income or assets of the Company and its subsidiaries, taken as a
whole), other than the transactions contemplated by this Agreement or any
securitization or financing transactions consistent with past practice. For
purposes of this Agreement, a "Company Superior Proposal" means any
proposal made by a third party (A) to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, sale,
lease, exchange, transfer or other disposition (including a contribution to
a joint venture), dissolution or similar transaction, for consideration
consisting of cash and/or securities, 100% of the combined voting power of
the shares of the Company's capital stock then outstanding or 100% of the
net revenues, net income or assets of the Company and its subsidiaries,
taken as a whole and (B) which is otherwise on terms which the Board of
Directors of the Company determines in its good faith judgment (after
consultation with (i) either Stephens Inc., Bear Stearns & Co., Inc. or
another nationally recognized investment banking firm and (ii) outside
counsel), taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the person making the
proposal, that the proposal, (i) if consummated would result in a
transaction that is more favorable to the Company's stockholders from a
financial point of view than the Merger and the other transactions
contemplated hereby and (ii) is reasonably capable of being completed,
including to the extent required, financing which is then committed or
which, in the good faith judgment of the Board of Directors of the Company,
is reasonably capable of being obtained by such third party.
(b) Except as expressly permitted by this Section
4.3, neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw, modify or qualify, or propose publicly to
withdraw, modify or qualify, in a manner adverse to Parent, the approval of
the Agreement, the Merger or the Company Recommendation (as defined in
Section 5.1(d)) or take any action or make any statement in connection with
the Company Stockholders Meeting inconsistent with such approval or Company
Recommendation (collectively, a "Change in the Company Recommendation"),
(ii) approve or recommend, or propose publicly to approve or recommend, any
Company Takeover Proposal, or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, a "Company Acquisition Agreement") related to any
Company Takeover Proposal. For purposes of this Agreement, a Change in the
Company Recommendation shall include any approval or recommendation (or
public proposal to approve or recommend), by the Company Board of a Company
Takeover Proposal, or any failure by the Company Board to recommend against
a Company Takeover Proposal. Notwithstanding the foregoing, the Board of
Directors of the Company, to the extent that it determines in good faith,
after consultation with outside counsel, that in light of a Company
Superior Proposal it is necessary to do so in order to act in a manner
consistent with its fiduciary duties to the Company's stockholders under
applicable law, may terminate this Agreement solely in order to
concurrently enter into a Company Acquisition Agreement with respect to any
Company Superior Proposal, but only at a time that is after the third
business day following Parent's receipt of written notice advising Parent
that the Board of Directors of the Company is prepared to accept a Company
Superior Proposal, specifying the material terms and conditions of such
Company Superior Proposal and identifying the person making such Company
Superior Proposal, all of which information will be kept confidential by
Parent in accordance with the terms of the Confidentiality Agreement (as
defined in Section 5.4).
(c) In addition to the obligations of the Company set
forth in paragraphs (a) and (b) of this Section 4.3, the Company shall
immediately advise Parent orally and in writing of any request for
information or of any Company Takeover Proposal, the material terms and
conditions of such request or Company Takeover Proposal and the identity of
the person making such request or Company Takeover Proposal. The Company
will keep Parent informed of the status and details (including amendments
or proposed amendments) of any such request or Company Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall
prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act
or from making any disclosure if, in the good faith judgment of the Board
of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, any such disclosure relating to a
Company Takeover Proposal shall be deemed to be a Change in the Company
Recommendation unless the Board of Directors of the Company reaffirms the
Company Recommendation in such disclosure.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4, Proxy Statement and
Form 10; Stockholders Meeting.
(a) As promptly as practicable following the date of
this Agreement, Parent and the Company shall prepare and file with the SEC
the Form S-4, the Proxy Statement and the Form 10. Each of Parent and the
Company shall use all reasonable efforts to have the Form S-4, in which the
Proxy Statement shall be included, declared effective under the Securities
Act and the Form 10 declared effective under the Exchange Act as promptly
as practicable after such filing. The Company shall use its reasonable best
efforts to cause the Proxy Statement to be mailed to its stockholders as
promptly as practicable after the Form S-4 is declared effective; provided,
that the Company may elect to postpone the mailing of the Proxy Statement
to a date that is no later than at least 20 business days prior to the date
Parent informs the Company that the DevCo. Distribution is reasonably
capable of being completed.
(b) Each of the Company and Parent covenants that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading and (ii) the Proxy Statement will, at the date it is first
mailed to the stockholders of the Company, or at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement and the Form
S-4 will comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act, as applicable. Notwithstanding
the foregoing, (i) no representation or covenant is made by the Company
with respect to statements made or incorporated by reference based on
information supplied in writing by Parent specifically for inclusion or
incorporation by reference in the Form S-4 or Proxy Statement and (ii) no
representation or covenant is made by Parent with respect to statements
made or incorporated by reference based on information supplied in writing
by the Company for inclusion or incorporation by reference in the Form S-4
or the Proxy Statement. If at any time prior to the Effective Time there
shall occur (i) any event with respect to the Company or any of its
subsidiaries, or with respect to other information supplied by Company for
inclusion in the Form S-4 or the Proxy Statement or (ii) any event with
respect to Parent, or with respect to information supplied by Parent for
inclusion in the Form S-4 or the Proxy Statement, in either case, which
event is required to be described in an amendment of, or a supplement, to
the Form S-4 or the Proxy Statement, such event shall be so described, and
such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of Company.
(c) Each of the Company and Parent shall promptly
notify the other of the receipt of any comments from the SEC or its staff
or any other appropriate government official and of any requests by the SEC
or its staff or any other appropriate government official for amendments or
supplements to any of the filings with the SEC in connection with the
Merger and other transactions contemplated hereby or for additional
information and shall supply the other with copies of all correspondence
between the Company or any of its representatives, or Parent or any of its
representatives, as the case may be, on the one hand, and the SEC or its
staff or any other appropriate government official, on the other hand, with
respect thereto. The Company and Parent shall use their respective
reasonable efforts to respond to any comments of the SEC with respect to
the Form S-4 and the Proxy Statement as promptly as practicable. The
Company and Parent shall cooperate with each other and provide to each
other all information necessary in order to prepare the Form S-4, the Proxy
Statement and the Form 10, and shall provide promptly to the other party
any information such party may obtain that could necessitate amending any
such document.
(d) The Company shall, as promptly as practicable
after the Form S-4 is declared effective under the Securities Act, duly
call, give notice of, convene and hold the Company Stockholders Meeting in
accordance with the DGCL for the purpose of obtaining the Company
Stockholder Approval; provided, that the Company may elect to postpone the
Company Stockholders Meeting to a date that is no later than 35 business
days after the date of mailing of the Proxy Statement in accordance with
Section 5.1(a). Subject to Section 4.3, the Board of Directors of the
Company shall recommend to the Company's stockholders the approval and
adoption of this Agreement, the Merger and the other transactions
contemplated hereby (the "Company Recommendation"). Without limiting the
generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 5.1(d) shall not be affected
by the commencement, public proposal, public disclosure or communication to
the Company of any Company Takeover Proposal. Notwithstanding any Change in
the Company Recommendation, this Agreement and the Merger shall be
submitted to the stockholders of the Company at the Company Stockholders
Meeting for the purpose of approving the Agreement and the Merger and
nothing contained herein shall be deemed to relieve the Company of such
obligation unless this Agreement has been terminated.
(e) The Company shall coordinate and cooperate with
Parent with respect to the timing of the Company Stockholders Meeting.
SECTION 5.2 Letter of the Company's Accountants. The Company
shall cause to be delivered to Parent a letter from the Company's
independent accountants dated a date within two business days before the
Closing Date addressed to Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 5.3 Letter of Parent's Accountants. Parent shall
cause to be delivered to the Company a letter from Parent's independent
accountants dated a date within two business days before the Closing Date
addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for comfort letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
SECTION 5.4 Access to Information; Confidentiality.
(a) Subject to the Secrecy Agreement, dated as of
August 11, 2000, as amended, between Parent and the Company (the
"Confidentiality Agreement"), and subject to the restrictions contained in
confidentiality agreements to which the Company is subject (which the
Company will use its reasonable best efforts to have waived) and applicable
law, the Company shall, and shall cause its subsidiaries to, afford Parent
and to the officers, employees, accountants, counsel, financial advisors
and other representatives of Parent, reasonable access during normal
business hours during the period prior to the Effective Time to all its
respective properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall, and shall cause each of its
subsidiaries to, furnish promptly to Parent (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and
(b) all other information concerning its business, properties and personnel
as such other party may reasonably request. In addition, the Company will
deliver, or cause to be delivered, to Parent the internal or external
reports reasonably required by Parent promptly after such reports are made
available to the Company's personnel. No review pursuant to this Section
5.4 shall affect any representation or warranty given by the Company to
Parent. Parent will hold, and will cause its officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms
of the Confidentiality Agreement.
(b) As soon as practicable after the execution of
this Agreement, the Company shall permit Parent to electronically link the
Company's financial reporting system to Parent's financial reporting system
("Hyperion"). The link to Hyperion will be completed by Parent's financial
reporting staff, with assistance from the Company's accounting staff, at no
incremental cost to the Company and provided that such installment will not
interfere with or disrupt the normal operation of the Company's financial
reporting system or violate any applicable software licenses. Parent will
provide the necessary Hyperion software to be installed on a computer in
the Company's accounting department; provided, however, that the
information retrieved from the Company's financial reporting system will
not be made available to persons who are directly involved in pricing or
any other competitive activity at Parent; provided, further, that such
persons shall not use such information other than for purposes of assessing
the financial condition of the Company for purposes of the transactions
contemplated by this Agreement, and shall not share, provide or sell the
information to any third party or use the information in any manner that
could reasonably be considered a restraint on competition or result in a
violation of any applicable laws. Any information provided under this
Section 5.4(b) shall be subject to the terms of the Confidentiality
Agreement.
SECTION 5.5 Reasonable Efforts. (a) Subject to the terms and
conditions set forth in this Agreement, each of the parties hereto shall
use its reasonable good faith efforts (subject to, and in accordance with,
applicable law) to take promptly, or cause to be taken, all actions, and to
do promptly, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Merger
and the other transactions contemplated by this Agreement, including (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary
to obtain an approval or waiver from, or to avoid an action or proceeding
by, any Governmental Entity, including, without limitation, the VOI
Registrations (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated by this
Agreement, including seeking to have any stay, temporary restraining order
or injunctions entered by any court or other Governmental Entity vacated or
reversed and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully
carry out the purposes of, this Agreement, subject to the limitations on
divestiture set forth in subsection (c) below.
(b) In connection with and without limiting the
foregoing, the Company and Parent shall (i) take all action necessary to
ensure that no state takeover statute or similar statute or regulation is
or becomes applicable to this Agreement, the Stock Option Agreement or the
Merger or any of the other transactions contemplated hereby and thereby,
and (ii) if any state takeover statute or similar statute or regulation
becomes applicable to this Agreement, the Stock Option Agreement or the
Merger or any other transaction contemplated hereby and thereby, take all
action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise to minimize the effect of such statute or regulation
on the Merger, the DevCo. Distribution and the other transactions
contemplated hereby and thereby.
(c) Each party agrees to provide the other party with
copies of any documentation or written materials provided to or by
Governmental Entities with respect to the HSR approval process. Parent
shall not be required to agree to any divestiture by Parent or any of
Parent's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of Parent or its subsidiaries or affiliates or
of the Company, its affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to
own or exercise control of such assets, properties and stock.
(d) The Company shall use its reasonable good faith
efforts to assist Parent and certain of its subsidiaries that are subject
to the reporting requirements of the Exchange Act (the "Reporting Subs") in
the preparation and filing, on the earliest practicable date after the date
of this Agreement, of Current Reports on Form 8-K for each of Parent and
the Reporting Subs containing the information required by Item
512(a)(1)(ii) of Regulation S-K of the SEC, including the historical
financial statements of the Company required by Rule 3-05 of Regulation S-X
of the SEC and the pro forma financial information with respect to the
business combination contemplated by this Agreement required by Article 11
of Regulation S-X of the SEC, and the Company shall take all other action
necessary to allow Parent and the Reporting Subs to issue and sell
securities on a continuous or delayed basis in one or more public offerings
registered under the Securities Act.
SECTION 5.6 Company Equity-Based Incentives. (a) As of the
Effective Time, (i) each outstanding Company Stock Option and Company
Warrant shall be converted into an option or warrant, as the case may be
(as applicable, an "Adjusted Option" or "Adjusted Warrant") to purchase the
number of shares of Parent Common Stock (rounded down to the nearest whole
number of shares of Parent Common Stock) equal to the number of shares of
Company Common Stock subject to such Company Stock Option or Company
Warrant immediately prior to the Effective Time multiplied by the Exchange
Ratio, at an exercise price per share (rounded up to the nearest whole
cent) equal to the exercise price for each such share of
Company Common Stock subject to such Company Stock Option or Company
Warrant divided by the Exchange Ratio, and all references in each such
option or warrant to the Company shall be deemed to refer to Parent, where
appropriate; provided, however, Parent shall assume the obligations of the
Company under the applicable Company Stock Plan and agreements under which
the Adjusted Option or Adjusted Warrant was originally granted, subject to
the adjustments required by this Section 5.6(a). The other terms of each
such Adjusted Option and Adjusted Warrant, and the plans under which they
were issued, shall continue to apply in accordance with their terms.
(b) As of the Effective Time, (i) each outstanding
Company Award other than Company Stock Options and Company Warrants
(including restricted stock, stock appreciation rights, performance shares,
deferred stock, phantom stock, stock equivalents and stock units) under the
Company Stock Plans shall be converted into the same instrument of Parent,
in each case with such adjustments (and no other adjustments) to the terms
of such Company Awards as are necessary to preserve the value inherent in
such Company Awards with no detrimental or beneficial effects on the holder
thereof and (ii) Parent shall assume the obligations of the Company under
the Company Awards, subject to the adjustments required by this Section
5.6(b). The other terms of each such Company Award, and the plans or
agreements under which they were issued, shall continue to apply in
accordance with their terms.
(c) The Company and Parent agree that the Company
Stock Plans and Parent equity-based incentive plans shall be amended, to
the extent necessary, to reflect the transactions contemplated by this
Agreement, including, but not limited to the conversion of shares of
Company Common Stock held or to be awarded or paid pursuant to such benefit
plans, programs or arrangements into shares of Parent Common Stock on a
basis consistent with the transactions contemplated by this Agreement.
After the Effective Time, Parent shall promptly issue new agreements
reflecting each holder's Adjusted Options, Adjusted Warrants or adjusted
Company Awards.
(d) Parent shall (i) reserve for issuance the number
of shares of Parent Common Stock that will become subject to the benefit
plans, programs and arrangements referred to in this Section 5.6 and (ii)
issue or cause to be issued the appropriate number of shares of Parent
Common Stock pursuant to applicable plans, programs and arrangements, upon
the exercise or maturation of rights existing thereunder on the Effective
Time or thereafter granted or awarded. As soon as practicable following the
Effective Time, Parent shall prepare and file with the SEC a registration
statement on Form S-8 (or other appropriate form) registering a number of
shares of Parent Common Stock necessary to fulfill Parent's obligations
under this Section 5.6. Such registration statement shall be kept effective
(and the current status of the prospectus required thereby shall be
maintained) for at least as long as Adjusted Options, Adjusted Warrants or
adjusted Company Awards remain outstanding.
(e) Parent and the Company shall each approve the
conversion of the outstanding Company Stock Options, Company Warrants and
Company Awards pursuant to this Section 5.6 in a manner sufficient to
comply with the exemptions provided by Rule 16b-3 of the Exchange Act.
(f) The Company shall take all actions necessary to
effect, as of immediately prior to the Effective Time, the termination of
the ESPP and of any offering period then in effect under the ESPP, in a
manner approved by Parent.
SECTION 5.7 Indemnification, Exculpation and Insurance. (a)
All rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor
of the current or former directors or officers of the Company and its
subsidiaries as provided in their respective certificates of incorporation
or by- laws (or comparable organizational documents) and any
indemnification agreements or arrangements of the Company and its
subsidiaries shall survive the Merger and shall continue in full force and
effect in accordance with their terms, and shall not be amended, repealed
or otherwise modified for a period of six years after the Effective Time in
any manner that would adversely affect the rights thereunder of such
individuals.
(b) In the event that the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges into any
other person and is not the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in
each such case, proper provision will be made so that the successors and
assigns of the Surviving Corporation will assume the obligations thereof
set forth in this Section 5.7.
(c) The provisions of this Section 5.7 (i) are
intended to be for the benefit of, and will be enforceable by, each
indemnified party, his or her heirs and his or her representatives and (ii)
are in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such person may have by contract
or otherwise.
(d) For six years after the Effective Time, the
Surviving Corporation shall maintain in effect the Company's current
directors' and officers' liability insurance covering acts or omissions
occurring prior to the Effective Time with respect to those persons who are
currently covered by the Company's directors' and officers' liability
insurance policy on terms with respect to such coverage and amount no less
favorable to the Company's directors and officers currently covered by such
insurance than those of such policy in effect on the date hereof; provided,
that the Surviving Corporation may substitute therefor policies of Parent
or its subsidiaries containing terms with respect to coverage and amount no
less favorable to such directors or officers; provided, further, that in no
event shall the Surviving Corporation be required to pay aggregate premiums
for insurance under this Section 5.7(d) in excess of 200% of the aggregate
premiums paid by the Company in 2000 on an annualized basis for such
purpose and, if the annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding such amount.
Notwithstanding the foregoing, the Company may obtain directors' and
officers' liability insurance covering all acts or omissions prior to the
Effective Time at a cost not to exceed 125% of the cost of the current
directors' and officers' liability insurance maintained by the Company.
(e) Parent shall cause the Surviving Corporation or
any successor thereto to comply with its obligations under this Section
5.7.
SECTION 5.8 Fees and Expenses. (a) Except as provided in
this Section 5.8, all fees and expenses incurred in connection with the
Merger, this Agreement, and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not
the Merger is consummated.
(b) (i) In the event that this Agreement is
terminated by Parent pursuant to Section 7.1(c), then, upon such termination,
the Company shallpay Parent a fee equal to $32,000,000 by wire transfer of
same day funds.
(ii) In the event that (A) a Pre-Termination
Takeover Proposal Event (as defined below) shall occur after the
date of this Agreement and thereafter this Agreement is terminated
by either Parent or the Company pursuant to Section 7.1(b)(i) and
(B) prior to the date that is 12 months after the date of such
termination the Company enters into a Company Acquisition
Agreement, then the Company shall promptly, but in no event later
than two business days after the date such Company Acquisition
Agreement is entered into, pay Parent a fee equal to $32,000,000 by
wire transfer of same day funds.
(iii) In the event that (A) a Pre-Termination
Takeover Proposal Event shall occur after the date of this
Agreement, (B) this Agreement is terminated by either Parent or the
Company pursuant to Section 7.1(b)(ii), (C) the Average Trading
Price shall not be below $6.00 per share, and (D) prior to the date
that is 12 months after the date of such termination the Company
enters into a Company Acquisition Agreement, then the Company shall
promptly, but in no event later than two business days after the
date such Company Acquisition Agreement is entered into, pay Parent
a fee equal to $32,000,000 by wire transfer of the same day funds.
(iv) In the event that this Agreement is
terminated by the Company pursuant to Section 7.1(d), then
concurrently with such termination, the Company shall pay to Parent
a fee equal to $32,000,000 by wire transfer of same day funds.
(v) In the event that (A) a Pre-Termination
Takeover Proposal Event shall occur after the date of this
Agreement, (B) the Company Board of Directors has effected a Change
in the Company Recommendation, and (C) this Agreement is terminated
by either Parent or Company for any reason provided for under
Section 7.1, then, promptly, but in no event later than two
business days after such termination, the Company shall pay Parent
a fee equal to $32,000,000 by wire transfer of same day funds.
(vi) For purposes of this Section 5.8(b), a
"Pre- Termination Takeover Proposal Event" shall be deemed to occur
if a Company Takeover Proposal shall have been made known to the
Company or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced
an intention (whether or not conditional) to make a Company
Takeover Proposal. The Company acknowledges that the agreements
contained in this Section 5.8(b) are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay the amount due
pursuant to this Section 5.8(b), and, in order to obtain such
payment, Parent commences a suit which results in a judgment
against the Company for the fee set forth in this Section 5.8(b),
the Company shall pay to Parent its costs and expenses (including
attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the rate on
six-month U.S. Treasury obligations plus 300 basis points in effect
on the date such payment was required to be made.
(c) The Company shall in no event be required to pay
more than one fee pursuant to Section 5.8(b). In the event that an amount
is payable by the Company pursuant to this Section 5.8, then, not
withstanding anything in this Agreement or the Voting Agreement to the
contrary, (i) such amount shall be full compensation and liquidated damages
for the loss suffered by Parent as a result of the failure of the
transactions contemplated by this Agreement and the Voting Agreement to be
consummated and to avoid the difficulty of determining the damages under
the circumstances and (ii) such amount shall be in lieu of any other
entitlement of Parent, and shall be the sole and exclusive liability of the
Company and the Company's stockholders, with respect to all matters arising
under or relating to this Agreement and the Voting Agreement, unless there
has been a willful or material breach of this Agreement or the Voting
Agreement by the Company or a stockholder of the Company, respectively.
SECTION 5.9 Public Announcements. Parent and the Company
will consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with and use reasonable
efforts to agree on, any press release or other public statements and any
internal communications with respect to the transactions contemplated by
this Agreement and the Stock Option Agreement, including the Merger, and
shall not issue any such press release or make any such public statement
prior to such consultation, except as either party may determine is
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange. The parties agree
that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
SECTION 5.10 Affiliates. To the extent practicable,
concurrently with the execution of this Agreement (or to the extent not
practicable, as soon as practicable and in any event within 10 business
days after the date hereof), the Company shall deliver to Parent a written
agreement substantially in the form attached as Exhibit 5.10(a) hereto of
all of the persons who are "affiliates" of the Company for purposes of Rule
145 under the Securities Act; all of such affiliates, who are affiliates as
of the date of this Agreement, are identified in Section 5.10 of the
Company Disclosure Schedule. Section 5.10 of the Company Disclosure
Schedule shall be updated by the Company as necessary to reflect changes
from the date hereof and the Company shall use reasonable best efforts to
cause each person added to such schedule after the date hereof to deliver a
similar agreement.
SECTION 5.11 Stock Exchange Listing. Parent shall use best
efforts to cause the Parent Common Stock issuable (i) under Article II or
(ii) upon exercise of the Adjusted Options pursuant to Section 5.6 to be
approved for issuance on the NYSE, in each case subject to official notice
of issuance, as promptly as practicable after the date hereof, and in any
event prior to the Closing Date.
SECTION 5.12 Stockholder Litigation. Each of the Company and
Parent shall give the other the reasonable opportunity to participate in
the defense of any stockholder litigation against the Company or Parent, as
applicable, and its directors relating to the transactions contemplated by
this Agreement.
SECTION 5.13 DevCo. Distribution.
(a) Unless Parent shall determine that the Company
shall not effect the DevCo. Distribution, it shall prepare and deliver to
the Company the proposed terms of the DevCo. Distribution and forms of the
agreements proposed to be entered into by the Company and DevCo. in
connection with the DevCo. Distribution on or prior to December 7, 2000.
(b) Prior to the Closing, the Company shall use its
reasonable efforts to complete the actions specified in Exhibit A as long
as those actions do not adversely affect the business of the Company and
its wholly owned subsidiaries before the DevCo. Distribution; provided,
however, that the completion of actions under this Section 5.13 shall not
be a condition to the Merger. The Company shall take all necessary action
to create DevCo. and transfer to DevCo. such assets and liabilities from
the Company and its subsidiaries and execute all necessary agreements that
shall govern the relationships between the Surviving Corporation and DevCo.
following the DevCo. Distribution, all in accordance with Parent's
instructions set forth on Exhibit A. The DevCo. Distribution must occur
immediately before the Effective Time unless otherwise agreed to by the
Company.
(c) The Company shall not take, or cause to be taken,
any action that would or might reasonably be expected to prevent or
materially delay Parent, the Company or DevCo. from consummating the
transactions contemplated in Exhibit A, including any action which may
materially limit the ability of Parent, the Company or DevCo. to consummate
the transactions contemplated thereby as a result of any regulatory
concerns.
(d) As promptly as practicable following the date of
this Agreement, the Company shall prepare and file with the SEC the Form
10. The Company shall use its best reasonable efforts to have the Form 10
declared effective under the Exchange Act as promptly as practicable after
such filing and to cause the Form 10 to be mailed to its stockholders as
promptly as practicable after the Form 10 is declared effective.
(e) The Company shall pay all expenses arising from
or incidental to the DevCo. Distribution (the "DevCo. Expenses"); provided,
however, that Parent shall pay the DevCo. Expenses if this Agreement is
terminated by Parent and the Company pursuant to Section 7.1(a) or by
either Parent or the Company pursuant to Section 7.1(b).
SECTION 5.14 Rights Agreement. The Company shall enter into
an amendment to the Rights Agreement, which will provide, among other
things, for purposes: (i) of the definitions of "Acquiring Person" and
"Beneficial Owner" and (ii) of the definitions of "Affiliate" of an
"Acquiring Person":
(i) as a result of entering into this
Agreement and the Voting Agreement, that Parent, its subsidiaries
(including Merger Sub) and its affiliates shall not be deemed to be
an "Affiliate" under the Rights Agreement;
(ii) as a result of entering into this
Agreement and the Voting Agreement, that Parent and Merger Sub
shall not be deemed to be "Beneficial Owners" (as such term is used
in the Rights Agreement) of shares of Company Common Stock owned by
Parent, its subsidiaries and its affiliates; and
(iii) as a result of entering into this
Agreement and the Voting Agreement, that Parent and Merger Sub
shall not be deemed to be an "Acquiring Person" (as such term is
used in the Rights Agreement).
Such amendment shall provide that such amended provisions of
the Rights Agreement cannot be further amended and the Rights cannot be
redeemed without the prior written consent of Parent.
SECTION 5.15 Standstill Agreements; Confidentiality
Agreements. During the period from the date of this Agreement through the
Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any
of its respective subsidiaries is a party. During such period, the Company
shall enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the
terms and provisions thereof in any court of the United States of America
or of any state having jurisdiction.
SECTION 5.16 Conveyance Taxes. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and
stamp taxes, any transfer, recording, registration and other fees or any
similar taxes which become payable in connection with the transactions
contemplated by this Agreement that are required or permitted to be filed
on or before the Effective Time. The Company shall pay on behalf of its
stockholders, without deduction or withholding from any amount payable to
the holders of Company Common Stock, any such taxes or fees imposed by any
Governmental Entity which become payable in connection with the
transactions contemplated by this Agreement for which such stockholders are
primarily liable and in no event shall Parent pay such amounts.
SECTION 5.17 Employee Benefits.
(a) Parent shall, or shall cause the Surviving
Corporation and its subsidiaries to, give those employees who are, as of
the Closing, employed by the Company and its subsidiaries (the "Continuing
Employees") full credit for purposes of eligibility and vesting under any
employee benefit plans or arrangements maintained by Parent, the Surviving
Corporation or any subsidiary of Parent or the Surviving Corporation for
such Continuing Employees' service with the Company or any subsidiary of
the Company to the same extent recognized by the Company for similar
purposes immediately prior to the Effective Time. Parent shall, or shall
cause the Surviving Corporation and its subsidiaries to, waive all
limitations as to preexisting conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Continuing Employees under any welfare plan that such employees may be
eligible to participate in after the Effective Time, other than limitations
or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Effective Time under
any welfare plan maintained for the Continuing Employees immediately prior
to the Effective Time, and provide credit under any such welfare plan for
any copayments, deductibles and out-of-pocket expenditures for the
remainder of the coverage period during which any transfer of coverage
occurs.
(b) From and after the Effective Time, Parent shall,
and shall cause the Surviving Corporation to, honor in accordance with the
terms thereof, without offset, deduction, counterclaim, interruption or
deferment (other than withholdings under applicable tax law) under all
Plans and administrative practices adopted thereunder, including all
employment, change in control, severance, termination, consulting and
unfunded retirement or benefit agreements or arrangements that have been
provided or made available to Parent.
SECTION 5.18 Resignation and Appointment of the Directors of
the Trustee. The Company shall take action to obtain the resignations of
Brian Keller and Michael Hug (the "Company Directors") from the board of
directors of the Trustee (the "Trustee Board") and to have persons chosen
by Parent (the "Parent Directors") appointed to the Trustee Board
immediately prior to the Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver by each of Parent and the Company on
or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder
Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been
terminated or shall have expired.
(c) Governmental and Regulatory Approvals. Other than
the filing provided for under Section 1.3 and the waiting period pursuant
to the HSR Act (which is addressed in Section 6.1(b)), (i) all consents,
approvals and actions of, filings with and notices to any Governmental
Entity required by the Company, Parent or any of their subsidiaries to
consummate the Merger and the other transactions contemplated hereby, the
failure of which to be obtained or made is reasonably expected to have a
material adverse effect on Parent and its subsidiaries and prospective
subsidiaries, taken as a whole, shall have been obtained or made and (ii)
all the registrations and amendments thereto set forth on Section 6.1(c) of
the Company Disclosure Schedule shall have been made and the related
consents, approvals or exemptions under state timeshare registration laws
or, in states that do not have specific timeshare laws, related real estate
or securities registration laws, shall have been obtained, other than the
registrations and amendments thereto set forth on Section 6.1(c) of the
Company Disclosure Schedule that are (A) marked with an asterisk and (B)
which the failure to obtain the related consent, approval or exemption
would not be reasonably expected to result in a material business impact on
the Company.
(d) Third Party Consents. Parent shall have been
furnished with evidence satisfactory to it that the Company has obtained
the consents of third parties to any agreement or instrument the absence of
which would result in the representations set forth in Section 3.1(d)
hereof being untrue (disregarding any disclosure relating thereto in the
Company Disclosure Schedule).
(e) No Injunctions or Restraints. No judgment, order,
decree, statute, law, ordinance, rule or regulation, entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity
of competent jurisdiction or other legal restraint or prohibition
(collectively, "Restraints") shall be in effect (i) preventing the
consummation of the Merger, or (ii) which otherwise is reasonably likely to
have a material adverse effect on the Company or Parent, as applicable;
provided, however, that each of the parties shall have used its best
efforts to prevent the entry of any such Restraints and to appeal as
promptly as possible any such Restraints that may be entered.
(f) Form S-4. The Form S-4 shall have become
effective under the Securities Act and no stop order or proceedings seeking
a stop order shall have been entered or be pending by the SEC.
(g) Stock Exchange Listing. The shares of Parent
Common Stock issuable to the Company's stockholders (i) as contemplated by
Article II or (ii) upon exercise of the Adjusted Options pursuant to
Section 5.6 shall have been approved for listing on the NYSE, subject to
official notice of issuance.
SECTION 6.2 Conditions to Obligations of Parent. The
obligation of Parent to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The
representations and warranties of the Company set forth herein (i) that are
qualified as to materiality shall be true and correct at and as of the
Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), and
(ii) that are not qualified as to materiality shall be true and correct at
and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
date) in all material respects.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations
required to be performed by it at or prior to the Closing Date under this
Agreement and in connection with the DevCo. Distribution.
(c) Regulatory Condition. No condition or requirement
has been imposed by one or more Governmental Entities in connection with
any required approval by them of the Merger relating to the transactions
contemplated hereunder which, either alone or together with all such other
conditions or requirements requires the Company or its subsidiaries to be
operated in a manner which is materially different from industry standards
in effect or which is different from the manner in which the Company
currently conducts its operations on the date hereof and which materially
adversely affects the business, financial condition or results of
operations or prospects of the Company and its subsidiaries, taken as a
whole, or their businesses, other than their commercial finance businesses,
taken as a whole.
(d) Resignation and Appointment of the Directors of
the Trustee. The Company shall have obtained the resignations of the
Company Directors from the Trustee Board and shall have appointed the
Parent Directors to the Trustee Board, subject to consummation of the
Merger and acceptance of such appointment.
SECTION 6.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The
representations and warranties of Parent set forth herein (i) that are
qualified as to materiality shall be true and correct at and as of the
Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), and
(ii) that are not qualified as to materiality shall be true and correct at
and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
date) in all material respects.
(b) Performance of Obligations of Parent. Parent
shall have performed in all material respects all obligations required to
be performed by it at or prior to the Closing Date under this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, and whether before or after the
Company Stockholder Approval:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been
consummated by March 31, 2001, provided, however, that the right to
terminate this Agreement pursuant to this Section 7.1(b) shall not
be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the
Merger to be consummated by such time; provided, further, that such
a date may be extended for not more than 30 days, by either party,
by written notice to the (x) other party if the Merger shall not
have been consummated solely as a result of the condition set forth
in Section 6.1(c) failing to have been satisfied and the extending
party reasonably believes that the relevant approvals will be
obtained during such extension period or (y) the delivery by Parent
of the Closing Extension Notice;
(ii) if the Company Stockholder Approval shall
not have been obtained at the Company Stockholders Meeting duly
convened therefor or at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the
effects set forth in Section 6.1(d) shall be in effect and shall
have become final and nonappealable; provided, that the party
seeking to terminate this Agreement pursuant to this Section
7.1(b)(iii) shall have used best efforts to prevent the entry of
and to remove such Restraint;
(c) by Parent, if the Company shall have failed to
make the Company Recommendation in the Proxy Statement or effected a Change
in the Company Recommendation (or resolved to take any such action),
whether or not permitted by the terms hereof, or shall have breached its
obligations under this Agreement by reason of a failure to call or convene
the Company Stockholders Meeting in accordance with Section 5.1(d);
(d) by the Company in accordance with Section 4.3(b);
provided, that in order for the termination of this Agreement pursuant to
this paragraph (d) to be deemed effective, the Company shall have complied
with all provisions of Section 4.3, including the notice provisions
therein, and with applicable requirements, including the payment of the fee
referred to in paragraph (b)(iv) of Section 5.8; or
The party desiring to terminate this Agreement pursuant to
clause (b), (c) or (d) of this Section 7.1 shall give written notice of
such termination to the other party in accordance with Section 8.2,
specifying the provision hereof pursuant to which such termination is
effected.
SECTION 7.2 Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent as provided
in Section 7.1, this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of Parent or the
Company, other than the provisions of Section 3.1(z), Section 3.2(f), the
last sentence of Section 5.4(a), Section 5.8, this Section 7.2 and Article
VIII, which provisions survive such termination, provided, however, that
nothing herein (including the payment of any amounts pursuant to Section
5.8 hereof) shall relieve any party from any liability for any willful or
material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the
parties at any time before or after the Company Stockholder Approval;
provided, however, that after such approval, there shall not be made any
amendment that by law requires further approval by the stockholders of the
Company without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of
all of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any
of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.3, waive compliance by
the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
SECTION 7.5 Procedure for Termination. A termination of this
Agreement pursuant to Section 7.1 shall, in order to be effective, require,
in the case of Parent or the Company, action by its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective
Time.
SECTION 8.2 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall
be deemed given if delivered personally, telecopied (which is confirmed) or
sent by overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Merger Sub, to
Cendant Corporation
Six Sylvan Way
Parsippany, NJ 07054
Telecopy No.: (973) 496-5335
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
Attention: David Fox
(b) if to the Company, to
Fairfield Communities, Inc.
8669 Commodity Circle
#200
Orlando, Florida 32819
Telecopy No.: (407) 370-5222
Attention: General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
2727 North Harwood Street
Dallas, Texas 75201
Telecopy No.: (214) 969-5100
Attention: Mark V. Minton
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person
that directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person, where
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a person,
whether through the ownership of voting securities, by contract, as trustee
or executor, or otherwise; provided, that in the case of the Company, the
Trust shall be deemed an affiliate.
(b) "material adverse change" or "material adverse
effect" means, when used in connection with the Company, Parent, an
Association, the Trust or the Trustee, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected to
be, materially adverse to the business, financial condition or results of
operations or prospects of such party and its subsidiaries taken as a
whole.
(c) "material business impact" means any change,
effect, event, occurrence or state of facts that, individually or in the
aggregate with any other change, effect, event, occurrence or state of
facts, is, or is reasonably likely to constitute or result in (i) loss
(including a loss of a benefit or right) or damage that is material to the
Company and its subsidiaries taken as a whole, (ii) impairment of or
interference in the ability of the Company or any of its subsidiaries to
conduct or operate their businesses as conducted or operated prior to the
date hereof, other than an impairment or interference which is not
significant to the Company and its subsidiaries taken as a whole, (iii)
detriment to the Company's good standing or reputation, (iv) an increase in
payments due to any employee in violation of Section 4.1(xiii) or Section
4.1(xiv) or (v) a material delay in the transactions contemplated hereby.
(d) "person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(e) a "subsidiary" of any person means another
person, an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which)
is owned directly or indirectly by such first person.
(f) "knowledge" of any person which is not an
individual means the actual knowledge of such person's executive officers
or directors, after due reasonable investigation.
(g) "VOI Laws" means the applicable provisions of (i)
the Consumer Credit Protection Act; (ii) Regulation Z of the Federal
Reserve Board; (iii) the Equal Credit Opportunity Act; (iv) Regulation B of
the Federal Reserve Board; (v) the Federal Trade Commission's 3-day
cooling-off Rule for Door-to-Door Sales; (vi) Section 5 of the Federal
Trade Commission Act; (vii) the Interstate Land Sales Full Disclosure Act;
(viii) the federal postal laws; (ix) usury laws; (x) trade practices, home
and telephone solicitation, sweepstakes, anti- lottery and consumer credit
and protection laws; (xi) real estate sales licensing, disclosure,
reporting condominium and timeshare and escrow laws; (xii) the Americans
With Disabilities Act and related accessibility guidelines; (xiii) the Real
Estate Settlement Procedures Act; (xiv) the Truth-in-Lending Act; (xv) the
Fair Housing Act; (xvi) Regulation X; (xvii) Civil Rights Act of 1964 and
1968; (xviii) state condominium timeshare, and seller of travel laws, (xix)
Federal Fair Debt Collection Practices Act and applicable state debt
collection laws and (xx) any state laws concerning construction, escrow or
surety bonds.
SECTION 8.4 Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means, in the case of any agreement
or instrument, such agreement or instrument as from time to time amended,
modified or supplemented, including by waiver or consent and, in the case
of statutes, such statutes as in effect on the date of this Agreement.
References to a person are also to its permitted successors and assigns.
The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed to also refer to any amendments
thereto and all rules and regulations promulgated thereunder, unless the
context requires otherwise.
SECTION 8.5 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties. A
facsimile copy of a signature page shall be deemed to be an original
signature page.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to herein)
and the Confidentiality Agreement (a) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement
and (b) except for the provisions of Section 5.7, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of
the parties hereto without the prior written consent of the other parties,
provided, however, that Parent may assign Merger Sub's rights and
obligations, in whole or in part, under this Agreement to any other
newly-formed subsidiary of Parent with no assets or liabilities, which is
wholly owned by Parent or by Parent's wholly-owned subsidiary, as the case
may be, in which event the assignee shall be considered Merger Sub for
purposes of this Agreement. Any assignment in violation of the preceding
sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of the parties
hereto irrevocably agrees that any action, suit, claim or other legal
proceeding with respect to this Agreement or in respect of the transactions
contemplated hereby brought by any other party hereto or its successors or
assigns shall be brought and determined in any state or federal court
located in the State of Delaware or any appeals courts thereof (the
"Delaware Courts"), and each of the parties hereto irrevocably submits with
regard to any such proceeding for itself and in respect to its property,
generally and unconditionally, to the exclusive jurisdiction of the
Delaware Courts. Each of the parties hereto irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement, (a) any claim
that it is not personally subject to the jurisdiction of the Delaware
Courts for any reason, (b) that it or its property is exempt or immune from
jurisdiction of any Delaware Court or from any legal process commenced in
any Delaware Court (whether through service of notice, attachment before
judgment, attachment in aid of execution of judgment, execution of judgment
or otherwise) and (c) to the fullest extent permitted by applicable law,
that (i) the proceeding in any Delaware Court is brought in an inconvenient
forum, (ii) the venue of such proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by a
Delaware Court. Notwithstanding the foregoing, each of the parties hereto
agrees that the other party shall have the right to bring any action or
proceeding for enforcement of a judgment entered by the Delaware Courts in
any other court or jurisdiction.
SECTION 8.10 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 8.12 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are
entitled at law or in equity.
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
CENDANT CORPORATION.
By /s/ James E. Buckman
----------------------------------------
Name: James E. Buckman
Title: Vice Chairman, General Counsel
and Assistant Secretary
FAIRFIELD COMMUNITIES, INC.
By /s/ James G. Berk
----------------------------------------
Name: James G. Berk
Title: President and CEO
GRAND SLAM ACQUISITION CORP.
By /s/ James E. Buckman
----------------------------------------
Name: James E. Buckman
Title: Executive Vice President
and Assistant Secretary
