SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 26, 1996
VACATION BREAK U.S.A., INC.
---------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA
---------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-27270 59-2581811
----------------------- ---------------------------------
(COMMISSION FILE NUMBER (IRS EMPLOYER IDENTIFICATION NO.)
VACATION BREAK U.S.A., INC.
6400 N. ANDREWS AVENUE
PLAZA SUITE 200
FORT LAUDERDALE, FLORIDA 33309
-----------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (954) 351-8500
<PAGE>
ITEM 5. OTHER EVENTS
Vacation Break U.S.A., Inc. (the "Company') announced the execution of
a definitive agreement providing for the merger of subsidiaries of the
Company with a group of companies affiliated with Jim Lambert (the
"Lambert Entities"). The Lambert Entities are engaged in the business
of developing, marketing, financing vacation ownership interests in
premium resort properties in Virginia and Florida. If the merger is
consummated, the Company will issue an aggregate of 21,000,000 shares
of its common stock, and Mr. Lambert will become the Chief Executive
Officer and majority shareholder of the Company. Consummation of the
merger is subject to several conditions, including the completion of
satisfactory due diligence on or before December 16, 1996, approval by
the shareholders of the Company, receipt by the Board of Directors of
the Company of a fairness opinion from Montgomery Securities and
certain governmental and regulatory approvals. The Company currently
has approximately 9 million shares of its common stock outstanding.
The Lambert Entities are one of the largest private developers and
operators of timeshare resorts in North America. The Lambert Entities
currently market timeshares at 12 resorts, including resorts in Fort
Lauderdale, Orlando, Delray Beach, Pompano Beach, Hollywood, and North
Miami Beach, Florida and various properties in Virginia.
The Company develops, markets, finances, and operates vacation
ownership interests in premium resort properties in Florida and hotel
interests in the Bahamas. Resorts include Sea Gardens Beach & Tennis
Resort (Pompano Beach, Florida), Vacation Break Resort at Star Island
(Orlando, Florida), and Port Lucaya Resort & Yacht Club (Freeport,
Bahamas).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
10.1 Agreement and Plan of Merger, dated as of November
26, 1996, among Vacation Break U.S.A., Inc., Vacation
Break Merger I Corp., Vacation Break Merger II Corp.,
Vacation Break Merger III Corp., Vacation Break
Merger IV Corp., Williamsburg Plantation, Inc.,
Westview Resorts Corporation, Ocean Ranch Development
Inc., The Berkley Group, Inc. and all the
Shareholders of Williamsburg Plantation, Inc.,
Westview Resorts Corporation, Ocean Ranch Development
Inc., and The Berkley Group, Inc.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VACATION BREAK U.S.A., INC.
Date: December 4, 1996 By:/s/ HENRY M. CAIRO
------------------
Henry M. Cairo, Chief Financial Officer
and Chief Operating Officer
3
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 26, 1996
AMONG
VACATION BREAK U.S.A., INC.,
VACATION BREAK MERGER I CORP.,
VACATION BREAK MERGER II CORP.,
VACATION BREAK MERGER III CORP.,
VACATION BREAK MERGER IV CORP.,
WILLIAMSBURG PLANTATION, INC.,
WESTVIEW RESORTS CORPORATION,
OCEAN RANCH DEVELOPMENT INC.,
THE BERKLEY GROUP, INC.,
AND
ALL OF THE SHAREHOLDERS OF
WILLIAMSBURG PLANTATION, INC.,
WESTVIEW RESORTS CORPORATION,
OCEAN RANCH DEVELOPMENT INC.,
AND THE BERKLEY GROUP, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - THE MERGERS.....................................................1
SECTION 1.1 THE MERGERS...........................................1
SECTION 1.2 CLOSING...............................................1
SECTION 1.3 EFFECTIVE TIME........................................1
SECTION 1.4 EFFECTS OF THE MERGERS................................2
SECTION 1.5 ARTICLES OF INCORPORATION AND BY-LAWS OF THE
COMPANIES.............................................2
SECTION 1.6 DIRECTORS OF THE SURVIVING COMPANIES..................2
SECTION 1.7 OFFICERS OF THE COMPANIES.............................3
ARTICLE II - EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.........................3
SECTION 2.1 EFFECT ON CAPITAL STOCK...............................3
SECTION 2.2 EXCHANGE OF CERTIFICATES..............................5
ARTICLE III - REPRESENTATIONS AND WARRANTIES................................7
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND
SHAREHOLDERS..........................................7
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBS....18
SECTION 3.3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.......20
ARTICLE IV - COVENANTS RELATING TO CONDUCT OF BUSINESS.....................22
SECTION 4.1 CONDUCT OF BUSINESS BY THE LAMBERT ENTITIES..........22
SECTION 4.2 CONDUCT OF BUSINESS BY THE PARENT....................24
ARTICLE V - ADDITIONAL AGREEMENTS..........................................26
SECTION 5.1 PREPARATION OF PROXY STATEMENT; SHAREHOLDERS
MEETING; FORM 8-K...................................26
SECTION 5.2 LETTERS OF THE COMPANIES' ACCOUNTANTS................26
SECTION 5.3 LETTERS OF PARENT'S ACCOUNTANTS......................27
SECTION 5.4 [Intentionally Omitted]..............................27
SECTION 5.5 ACCESS TO INFORMATION................................27
SECTION 5.6 REASONABLE EFFORTS; NOTIFICATION.....................28
SECTION 5.7 FEES AND EXPENSES....................................28
SECTION 5.8 PUBLIC ANNOUNCEMENTS.................................29
SECTION 5.9 WAIVER OF EMPLOYMENT AGREEMENT RIGHTS................29
SECTION 5.10 STOCK EXCHANGE LISTING...............................29
SECTION 5.11 CERTAIN LITIGATION...................................29
SECTION 5.12 EMPLOYMENT AGREEMENTS................................29
SECTION 5.13 REGISTRATION RIGHTS..................................29
SECTION 5.14 STOCK OPTION PLAN....................................30
SECTION 5.15 POOLING OF INTERESTS.................................30
ARTICLE VI - CONDITIONS PRECEDENT..........................................30
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS..............................................30
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF THE PARENT AND SUBS.....30
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANIES AND THE
SHAREHOLDERS.........................................31
i
<PAGE>
PAGE
----
ARTICLE VII - TERMINATION; AMENDMENT AND WAIVER............................32
SECTION 7.1 TERMINATION..........................................32
SECTION 7.2 EFFECT OF TERMINATION................................33
SECTION 7.3 AMENDMENT............................................33
SECTION 7.4 EXTENSION; WAIVER....................................33
ARTICLE VIII - INTENTIONALLY OMITTED.......................................34
ARTICLE IX - TAXES.........................................................34
SECTION 9.1 REPRESENTATIONS AND OBLIGATIONS REGARDING TAXES......34
ARTICLE X - GENERAL PROVISIONS.............................................35
SECTION 10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES........35
SECTION 10.2 NOTICES..............................................36
SECTION 10.3 DEFINITIONS..........................................36
SECTION 10.4 INTERPRETATION.......................................37
SECTION 10.5 COUNTERPARTS.........................................37
SECTION 10.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.......37
SECTION 10.7 GOVERNING LAW........................................37
SECTION 10.8 ASSIGNMENT...........................................37
SECTION 10.9 ENFORCEMENT..........................................38
SECTION 10.10 SCHEDULES............................................38
ii
<PAGE>
EXHIBIT
<TABLE>
<CAPTION>
Exhibit No. Description Responsible Party
----------- ----------------------------------------------------- ---------------------------------------
<S> <C> <C>
A List of Shareholders of the Companies: Names and Companies
Addresses
</TABLE>
SCHEDULES
<TABLE>
<CAPTION>
Schedules No. Description Responsible Party
------------- --------------------------------------------------------- ----------------------------------------
<S> <C> <C>
3.1(b) List of Subsidiaries of the Companies and their Companies
Jurisdictions of Incorporation
3.1(c) Companies' Ownership of Capital Stock of Each Companies
Subsidiary; Shareholder Information Including Names and
Number of Shares for Each Company
3.1(d) Defaults of Companies as a Result of Agree-ment Companies
3.1(e)(i) & (ii) Unaudited Financial Statements of Each of the Companies Companies
for the Three Fiscal Years Ended December 31, 1995, and
for the Three and Nine Month Periods Ended September 30,
1996
3.1(h) Disclosure List of Pending or Threatened Actions Against Companies, Shareholders
the Lambert Entities
3.1(i) Disclosure List re: Non-Compliance with Government Companies, Shareholders
Regulations
3.1(j) Employment, Severance, Termination or Indemnification Companies, Shareholders
Agreements of the Lambert Entities
3.1(k)(i) Employee Benefit Plans of Lambert Entities Companies, Shareholders
3.1(k)(ii) Pension Plans of Lambert Entities Companies, Shareholders
3.1(k)(vi) Employee Welfare Benefit Plans or Group Health Plans of Companies, Shareholders
Lambert Entities
3.1(vii) Additional Compensation or Benefits under any Benefit Companies, Shareholders
Plan of Lambert Entities
3.1(k)(viii) Commitments with Employees of Lambert Entities Regarding Companies, Shareholders
Increased Compensation or Benefits Under Plans
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Schedules No. Description Responsible Party
------------- --------------------------------------------------------- ----------------------------------------
<S> <C> <C>
3.1(m) Excess Parachute Payments to Representa-tives or Companies, Shareholders
Affiliates of Lambert Entities
3.1(n)(i) Aggregate Amount of "Mortgages receiv-able" owned by Companies, Shareholder
Lambert Entities; weighted average maturity of such
mortgage loans; weighted average interest rate of such
mortgage loans, and historical nonper-formance rate of
such mortgage loans since January 1, 1995
3.1(n)(ii) Contracts pursuant to which a Lambert Entity borrows Companies, Shareholders
money, the aggregate amount of "mortgages receivable"
pledged as security for such contract, each resort
property pledged as security for such contract, and the
weighted average interest rate paid for financing
secured by "mortgages receivable" and resort properties
3.1(n)(iii) Certain Relationships and Related Party Transactions Companies, Shareholders
Involving Lambert Entities
3.1(n)(iv) VOI Contracts and Designations Awarded by VOI Exchange Companies, Shareholders
Organizations
3.1(n)(v) Contracts with Construction Contractors Companies, Shareholders
3.1(n)(vi) Management Contracts re: Resort Proper-ties Companies, Shareholders
3.1(n)(vii) Timeshare Plans Companies, Shareholders
3.1(n)(viii) Miscellaneous Contracts Companies, Shareholders
3.1(s)(i) Information re: to VOI Resort Properties Companies, Shareholders
3.1(s)(ii) Liens and Restrictions on Title Companies, Shareholders
3.1(u) Violations of Environmental Laws Companies, Shareholders
3.1(v) Insurance Policies Companies, Shareholders
3.1(y) Distributions or Dividends Companies, Shareholders
Intentionally Omitted
3.3(n) Directors, Executive Officers, Promoters and Control Companies, Shareholders
Persons
4.1(a)(i) List Distributions Including Contributions by the Lambert Entities
Berkley ESOP
4.1(a)(iv) Mergers and Acquisitions by Companies & Subsidiaries Lambert Entities, Shareholders
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Schedules No. Description Responsible Party
------------- --------------------------------------------------------- ----------------------------------------
<S> <C> <C>
4.1(a)(vi) Instances of Borrowing of Money or Gua-ranteeing Lambert Entities, Shareholders
Indebtedness by Lambert Entities
4.1(a)(vii) Capital Expenditures Lambert Entities, Shareholders
4.1(a)(ix) Claims, Liabilities or Obligations Lambert Entities, Shareholders
4.1(a)(xi) Increases in Benefits, Compensation, etc. Lambert Entities, Shareholders
4.2(a)(iv) Mergers and Acquisitions of the Parent Parent
4.2(a)(vi) Borrowing of Money or Guaranteeing of In-debtedness by Parent
the Parent
4.2(a)(vii) Capital Expenditures by the Parent Parent
4.2(a)(ix) Payment, Discharge or Satisfaction of Any Claims, Parent
Liabilities or Obligations of the Parent
5.9 List of Employees Who May Waive Their Right to Receive Parent
Payments
9.1(a) Tax Return Information Regarding Lambert Entities Companies, Shareholders
9.1(b) Tax Claims Against the Lambert Entities Companies, Shareholders
9.1(c) Extensions Given to Lambert Entities for Filing Tax Companies, Shareholders
Returns
9.1(d) Lambert Entities' Liabilities for Taxes Companies, Shareholders
9.1(e) Liability to Parent or Subs Due to Lambert Entities Companies, Shareholders
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of November 26, 1996, among
VACATION BREAK U.S.A., INC., a Florida corporation ("Parent"), VACATION BREAK
MERGER I CORP., a Florida corporation, and a wholly owned subsidiary of Parent
("Sub I"), VACATION BREAK MERGER II CORP., a Florida corporation, and a wholly
owned subsidiary of Parent ("Sub II"), VACATION BREAK MERGER III CORP., a
Florida corporation, and a wholly owned subsidiary of Parent ("Sub III"),
VACATION BREAK MERGER IV CORP., a Florida corporation and a wholly owned
subsidiary of Parent ("Sub IV"), (collectively, Sub I, Sub II, Sub III and Sub
IV are referred to herein as the "Subs"), WILLIAMSBURG PLANTATION, INC., a
Virginia corporation ("Williamsburg"), WESTVIEW RESORTS CORPORATION, a Florida
corporation ("Westview"), OCEAN RANCH DEVELOPMENT INC., a Florida corporation
("Ocean"), THE BERKLEY GROUP, INC., a Florida corporation ("Berkley")
(collectively, Williamsburg, Westview, Ocean, and Berkley are referred to herein
as the "Companies"), and all of the shareholders (the "Shareholders") of the
Companies, which Shareholders are listed on Exhibit A hereto.
WHEREAS the respective Boards of Directors of Parent and each of the
Subs and the Board of Directors and Shareholders of the Companies have approved
the merger of Sub I with and into Williamsburg, Sub II with and into Westview,
Sub III with and into Ocean and Sub IV with and into Berkley (collectively, the
"Mergers"), upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS the Parent, the Subs, the Companies and Shareholders desire to
make certain representations, warranties, covenants and agreements in connection
with the Mergers and also to prescribe various conditions to the Mergers; and
WHEREAS, for Federal income tax purposes, it is intended that the
Mergers shall qualify as reorganizations within the meaning of Section 368 of
the Code.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGERS
SECTION 1.1. THE MERGERS. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Florida
Business Corporation Act (the "FBCA") and the Virginia Stock Corporation Act
(the "VSCA"), Sub I shall be merged with and into Williamsburg, Sub II shall be
merged with and into Westview, Sub III shall be merged with and into Ocean, and
Sub IV shall be merged with and into Berkley at the Effective Time (as
hereinafter defined). Following the Mergers, the separate corporate existence of
Sub I, Sub II, Sub III and Sub IV shall cease and Williamsburg, Westview, Ocean
and Berkley shall continue as the surviving corporations (the "Surviving
Corporations") and shall succeed to and assume all the rights and obligations of
Sub I, Sub II, Sub III and Sub IV, respectively, in accordance with the FBCA and
the VSCA.
SECTION 1.2. CLOSING. The closing of the Mergers (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of the
conditions set forth in Article VI (the "Closing Date"), at the offices of
Greenspoon, Marder, Hirschfeld, Rafkin, Ross & Berger, P.A., Trade Center South,
Suite 700, 100 West Cypress Creek Road, Fort Lauderdale, Florida 33309, unless
another date, time or place is agreed to in writing by all of the parties
hereto.
SECTION 1.3. EFFECTIVE TIME. AS soon as practicable on the Closing
Date, the parties shall deliver Articles of Merger (the "Articles of Merger")
executed in accordance with the relevant provisions of the FBCA and, if
applicable, the VSCA to the Florida Department of State and, if applicable, the
Virginia Department of State for filing as required under the FBCA and, if
applicable, under VSCA and shall make all other filings or recordings
<PAGE>
required under the FBCA and, if applicable, the VSCA. The Mergers shall become
effective at such time as the Parent and the Companies shall agree as specified
in the Articles of Merger (the time the Mergers become effective being the
"Effective Time").
SECTION 1.4. EFFECTS OF THE MERGERS. The Mergers shall have the
effects set forth in Section 607.1106 of the FBCA and, if applicable, Section
13.1-721 of the VSCA.
SECTION 1.5. ARTICLES OF INCORPORATION AND BY-LAWS OF THE COMPANIES.
(a)(i) The Articles of Incorporation of Williamsburg, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that they are identical to the Articles of Incorporation of Sub I (with
the exception that Williamsburg will retain the name Williamsburg Plantation,
Inc.) and, as so amended, such Amended and Restated Articles of Incorporation
shall be the Articles of Incorporation of Williamsburg until thereafter changed
or amended as provided therein or by applicable law.
(a)(ii) The Articles of Incorporation of Westview, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that they are identical to the Articles of Incorporation of Sub II (with
the exception that Westview will retain the name Westview Resorts Corporation)
and, as so amended, such Amended and Restated Articles of Incorporation shall be
the Articles of Incorporation of Westview until thereafter changed or amended as
provided therein or by applicable law.
(a)(iii) The Articles of Incorporation of Ocean, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that they are identical to the Articles of Incorporation of Sub III
(with the exception that Ocean will retain the name Ocean Resorts Development
Inc.) and, as so amended, such Amended and Restated Articles of Incorporation
shall be the Articles of Incorporation of Ocean until thereafter changed or
amended as provided therein or by applicable law.
(a)(iv) The Articles of Incorporation of Berkley, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time so that they are identical to the Articles of Incorporation of Sub IV (with
the exception that Berkley will retain the name The Berkley Group, Inc.) and, as
so amended, such Amended and Restated Articles of Incorporation shall be the
Articles of Incorporation of Berkley until thereafter changed or amended as
provided therein or by applicable law.
(b)(i) The By-laws of Williamsburg as in effect at the Effective Time
shall be the By-laws of Williamsburg following the Mergers until thereafter
changed or amended as provided therein or by applicable law.
(b)(ii) The By-laws of Westview as in effect at the Effective Time
shall be the By-laws of Westview following the Mergers until thereafter changed
or amended as provided therein or by applicable law.
(b)(iii) The By-laws of Ocean is in effect at the Effective Time shall
be the By-laws of Ocean following the Mergers until thereafter changed or
amended as provided therein or by applicable law.
(b)(iv) The By-laws of Berkley as in effect at the Effective Time shall
be the By-laws of Berkley following the Mergers until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.6. DIRECTORS OF THE SURVIVING COMPANIES.
(a) The directors of Williamsburg at the Effective Time shall be the
directors of Williamsburg following the Mergers, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
2
<PAGE>
(b) The directors of Westview at the Effective Time shall be the
directors of Westview following the Mergers, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(c) The directors of Ocean at the Effective Time shall be the
directors of Ocean following the Mergers, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
(d) The directors of Berkley at the Effective Time shall be the
directors of Berkley following the Mergers, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
SECTION 1.7. OFFICERS OF THE COMPANIES.
(a) The officers of Williamsburg at the Effective Time shall be the
officers of Williamsburg following the Mergers, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(b) The officers of Westview at the Effective Time shall be the
officers of Westview following the Mergers, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(c) The officers of Ocean at the Effective Time shall be the officers
of Ocean following the Mergers, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
(d) The officers of Berkley at the Effective Time shall be the
officers of Berkley following the Mergers, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGERS 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 Mergers and without any action on the part of the holder of any
shares of the capital stock of the Companies or any shares of the capital stock
of the Subs:
(a) CAPITAL STOCK OF SUBS. (i) Each issued and outstanding share of
capital stock of Sub I shall be converted into and become one validly issued,
fully paid and nonassessable shares of common stock, par value $____ per share,
of Williamsburg; (ii) each issued and outstanding share of capital stock of Sub
II shall be converted into and become one validly issued, fully paid and
nonassessable shares of common stock, par value $____ per share, of Westview;
(iii) each issued and outstanding share of capital stock of Sub III shall be
converted into and become one validly issued, fully paid and nonassessable
shares of common stock, par value $____ per share, of Ocean; and (iv) each
issued and outstanding share of capital stock of Sub IV shall be converted into
and become one validly issued, fully paid and nonassessable shares of common
stock, par value $____ per share, of Berkley.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. (i) Each
share of common stock, par value $._____ per share, of Williamsburg (the
"Williamsburg Common Stock") that is owned by Williamsburg and
3
<PAGE>
each share of Williamsburg Common Stock owned by Parent or any subsidiary of
Parent shall automatically be canceled and retired and shall cease to exist, and
no Parent Common Stock or other consideration shall be delivered in exchange
therefor; (ii) Each share of common stock, par value $._____ per share, of
Westview (the "Westview Common Stock") that is owned by Westview and each share
of Westview Common Stock owned by Parent or any subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no Parent
Common Stock or other consideration shall be delivered in exchange therefor;
(iii) Each share of common stock, par value $._____ per share, of Ocean (the
"Ocean Common Stock") that is owned by the Ocean and each share of Ocean Common
Stock owned by Parent or any subsidiary of Parent shall automatically be
canceled and retired and shall cease to exist, and no Parent Common Stock or
other consideration shall be delivered in exchange therefor; and (iv) each share
of common stock, par value $._____ per share, of Berkley (the "Berkley Common
Stock") that is owned by Berkley and each share of Berkley Common Stock owned by
Parent or any subsidiary of Parent shall automatically be canceled and retired
and shall cease to exist, and no Parent Common Stock or other consideration
shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANIES' COMMON STOCK. Notwithstanding the
following, in no event shall the Parent be required to issue more than
21,000,000 shares of Parent Common Stock pursuant to the provisions of this
Section 2.1(c).
(i) Subject to Section 2.2(e), the outstanding shares of
Williamsburg Common Stock (other than shares to be canceled in
accordance with Section 2.1(b)) shall be converted into the right to
receive an aggregate of 3,000,000 shares of Parent Common Stock. As of
the Effective Time, all such shares of Williamsburg Common Stock shall
no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Williamsburg Common Stock shall cease
to have any rights with respect thereto, except the right to receive
shares of Parent Common Stock;
(ii) Subject to Section 2.2(e), outstanding shares of
Westview Common Stock (other than shares to be canceled in accordance
with Section 2.1(b)) shall be converted into the right to receive an
aggregate of 7,000,000 shares of Parent Common Stock. As of the
Effective Time, all such shares of Westview Common Stock shall no
longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing
any such shares of Westview Common Stock shall cease to have any rights
with respect thereto, except the right to receive shares of Parent
Common Stock;
(iii) Subject to Section 2.2(e), the outstanding shares of
Ocean Common Stock (other than shares to be canceled in accordance with
Section 2.1(b)) shall be converted into the right to receive an
aggregate of 1,000,000 shares of Parent Common Stock. As of the
Effective Time, all such shares of Ocean Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares of Ocean Common Stock shall cease to have any rights with
respect thereto, except the right to receive shares of Parent Common
Stock; and
(iv) Subject to Section 2.2(e), the outstanding shares of
Berkley Common Stock (other than shares to be canceled in accordance
with Section 2.1(b)) shall be converted into the right to receive an
aggregate of 10,000,000 shares of Parent Common Stock. As of the
Effective Time, all such shares of Berkley Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares of Berkley Common Stock shall cease to have any rights with
respect thereto, except the right to receive shares of Parent Common
Stock.
4
<PAGE>
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit
with Continental Stock Transfer & Trust Company or such other bank or trust
company as may be designated by Parent (and reasonably acceptable to the
Companies) (the "Exchange Agent"), for the benefit of the holders of shares of
Williamsburg Common Stock, Westview Common Stock, Ocean Common Stock, Berkley
Common Stock (collectively, the "Companies' Common Stock"), for exchange in
accordance with this Article II through the Exchange Agent, certificates
representing the shares of Parent Common Stock (such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section 2.1
in exchange for outstanding shares of the Companies' Common Stock. Except as
contemplated by Section 2.2(f), the Exchange Fund shall not be used for any
other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of the Companies' Common Stock (the
"Certificates") whose shares were converted into the right to receive shares of
Parent Common Stock pursuant to Section 2.1 (c), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent, and which shall be in such form and have such other provisions
as Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of shares of Parent Common Stock which such
holder has the right to receive pursuant to the provisions of this Article II
after taking into account all the shares of the Companies' Common Stock then
held by such holder under all such Certificates so surrendered and any dividends
or other distributions to which such holder is entitled pursuant to Section
2.2(c), and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of the Companies' Common Stock which is not
registered in the transfer records of the Companies, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a person
other than the person in whose name the Certificate so surrendered is
registered, if, upon presentation to the Exchange Agent, such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of the issuance of shares of Parent Common Stock to a person other than the
registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Parent Common
Stock and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c). No interest will be paid or will accrue on any cash
payable pursuant to Section 2.2(c).
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. 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 Certificate
with respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Following
surrender of any such Certificate, there shall be paid to the record holder of
the certificate representing whole shares of Parent Common Stock issued in
exchange therefor, 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 (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 a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
5
<PAGE>
(d) NO FURTHER OWNERSHIP RIGHTS IN THE COMPANIES' COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender for exchange of shares
of the Companies' Common Stock in accordance with the terms hereof (including
any cash paid pursuant to Section 2.2(c)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of the Companies'
Common Stock, SUBJECT, HOWEVER, to the Companies' obligations to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Companies in
accordance with the terms of this Agreement or prior to the date of this
Agreement and as to which Parent shall have received written notice prior to the
Effective Time and which remain unpaid at the Effective Time, and there shall be
no further registration of transfers on the stock transfer books of the
Companies of the shares of the Companies' Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Companies or the Exchange Agent for any
reason, they shall be canceled and exchanged as provided in this Article II.
(e) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for three months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for payment of their claim for Parent
Common Stock and any dividends or distributions with respect to Parent Common
Stock.
(g) NO LIABILITY. None of Parent, the Subs, the Companies or the
Exchange Agent shall be liable to any, person in respect of any shares of Parent
Common Stock (or dividends or distributions with respect thereto) or cash the
Exchange Fund delivers to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(i) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Companies, the posting by such person of a bond in such reasonable amount as
the Companies may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect thereof,
pursuant to this Agreement.
(j) RESTRICTIVE LEGEND. Each certificate evidencing shares of Parent
Common Stock issued in connection with the Mergers shall bear the following
restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "1933
ACT"), NOR UNDER ANY STATE SECURITIES LAW AND SHALL NOT BE
TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS OR (II) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH SECURITIES MAY BE TRANSFERRED, SOLD, ASSIGNED OR
HYPOTHECATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS.
6
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND
SHAREHOLDERS. Each of the Companies represents and warrants with respect to
itself, and each of the Shareholders individually represents and warrants with
respect to itself and, to the best of its knowledge, with respect to each of the
Companies in which it owns capital stock, to Parent and the Subs, as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Companies
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of the Companies 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 or leasing of its properties makes such qualification or licensing
necessary other than in such 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 the Company. Each of the Companies has
delivered to Parent complete and correct copies of its Articles of Incorporation
and By-laws (or similar organizational documents), in each case as amended to
the date hereof.
(b) SUBSIDIARIES. Schedule 3.1(b) lists each subsidiary
(collectively, the "Subsidiaries") of each of the Companies, together with its
jurisdiction of incorporation or organization. All the outstanding shares of
capital stock of each such subsidiary have been validly issued and are fully
paid and nonassessable and owned by such company, free and clear of all pledges,
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens"). Except for the capital stock of the
Subsidiaries, and except for the joint venture interests in Ocean Ranch Vacation
Group and Palm Vacation Group described below, the Companies do not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity. Palm Resort Group,
Inc., a wholly owned subsidiary of Berkley, owns a 45% joint venture interest in
Palm Vacation Group. Ocean owns a 45% joint venture interest in Ocean Ranch
Vacation Group.
(c) CAPITAL STRUCTURE OF THE COMPANIES.
(i) The authorized capital stock of Williamsburg consists of
30,000 shares of Williamsburg Common Stock. As of the date of this
Agreement, (1) 100 shares of Williamsburg Common Stock are outstanding,
and (2) no shares of Williamsburg Common Stock are held by Williamsburg
in its treasury. Except as set forth above, as of the date of this
Agreement, no shares of capital stock or other voting securities of
Williamsburg are issued, reserved for issuance or outstanding. As of
the date of this Agreement, all outstanding shares of capital stock of
Williamsburg have been duly authorized and validly issued, and are
fully paid and nonassessable and not subject to preemptive rights. As
of the date of this Agreement, there are no bonds, debentures, notes or
other indebtedness of Williamsburg having the right to vote (or
convertible into securities having the right to vote) on any matters on
which shareholders of Williamsburg may vote. Except as set forth above,
as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Williamsburg or any of the
Williamsburg Subsidiaries is a party or by which any of them is bound
obligating Williamsburg or any of Williamsburg Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of Williamsburg or
of any of the Williamsburg Subsidiaries or obligating Williamsburg or
any of the Williamsburg Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding contractual obligations of
Williamsburg or the Williamsburg Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Williamsburg or the
Williamsburg Subsidiaries.
7
<PAGE>
(ii) The authorized capital stock of Westview consists of
7,500 shares of Westview Common Stock. As of the date of this
Agreement, (1) 100 shares of Westview Common Stock are issued and
outstanding, and (2) no shares of Westview Common Stock are held by
Westview in its treasury. Except as set forth above, as of the date of
this Agreement, no shares of capital stock or other voting securities
of Westview are issued, reserved for issuance or outstanding. As of the
date of this Agreement, all outstanding shares of capital stock of the
Westview have been duly authorized and validly issued, and are fully
paid and nonassessable and not subject to preemptive rights. As of the
date of this Agreement, there are no bonds, debentures, notes or other
indebtedness of Westview having the right to vote (or convertible into
securities having the right to vote) on any matters on which
shareholders of Westview may vote. Except as set forth above, as of the
date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which Westview or any of the Westview Subsidiaries is a
party or by which any of them is bound obligating Westview or any of
the Westview Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
voting securities of Westview or of any of the Westview Subsidiaries or
obligating Westview or any of Westview Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of
this Agreement, there are not nor will there be any, respectively,
outstanding contractual obligations of Westview or the Westview
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Westview or the Westview Subsidiaries.
(iii) The authorized capital stock of Ocean consists of
1,000 shares of Ocean Common Stock. As of the date of this Agreement
and upon consummation of the Exchange, (1) 100 shares of Ocean Common
Stock are issued and outstanding, and (2) no shares of Ocean Common
Stock are held by Ocean in its treasury. Except as set forth above, as
of the date of this Agreement, no shares of capital stock or other
voting securities of Ocean are reserved for issuance or outstanding. As
of the date of this Agreement, all outstanding shares of capital stock
of Ocean have been duly authorized and validly issued, and are fully
paid and nonassessable and not subject to preemptive rights. As of the
date of this Agreement, there are no bonds, debentures, notes or other
indebtedness of Ocean having the right to vote (or convertible into
securities having the right to vote) on any matters on which
shareholders of Ocean may vote. Except as set forth above, as of the
date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which Ocean or any of the Ocean Subsidiaries is a party or
by which any of them is bound obligating Ocean or any of Ocean
Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of Ocean or of any of the Ocean Subsidiaries or obligating
Ocean or any of Ocean Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this Agreement
there are no outstanding contractual obligations of Ocean or Ocean
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Ocean or the Ocean Subsidiaries.
(iv) The authorized capital stock of Berkley consists of
700,000 shares of Class A Berkely Common Stock and 1,000,000 shares of
Class B Berkely Common Stock. As of the date of this Agreement (1)
420,000 shares of Class A Berkely Common Stock and 970,000 shares of
Class B Berkely Common Stock are issued and outstanding, and (2) no
shares of Berkley Common Stock are held by Berkley in its treasury.
Except as set forth above, as of the date of this Agreement, no shares
of capital stock or other voting securities of Berkley are issued,
reserved for issuance or outstanding. As of the date of this Agreement,
all outstanding shares of capital stock of Berkley have been duly
authorized and validly issued, fully paid and nonassessable and not
subject to preemptive rights. As of the date of this Agreement, there
are no bonds, debentures, notes or other indebtedness of Berkley having
the right to vote (or convertible into securities having the right to
vote) on any matters on which shareholders of Berkley may vote. Except
as set forth above and in connection with The Berkley Group, Inc.
Employee Stock Ownership Plan and Trust, as of the date of this
Agreement, there are no securities, options, warrants, calls, rights,
8
<PAGE>
commitments, agreements, arrangements or undertakings of any kind to
which the Berkley or any of Berkley Subsidiaries is a party or by which
any of them is bound obligating Berkley or any of Berkley Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the
Berkley or of any of the Berkley Subsidiaries or obligating Berkley or
any of Berkley Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are
no outstanding contractual obligations of Berkley or Berkley
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Berkley or the Berkley Subsidiaries.
(v) (A) The type and number of authorized, issued and
outstanding shares of capital stock ("Williamsburg Subsidiary Stock")
of each subsidiary of Williamsburg (a "Williamsburg Subsidiary") is set
forth on Schedule 3.1(c)(v) hereof. All of the issued and outstanding
shares of Williamsburg Subsidiary Stock are owned by Williamsburg.
Except as set forth on Schedule 3.1(c)(v), no other voting securities
of any Williamsburg Subsidiary are issued, reserved for issuance or
outstanding. All outstanding shares of Williamsburg Subsidiary Stock
are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no bonds, debentures, notes
or other indebtedness of a Williamsburg Subsidiary having the right to
vote (or convertible into securities having the right to vote) on any
matters on which shareholders of a Williamsburg Subsidiary may vote;
(B) the type and number of authorized issued and
outstanding shares of capital stock ("Westview Subsidiary Stock") of
each subsidiary of Westview (a "Westview Subsidiary") is set forth on
Schedule 3.1(c)(v) hereof. All of the issued and outstanding shares of
Westview Subsidiary Stock are owned by Westview. Except as set forth on
Schedule 3.1(c)(v), no other voting securities of any Westview
Subsidiary are issued, reserved for issuance or outstanding. All
outstanding shares of Westview Subsidiary Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other
indebtedness of Westview Subsidiary having the right to vote (or
convertible into securities having the right to vote) on any matters on
which shareholders of Westview Subsidiary may vote;
(C) the type and number of authorized issued and
outstanding shares of capital stock ("Ocean Subsidiary Stock") of each
subsidiary of Ocean (an "Ocean Subsidiary") is set forth on Schedule
3.1(c)(v) hereof. All of the issued and outstanding shares of Ocean
Subsidiary Stock are owned by Ocean. Except as set forth on Schedule
3.1(c)(v), no other voting securities of any Ocean Subsidiary are
issued, reserved for issuance or outstanding. All outstanding shares of
Ocean Subsidiary Stock are duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. There are no
bonds, debentures, notes or other indebtedness of the Ocean Subsidiary
having the right to vote (or convertible into securities having the
right to vote) on any matters on which shareholders of an Ocean
Subsidiary may vote; and
(D) the type and number of authorized issued and
outstanding shares of capital stock ("Berkley Subsidiary Stock") of
each subsidiary of Berkley (a "Berkley Subsidiary") is set forth on
Schedule 3.1(c)(v) hereof. All of the issued and outstanding shares of
Berkley Subsidiary Stock are owned by Berkley. Except as set forth on
Schedule 3.1(c)(v), no other voting securities of any Berkley
Subsidiary are issued, reserved for issuance or outstanding. All
outstanding shares of Berkley Subsidiary Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other
indebtedness of a Berkley Subsidiary having the right to vote (or
convertible into securities having the right to vote) on any matters on
which shareholders of a Berkley Subsidiary may vote (collectively, the
Williamsburg Subsidiaries, the Westview Subsidiaries, the Ocean
Subsidiaries and the Berkley Subsidiaries are referred to herein as the
"Subsidiaries").
(vi) Schedule 3.1(c)(vi) sets forth: (A) the name of each
shareholder of Williamsburg and the number of shares of Williamsburg
Common Stock owned by such shareholder; (B) the name of each
9
<PAGE>
shareholder of Westview and the number of shares of Westview Common
Stock owned by such shareholder; (C) the name of each shareholder of
Ocean and the number of shares of Ocean Common Stock owned by such
shareholder; and (D) the name of each shareholder of Berkley; and the
number of shares of Berkley Common Stock owned by such shareholder.
(d) AUTHORITY; NONCONTRAVENTION. Each of the Companies has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement to be consummated by
it. The execution and delivery of this Agreement by each of the Companies and
the consummation by each of the Companies of the transactions contemplated by
this Agreement to be consummated by it have been duly authorized by all
necessary corporate action on the part of each of the Companies. This Agreement
has been duly executed and delivered by each of the Companies and the
Shareholders and constitutes a valid and binding obligation of each of the
Companies and each of the Shareholders, enforceable against each of the
Companies and each of the Shareholders in accordance with its terms. Except as
set forth on Schedule 3.1(d), the execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or constitute a 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 to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the Companies and the Subsidiaries (collectively, the "Lambert
Entities") under, any provision of (i) the Articles of Incorporation or By-laws
(or comparable organizational documents) of the Lambert Entities; (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to each Lambert
Entity or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any (A) statute, law, ordinance, rule or regulation or (B) judgment, order or
decree applicable to any Lambert Entity or their respective properties or
assets. No consent, approval order or authorization of, or registration,
declaration or filing with, any Federal, state or local government or any court,
tribunal, administrative agency or commission or other governmental authority or
agency, domestic or foreign (a "Governmental Entity"), is required by or with
respect to any Lambert Entity in connection with the execution and delivery of
this Agreement by the Companies or the consummation by the Companies of the
transactions contemplated by this Agreement to be consummated by it, except for
(i) the filing of a premerger notification and report form by the Companies
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and such foreign antitrust filings as may be applicable, (ii) to
effectuate the Mergers, the filing of the Articles of Merger with the Florida
Department of State, the Virginia Department of State and appropriate documents
with the relevant authorities of other states in which the Companies are
qualified to do business, and (iii) the consents set forth on Schedule 3.1(d).
(e) FINANCIAL STATEMENTS. Schedule 3.1(e) hereto sets forth true and
complete copies of: (i) the consolidated unaudited financial statements of each
of Westview, Williamsburg, Ocean and Berkley for the three fiscal years ended
December 31, 1995 (or such shorter period if such Companies commenced operations
within such three year period) (the "Companies' Unaudited Yearly Financial
Statements"); (ii) the consolidated unaudited financial statements of Westview,
Williamsburg, Ocean and Berkley for the three month and nine month period ended
September 30, 1996 (collectively, the "Companies' Unaudited Quarterly Financial
Statements") (collectively, the Companies' Unaudited Yearly Financial Statements
and the Companies' Unaudited Quarterly Financial Statements are referred to as
the "Financial Statements"). The Financial Statements include the following
statements with respect to each of the Companies: (i) the consolidated financial
position of the subject company as of December 31, 1995 and December 31, 1994;
(ii) the consolidated results of operations of the subject company for the years
ended December 31, 1995, December 31, 1994 and December 31, 1993; and (iii) the
consolidated cash flow of the subject company for the years ended December 31,
1995, December 31, 1994 and December 31, 1993. The Financial Statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of each of the Companies and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their respective operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except for
10
<PAGE>
liabilities and obligations incurred in the ordinary course of business
consistent with past practice or disclosure in the financial statements, none of
the Companies, to the best of their knowledge, has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on their respective consolidated balance sheets
or in the notes thereto which, individually or in the aggregate, could
reasonably be expected to have an adverse effect on the Companies. The Financial
Statements shall account for the sale of vacation packages and VOIs in a manner
which is consistent with the manner Parent accounts for such items.
(f) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Lambert Entities, the Subsidiaries or the Shareholders
specifically for inclusion or incorporation by reference in (i) the registration
statement on Form S-1 (the "Form S-1") which may be filed with the Securities
and Exchange Commission (the "SEC") by Parent in connection with: (1) the resale
of certain Parent Common Stock received by the Shareholders pursuant to the
Mergers; (2) the resale of certain Parent Common Stock by certain affiliates of
the Parent; and (3) the issuance of Parent Common Stock by the Parent, will at
the time the Form S-1 is filed with the SEC, at any time it is amended or
supplemented and at the time it becomes effective under the Securities Act of
1933, as amended (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, in light of the circumstances under
which they are made, not misleading, (ii) the Proxy Statement (as amended from
time to time, the "Proxy Statement") relating to: (1) the approval of the
Parent's shareholders of this Agreement; and (2) an increase in the authorized
capital stock of the Parent sufficient to permit the due and valid issuance of
the shares of Parent Common Stock pursuant to the Mergers, will at the date it
is first mailed to the Parent's shareholders and at the time of the meeting of
the Parent's shareholders held to vote on approval of this Agreement, 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, and (iii) the Form 8-K(s) (the "Form 8-K") to be filed with the SEC
by Parent in connection with the Mergers will, at the time the Form 8-K is filed
with the SEC and at any time it is amended or supplemented, 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.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as expressly
contemplated by this Agreement, since September 30, 1996, each of the Companies
and Subsidiaries has conducted its business only in the ordinary course and in a
manner consistent with past practices, and there has not been (i) any material
adverse change in the business, financial condition, results of operations or
prospects of any of the Lambert Entities, (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 Lambert Entities' capital stock, (iii)
combination or reclassification of any of the Lambert Entities' 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 any of the Lambert
Entities' capital stock (iv) (x) any granting by the Lambert Entities to any
officer of the Lambert Entities of any increase in compensation, except in the
ordinary course of business consistent with prior practice or as was required
under employment agreements in effect as of September 30, 1996, (y) any granting
by the Lambert Entities to any officer of any increase in severance or
termination pay, except as was required under any employment, severance or
termination agreements in effect as of September 30, 1996 or (z) any entry by
the Lambert Entities into any employment, severance or termination agreement
with any officer, (v) any damage, destruction or loss, whether or not covered by
insurance, that has or is likely to have an adverse effect on the Lambert
Entities, (vi) any change in accounting methods, principles or practices by the
Lambert Entities affecting its assets, liabilities or business, or (vii) any
sale, agreement to sell or option to purchase or sell the Lambert Entities or
any of their assets other than in the ordinary course of business in a manner
consistent with past practices.
(h) LITIGATION. Except as disclosed in Schedule 3.1(h), there is no
suit, action or proceeding pending or, to the knowledge of the Companies or the
Shareholders threatened against any of the Lambert Entities that, individually
or in the aggregate, could reasonably be expected to have an adverse effect on
the any of the Lambert Entities, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator
11
<PAGE>
outstanding against any of the Lambert Entities having, or which could
reasonably be expected to have, any such effect.
(i) COMPLIANCE WITH LAWS. Except as disclosed in Schedule 3.1(i),
each of the Lambert Entities is in compliance in all material respects with all
applicable statutes, laws, ordinances, regulations, rules, judgments, decrees
and orders of any Governmental Entity (including, without limitation, the
Federal Trade Commission Act, the Truth-in-Lending Act and Regulation Z, the
Equal Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, and the Civil Rights Act of 1964 and 1968) applicable to its
business or operations. Each of the Lambert Entities has in effect all Federal,
state, local and foreign governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights ("Permits"),
necessary for it to own, lease or operate its properties and assets and to carry
on its business as now conducted, and there has occurred no default under any
such Permit.
(j) ABSENCE OF CHANGES IN BENEFIT PLANS; LABOR RELATIONS. Except as
disclosed in Schedule 3.1(j), since the date of the Financial Statements there
has not been any adoption or amendment in any material respect by any of the
Lambert Entities of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding in each case maintained or contributed to, or required to be
maintained or contributed to, by any of the Lambert Entities for the benefit of
any current or former employee, officer or director of any of the Lambert
Entities (each, a "Benefit Plan" and, collectively, "Benefit Plans"). Except as
set forth in Schedule 3.1(j) there exist no employment, severance, termination
or indemnification agreements, arrangements or understandings between any of the
Lambert Entities and any current or former employee, officer or director of the
Lambert Entities or any consulting agreement with any of the Lambert Entities
with respect to which the aggregate liability thereunder exceeds $25,000 or
which cannot be canceled by the subject Lambert Entities without penalty on 30
days' or less notice. None of the Lambert Entities is a party to any collective
bargaining agreements and each Lambert Entity believes that its relationship
with its employees is satisfactory.
(k) BENEFIT PLAN COMPLIANCE.
(i) Schedule 3.1 (k)(i) contains a list and brief
description of all "employee pension benefit plans" (as definer in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
and all other Benefit Plans maintained, or contributed to, or required
to be contributed to, by any of the Lambert Entities or any other
person or entity that, together with a Lambert Entity, is treated as a
single employer under Section 414(b), (c), (m) or (a) of the Code (the
subject Lambert Entity and each such other person or entity, a
"Commonly Controlled Entity") for the benefit of any current or former
employees, officers or directors of a Lambert Entity. The Lambert
Entities have delivered or made available to Parent true, complete and
correct copies of (1) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (2) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with
respect to each Benefit Plan (if any such report was required), (3) the
most recent summary plan description for each Benefit Plan for which
such summary plan description is required and (4) each trust agreement
and group annuity contract relating to any Benefit Plan. Each Benefit
Plan has been administered in all material respects in accordance with
its terms and is in compliance with the applicable provisions of ERISA,
the Code, all other applicable laws and all applicable collective
bargaining agreements.
(ii) Except as disclosed in Schedule 3.1 (k)(ii), all
Pension Plans have been the subject of determination letters from the
Internal Revenue Service, or have filed a timely application therefor,
to the effect that such Pension Plans are qualified and exempt from
Federal income taxes under Section 401 (a) and 501 (a), respectively,
of the Code, and no such determination letter has been revoked nor has
any such
12
<PAGE>
Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would
adversely affect its qualification or materially increase its costs.
(iii) No Commonly Controlled Entity has incurred any
liability which has not been fully paid to a Pension Plan under Title
IV of ERISA (other than for contributions not yet due) or to the
Pension Benefit Guaranty Corporation (other than for payment of
premiums not yet due).
(iv) As of the most recent valuation date for each Pension
Plan that is a "defined benefit pension plan" (as defined in Section
3(35) of ERISA subject to Title IV of ERISA (other than a multiemployer
plan) (hereinafter a "Defined Benefit Plan")), there was not any amount
of "unfunded benefit liabilities" (as defined in Section 4001(a)(18) of
ERISA) under such Defined Benefit Plan, and none of the Lambert
Entities is aware of any facts or circumstances that would adversely
change the funded status of any such Defined Benefit Plan. Each of the
Lambert Entities has furnished or made available to Parent the most
recent actuarial report or valuation with respect to each Defined
Benefit Plan and has no reason to believe that the conclusions
expressed in those reports or valuations are incorrect.
(v) No Commonly Controlled Entity has been required at any
time within the five calendar years preceding the date hereof or is
required currently to contribute to any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or would result
in any "withdrawal liability" (within the meaning of Section 4201 of
ERISA) that has not been fully paid.
(vi) With respect to any Benefit Plan that is an employee
welfare benefit plan, except as disclosed in Schedule 3.1 (k)(vi), (1)
no such Benefit Plan is funded through a "welfare benefits fund", as
such term is defined in Section 419(e) of the Code, and (2) each such
Benefit Plan that is a "group health plan", as such term is defined in
Section 5000(b)(1) of the Code, complies substantially with the
applicable requirements of Section 4980B(f) of the Code.
(vii) Except as provided in Section 5.9 or as listed on
Schedule 3.1(l), no employee of a Lambert Entity will be entitled to
any additional compensation or benefits or any acceleration of the time
of payment or vesting of any compensation or benefits under any Benefit
Plan as a result of the transactions contemplated by this Agreement.
(viii) Except as set forth in Schedule 3.1(k) (viii) or
as contemplated under Section 5.17, none of the Lambert Entities nor
any person acting on behalf of the Lambert Entities has, in
contemplation of any corporate transaction involving Parent or the
Subs, issued any written communication to, or otherwise made or entered
into any legally binding commitment with, any employees of a Lambert
Entity to the effect that, following the date hereof, (i) any benefits
or compensation provided to such employees under existing Benefit Plans
or under any other plan or arrangement will be enhanced, (ii) any new
plans or arrangements providing benefits or compensation will be
adopted, (in) any Benefit Plans will be condoned for any period of
time, or (iv) any plans or arrangements provided by Parent or Sub will
be made available to such employees.
(l) DISCLOSURE. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items which
were prepared for or supplied to the Companies by or on behalf of the Parent
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading in light of the
circumstances when made.
(m) NO EXCESS PARACHUTE PAYMENTS. Except as described on Schedule
3.1(m), no amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the Lambert Entities or any of
its affiliates
13
<PAGE>
who is a "disqualified individual" (as such term is defined in Section 280G(c)
of the Code or proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Benefit Plan currently in effect would be an "excess parachute payment" (as
such term is defined in Section 280G(b) (l) of the Code).
(n) CERTAIN AGREEMENTS.
(i) Schedule 3.1(n)(i) sets forth as of September 30, 1996,
(a) the aggregate amount of "Mortgages receivable" owned by a Lambert
Entity; (b) the weighted average maturity of such mortgage loans; (c)
the weighted average interest rate of such mortgage loans; and (d) the
historical nonperformance rate of such mortgage loans since January 1,
1995.
(ii) Schedule 3.1(n)(ii) sets forth as of September 30, 1996;
(a) each contract pursuant to which a Lambert Entity borrows money or
otherwise mortgages, pledges or other places a lien on any asset of a
Lambert Entity; (b) the aggregate amount of "mortgages receivable"
pledged as security for such contract; (c) each resort property pledged
as security for such contract; and (d) weighted average interest rate
paid for financing secured by (A) "mortgage receivable" and (B) resort
properties.
(iii) Schedule 3.1(n)(iii) sets forth a description of each
transaction since January 1, 1994 and each relationship between a
Lambert Entity and any officer, director, shareholder or affiliate of a
Lambert Entity or any member of their immediate family which would be
required to be disclosed by a Lambert Entity pursuant to Item 404 of
Regulation S-K promulgated pursuant to the Securities Act and the
Exchange Act, assuming each Lambert Entity was subject to such
reporting requirements and without regard to the dollar amount involved
in such relationship or transaction.
(iv) Schedule 3.1(n)(iv) sets forth as of September 30,
1996, (a) each contract or understanding pursuant to which the
customers of any Lambert Entity may participate in a vacation ownership
interest ("VOI") exchange organization with respect to the resort
properties of a Lambert Entity; and (b) the designations awarded by
such exchange organization to the resort properties of a Lambert
Entity.
(v) Schedule 3.1(n)(v) sets forth as of September 30, 1996,
each contract pursuant to which a Lambert Entity has engaged the
services of a construction contractor.
(vi) Schedule 3.1(n)(vi) sets forth as of September 30,
1996, each contract pursuant to which a Lambert Entity manages resort
properties.
(vii) Schedule 3.1(n)(vii) sets forth as of September 30,
1996: (a) a list of each Timeshare Plan (a "Timeshare Plan") pursuant
to which the resort properties of a Lambert Entity have been developed
as VOIs; and (b) a copy of each such Timeshare Plan.
(viii) Except as expressly contemplated by this Agreement, as
specifically identified in Schedule 3.1(n)(i)-(vii) hereto, or as
specifically identified in Schedule 3.1(n)(viii), none of the Lambert
Entities is a party to any written or oral:
(a) contract under which it has advanced, loaned or
agreed to advance or lien any person amounts in the aggregate
exceeding $25,000;
(b) contract under which it has purchased or agreed
to purchase any security, as defined under the Securities Act,
partnership interest or evidence of indebtedness, in an amount
exceeding in value of $25,000;
14
<PAGE>
(c) guarantee of any obligation;
(d) contract prohibiting it from freely engaging in
any business or competing anywhere in the world;
(e) employment, consulting, sales, commissions,
dealer, distributor or marketing contracts;
(f) contract under which it is lessee of or holds
or operates any property, real or personal, owned by any other
party, except for any lease of real or personal property under
which the aggregate annual rental payments do not exceed
$25,000;
(g) contract under which it is lessor of or permits
any third party to hold or operate any property, real or
personal, owned or controlled by it;
(h) assignment, license, indemnification agreement or
contract with respect to any intangible property;
(i) warranty contract with respect to its services
rendered or its products sold or leased;
(j) contract under which it has granted any person
any registration rights (including "piggyback" registration
rights) with respect to any securities; or
(k) contract with any officer, director, employee or
consultant of it which obligates it or its successors to make
any form of payment to such person(s) as a result of the
Mergers.
(ix) Each of the Lambert Entities has performed in all
material respects all obligations required to be performed by it and is
not in default in any respect under or in breach of nor in receipt of
any claim of default or breach under any contract to which it is
subject; no event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or event of
noncompliance under any contract to which a Lambert Entity is subject;
none of the Lambert Entities has a present expectation or intention of
not fully performing all such obligations; none of the Lambert Entities
has knowledge of any breach or anticipated breach by the other parties
to any contract to which it is a party.
(o) STATE TAKEOVER/DISSENTER'S RIGHTS STATUTES. Except for the
approval of this Agreement by the Berkley Group Employee Stock Ownership Plan
and Trust in its capacity as a shareholder of Berkley, the Board of Directors
and each of the Shareholders of the Lambert Entities have approved the Mergers
and this Agreement, and such approval is sufficient to render inapplicable to
the Mergers and this Agreement, and the transactions contemplated by this
Agreement, the provisions of Sections 607.0901, 607.0902 and 607.1302 of the
FBCA to the extent, if any, any such section is applicable to the Mergers and
this Agreement and the transactions contemplated by this Agreement.
(p) BROKERS. No broker, investment banker, financial advisor or other
person, other than Montgomery Securities ("Montgomery") and CS First Boston
Corporation, 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 Lambert
Entities.
15
<PAGE>
(q) ACCOUNTING MATTERS.
(i) None of the Lambert Entities has had changes in or
disagreements with accountants which it would be required to disclose
by Item 304 of Regulation S-K if the Lambert Entities were subject to
such reporting requirements;
(ii) Each of the Companies shall have requested its
auditors, Millward & Co., to review the Financial Statements
(including, without limitation, the ownership of and transactions in
capital stock of the Companies), together with this Agreement and the
transactions contemplated hereby for the purpose of evaluating and
determining whether there is any reason why the Mergers, as provided
for under the terms and provisions of this Agreement, may not be
accounted for as a "pooling of interests."
(r) TAX MATTERS. Neither the Lambert Entities or the Shareholders,
nor, to their knowledge, any of their affiliates, has taken or agreed to take
any action, or knows of any circumstances, that would prevent the Mergers from
qualifying as reorganizations within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
(s) PROPERTIES, TITLE AND RELATED MATTERS.
(i) Schedule 3.1(s)(i) sets forth as of October 31, 1996:
(i) each VOI resort property owned by each of the Lambert Entities;
(ii) the number of VOI's which have been and which are planned to be
developed at each resort property; and (iii) the number of VOI's which
have been sold at each resort. With respect to each resort property or
portion thereof which has completed development of VOI's, the resort or
developed portion thereof is in good repair and condition and each VOI
held for sale is in a condition acceptable for sale. With respect to
each resort property or portion thereof which a Lambert Entity has not
completed development of VOI's, the Lambert Entities anticipate
expending, between September 30, 1996 and the completion of
development, the amounts set forth on Schedule 3.1(s)(i).
(ii) Except as set forth in Schedule 3.1(s)(ii), each of
the Lambert Entities has good and marketable title to all of the real,
personal and intellectual properties and assets reflected in the
Financial Statements or acquired after the date thereof except for
properties sold or otherwise disposed of since the date thereof in the
ordinary course of business consistent with past practices, free and
clear of all Liens. All of the assets of the Lambert Entities as of
September 30, 1996 are reflected in the Financial Statements in the
manner and to the extent required by GAAP.
(iii) Each of the Lambert Entities owns good and
marketable title to all the personal property and assets, tangible or
intangible, used in its respective business, except as to those assets
leased or rented in the ordinary course of business consistent with
past practices or as set forth in Schedule 3.1(s)(ii), all of which
leases are in effect and no party is in default thereunder. Except as
set forth in Schedule 3.1(s)(ii) or except for Contracts of sale or
lease or liens generated or incurred in the ordinary course of business
consistent with past practice, none of the assets of the Lambert
Entities are subject to any Contracts of sale or lease or Liens.
(t) CUSTOMER WARRANTIES. There are not pending nor are there to the
best knowledge of the Companies and the Shareholders, threatened, any claims
under or pursuant to any warranty, whether expressed or implied, on products or
services sold prior to the date of this Agreement by the Lambert Entities that
are not disclosed or referred to in the Financial Statements and which are not
fully reserved against.
(u) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 3.1(u),
(a) neither the businesses of the Lambert Entities nor the operation thereof
violates any applicable Environmental Law (as defined in Article X) and no
condition or event has occurred which, with notice or the passage of time or
both, would constitute a violation of any Environmental Law; (b) each of the
Lambert Entities is in possession of all permits required under any
16
<PAGE>
applicable Environmental Law ("Environmental Permits") for the conduct or
operation of the businesses of the Lambert Entities (or any part thereof), and
each of the Lambert Entities is in full compliance with all of the requirements
and limitations included in such Environmental Permits; (c) none of the Lambert
Entities has stored or used any pollutants, contaminants or hazardous or toxic
wastes, substances or materials on or at any of its property or facilities
except for inventories of chemicals which are used or to be used in the ordinary
course of the businesses of the Lambert Entities (which inventories have been
stored or used in accordance with all applicable Environmental Permits and all
Environmental Laws, including all so-called "Right To Know" laws); (d) none of
the Lambert Entities has received any notice, suit or claim from any authority
or any private person or entity that the businesses of the Lambert Entities or
the operation of any of their respective facilities is in violation of any
Environmental Law or any Environmental Permit or that it is responsible (or
potentially responsible) for the cleanup of any pollutants, contaminants, or
hazardous or toxic wastes, substances or materials at, on or beneath any of the
properties of the Lambert Entities, or at, on or beneath any land adjacent
thereto or in connection with any waste or contamination site; (e) none of the
Lambert Entities has buried, dumped, disposed, spilled or released any
pollutants, contaminants or hazardous or wastes, substances or materials on,
beneath or adjacent to any of this property or any property adjacent thereto;
and (f) no by-products of any manufacturing process employed in the operation of
the businesses of the Lambert Entities which may constitute pollutants,
contaminants or hazardous or toxic wastes, substances or materials under any
Environmental Law are currently stored or otherwise located on any of the
properties of the Lambert Entities. Each of the Lambert Entities has timely
filed all reports required to be filed with respect to all of its property and
facilities and has generated and maintained all required data, documentation and
records under all applicable Environmental Laws.
(v) INSURANCE. Each of the Lambert Entities has insurance contracts
or policies (the "Policies") in full force and effect which provide for
coverages that are usual and customary as to amount and scope in its businesses.
Schedule 3.1(v) hereto sets forth descriptions of all insurance contracts or
policies that relate to liability or excess liability insurance (collectively
the "Liability Policies"), including the name of the insurer, the types, dates
and amounts of coverages, and any material coverage exclusions. None of the
Lambert Entities has breached or otherwise failed to perform in any material
respects its obligations under any of the Policies or the Liability Policies nor
has any of the Lambert Entities received any adverse notice or communication
from any of the insurers party to the Policies or the Liability Policies with
respect to any such alleged breach or failure in connection with any of the
Policies or the Liability Policies. All Policies are sufficient for compliance
with all governmental laws and regulations and all agreements to which the
Lambert Entities are subject; are valid, outstanding, collectible and
enforceable policies; and will not in any way be affected by, or terminate or
lapse by reason of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(w) ACCOUNTS RECEIVABLE; INVENTORIES. The "Mortgages receivable" of
each of the Companies reflected in the Financial Statements and such additional
accounts receivable as are reflected on the books of the Companies are good and
collectible except to the extent reserved against thereon (which reserves have
been determined based upon actual prior experience and are consistent with prior
practices). All such accounts receivable (except to the extent so reserved
against) are valid, genuine and subsisting, arise out of bona fide sales and
deliveries of goods, performance of services or other business transactions and
are not subject to defenses, setoffs or counterclaims. Not more than 2% of the
"The Inventory of Real Estate Held for Sale" reflected on the Financial
Statements represents items which are not or will not be usable or saleable in
the ordinary course of business of the Lambert Entities. Such "Inventory of Real
Estate Held for Sale" have been reflected on such balance sheets at the lower of
cost or market value (taking into account the usability or saleability thereof),
in accordance with GAAP. All such "Inventory of Real Estate Held for Sale" are
owned free and clear and is not subject to any Lien or encumbrance except to the
extent reserved against or reflected in the Financial Statements.
(x) VOI SALES RECOGNITION.
(y) DISTRIBUTIONS. Except as disclosed on Schedule 3.1(y), none of the
Lambert Entities has made a distribution or dividend with respect to any
outstanding equity interest or security issued by it since January 1, 1996.
17
<PAGE>
(z) DISCLOSURE. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items which
were prepared for or supplied to the Parent by or on behalf of the Companies
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading in light of the
circumstances when made.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBS. Parent
and Subs represent and warrant to the Companies and Shareholders as follows:
(a) ORGANIZATION STANDING AND CORPORATE POWER. Each of the Parent and
the Subs is a corporation duly organized, validly existing and in good standing
under the laws of Florida and has the requisite corporate power and authority to
carry on its business as now being conducted each of the Parent and the Subs 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 or leasing of
its Properties makes such qualification or licensing necessary, other than in
such 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. Parent has delivered to the Companies complete and
correct copies of its Certificate of Incorporation and By-laws and the Articles
of Incorporation and By-laws of the Subs, in each case as amended to the date
hereof.
(b) CAPITAL STRUCTURE. The authorized capital stock of Parent
consists of 25,000,000 shares of Parent Common Stock and 25,000,000 shares of
Preferred Stock without par value. At the close of business on November 26,
1996, (i) 8,585,000 shares of Parent Common Stock were issued and outstanding,
(ii) zero shares of Parent Common Stock were held by Parent in its treasury,
(iii) not more than 538,000 shares of Parent Common Stock were reserved for
issuance upon exercise of outstanding employee and director stock options to
purchase shares of Parent Common Stock and (iv) no shares of Parent Preferred
Stock were outstanding. Except as set forth above and for amounts which in the
aggregate are not material, at the close of business on November __, 1996, no
shares of capital stock or other voting securities of the Parent were issued,
reserved for issuance or outstanding. Other than the options referred to in
clause (iii) above and as disclosed in Parent SEC Documents (as defined in
Section 3.2(d)), as of the date of this Agreement, there are no material amounts
of outstanding securities convertible into Parent Common Stock. All outstanding
shares of capital stock of the Parent are, and all shares which may be issued
pursuant to this Agreement will be, when issued in accordance with the terms
hereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. As of the date of this Agreement, the authorized
capital stock of each Sub consists of 1,000 shares of common stock, par value
$.01 per share, 100 shares of which have been validly issued, are fully paid and
nonassessable and are owned by Parent free and clear of any Liens.
(c) AUTHORITY; NONCONTRAVENTION. Parent and the Subs have all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement to be consummated by
them. The execution and delivery of this Agreement, and the consummation of the
transactions contemplated by this Agreement to be consummated by the Parent
and/or the Subs, as the case may be, have been duly authorized by all necessary
corporate action on the part of the Parent and the Subs. This Agreement has been
duly executed and delivered by the Parent and the Subs, and constitutes a valid
and binding obligation of each such party, enforceable against each such party
in accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or constitute a 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 to loss of a material 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, any provision of (i) the
certificate of incorporation or by-laws of Parent or the Subs or any provision
of the comparable charter or organizational documents of any other subsidiary of
Parent, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Parent, any subsidiary of Parent or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the
18
<PAGE>
following sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree applicable to Parent or the Subs or any other
subsidiary of Parent or their respective properties or assets, other than, in
the case of clause (ii) and clause (iii), 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, (y) impair in any material
respect the ability of Parent and the Subs to perform their respective
obligations hereunder or (z) prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement to be consummated by them. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to Parent or
any subsidiary of Parent in connection with the execution and delivery of this
Agreement by the Parent and the Subs or the consummation by the Parent and the
Subs of the transactions contemplated by this Agreement to be consummated by
them, except for (i) the filing of a premerger notification and report form
under the HSR Act and such foreign antitrust filings as may be applicable, (ii)
the filing with the SEC of the Form S-4 and such reports under the Exchange Act
as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing with the SEC of the Proxy
Statement, (iv) the filing of the Articles of Merger with the Florida Department
of State, the Virginia Department of State, and appropriate documents with the
relevant authorities of other states in which the Subs are qualified to do
business and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the "blue sky"
laws of various states, the failure of which to be obtained or made would not,
individually or in the aggregate, have a material adverse effect on Parent or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
(d) SEC DOCUMENTS. Parent has filed all required reports, schedules,
forms, statements and other documents with the SEC since December 27, 1995 (the
"Parent SEC Documents"). As of their respective dates, the Parent SEC Documents
complied as to form 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 none of the Parent SEC Documents 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. Except to the extent
that information contained in any Parent SEC Document has been revised or
superseded by a later-filed Parent SEC Document filed and publicly available
prior to the date of this Agreement (the "Filed Parent SEC Documents"), as of
the date of this Agreement, none of the Parent SEC Documents contains any untrue
statement of a material fact or omits 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 were made, not misleading. The consolidated
financial statements of Parent included in the Parent SEC Documents complied as
of their respective dates of filing with the SEC as to form 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 (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 the financial position of Parent and its 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). Except as set forth in the Filed Parent
SEC Documents, and except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice, neither Parent nor
any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a consolidated balance sheet
of Parent and its consolidated subsidiaries or in the notes thereto which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Parent.
(e) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Parent or the Subs specifically for inclusion or incorporation
by reference in (i) the Form S-1 will, at the time the Form S-1 is filed with
the SEC, at any time it is amended or supplemented and 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, in light of the circumstances under
which they are made, not misleading, (ii) the Proxy Statement will, at the date
it is first mailed to the Parent's shareholders and at the time of
19
<PAGE>
the meeting of the Parent's shareholders held to vote on approval of this
Agreement, 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, and (iii) the Form 8-K(s) (the "Form 8-K") to be filed with the SEC
and at any time it is amended or supplemented, 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,
the Form S-1 and the Form 8-K will comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
thereunder, except that no representation is made by the Parent or the Subs with
respect to statements made or incorporated by reference therein based on
information supplied by the Lambert Entities or the Shareholders specifically
for inclusion or incorporation by reference in the Proxy Statement or Form S-1.
(f) COMPLIANCE WITH LAWS. Except as disclosed in the Filed Parent SEC
Documents, the Parent is in compliance in all material respects with all
applicable statutes, laws, ordinances, regulations, rules, judgments, decrees
and orders of any Governmental Entity (including, without limitation, the
Federal Trade Commission Act, the Truth-in-Lending Act and Regulation Z, the
Equal Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, and the Civil Rights At of 1964 and 1968) applicable to its
business or operations. The Parent has in effect all Federal, state, local and
foreign governmental approvals, authorization, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits"), necessary for it
to own, lease or operate its properties and assets and to carry on its business
as now conducted, and there has occurred no default under any such Permit.
(g) TAX MATTERS. Neither Parent nor any of the Subs nor, to Parent's
knowledge, any affiliate of Parent, has taken or agreed to take any action, or
knows of any circumstances, that would prevent the Mergers from qualifying as
reorganizations within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
(h) OWNERSHIP OF THE COMPANIES' COMMON STOCK. As of the date hereof,
neither Parent nor, to its knowledge, any of its affiliates or associates (as
such terms are defined under the Exchange Act), (i) beneficially owns, directly
or indirectly, or (ii) is party to any agreement, arrangement or understanding
providing for the acquisition, holding, voting or disposition of, in each case,
shares of capital stock of the Companies or any securities convertible into or
exercisable or exchangeable for capital stock of the Companies.
(i) INTERIM OPERATIONS OF THE SUBS. Each of the Subs were formed
solely for the purpose of engaging in a business combination transaction with
the Companies and has engaged in no other business activities and has conducted
its operations only as contemplated hereby.
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Each
Shareholder jointly and severally represents, warrants and covenants to Parent
and the Subs as follows:
(a) Such Shareholder is acquiring the shares of Parent Common Stock
to be issued to it pursuant to the Mergers (the "Merger Shares") for its own
account and not on behalf of any other person; the Shareholder is aware and
acknowledges that the Merger Shares have not been registered under the
Securities Act and may not be offered or sold unless the Merger Shares are
registered under the Securities Act or an exemption from the registration
requirements of the Securities Act is available;
(b) Such Shareholder has received and carefully reviewed all the Parent
SEC Documents; and the Shareholder has not been furnished with any offering
materials or literature relating to the offer and sale of the Merger Shares;
(c) Such Shareholder has been furnished all information that it deems
necessary to enable it to evaluate the merits and risks of an investment in the
Parent; such Shareholder has had a reasonable opportunity to ask questions of
and receive answers from Parent concerning Parent and the Merger Shares, and all
such questions, if any, have been answered to the full satisfaction of such
Shareholder;
20
<PAGE>
(d) No person or entity other than such Shareholder has (i) any
rights in and to the Merger Shares, which rights were obtained through or from
such Shareholder or (ii) any rights to acquire the Merger Shares, which rights
were obtained through or from such Shareholder;
(e) Such Shareholder has such knowledge and expertise in financial
and business matters (including knowledge and expertise in the Parent's
industry) that is capable of evaluating the merits and risks involved in an
investment in the Merger Shares; and such Shareholder is financially able to
bear the economic risk of the investment in the Merger Shares, including a total
loss of such investment;
(f) Such Shareholder represents that it has adequate means of
providing for his current needs and has no need for liquidity in its investment
in the Merger Shares; such Shareholder has no reason to anticipate any material
change in its financial condition for the foreseeable future;
(g) Such Shareholder is aware that the acquisition of the Merger
Shares is a speculative investment involving a high degree of risk and that
there is no guarantee that the Shareholder will realize any gain from this
investment, and that such Shareholder could lose the total amount of his
investment;
(h) Such Shareholder understands that no United States federal or
state agency had made any finding or determination regarding the fairness of the
offering of the Merger Shares for investment, or any recommendation or
endorsement of the offering of the Merger Shares;
(i) Such Shareholder is acquiring the Merger Shares for investment,
with no present intention of dividing or allowing others to participate in such
investments or of reselling, or otherwise participating directly or indirectly,
in a distribution of the Merger Shares, and shall not make any sale, transfer or
pledge thereof without registration under the Securities Act and any applicable
securities laws of any state or unless an exemption from registration is
available;
(j) No representations or warranties have been made to such
Shareholder by the Parent or any agent, employee or affiliate of the Parent, and
in entering into this transaction such Shareholder is not relying upon any
information, other than that contained in the Parent SEC Documents and the
results of independent investigation by such Shareholder; and
(k) Such Shareholder understands that the Merger Shares are being
offered to him in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Parent is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Shareholder
set forth herein in order to determine the applicability of such exemptions and
the suitability of such Shareholder to acquire the Merger Shares.
(l) Such Shareholder will not sell, assign or transfer any of the
Merger Shares except (i) pursuant to an effective registration statement under
the Securities Act, (ii) in a transaction which, in the opinion of the general
counsel of Parent or other counsel reasonably satisfactory to Parent, is not
required to be registered under the Act.
(m) Such Shareholder has not, within the preceding 30 days, sold,
transferred or otherwise disposed of any shares of the Companies' Common Stock
or stock of a Subsidiary ("Subsidiary Stock") held by such Shareholder and such
Shareholder will not sell, transfer or otherwise dispose of any Merger Shares
until after such time as results covering at least 30 days of combined
operations of the Parent and Company have been published by Parent, in the form
of a quarterly earning report, an effective registration statement filed with
the SEC, a report to the SEC on Form 10-K, 10-Q, or 8-K, or any other public
filing or announcement which includes such combined results of operations.
21
<PAGE>
(n) Schedule 3.3.(n) sets forth all the information which the Lambert
Entities would be required to disclose by Item 401 of Regulation S-K if the
Lambert Entities were subject to such reporting requirements.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. CONDUCT OF BUSINESS BY THE LAMBERT ENTITIES.
(a) CONDUCT OF BUSINESS BY THE LAMBERT ENTITIES. The Lambert Entities
and the Shareholders agree that during the period from the date of this
Agreement to the Effective Time, the Lambert Entities shall, except as expressly
contemplated or permitted by this Agreement or to the extent that Parent shall
otherwise consent in writing, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use reasonable efforts to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers; lenders; marketing companies, distributors; and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, each of the
Companies agrees on its behalf and on behalf of its Subsidiaries that during the
period from the date of this Agreement to the Effective Time, it shall not
(except as expressly contemplated or permitted by this Agreement or to the
extent that Parent shall otherwise consent in writing):
(i) (x) except as set forth on Schedule 4.1(a)(i) declare,
set aside or pay any dividends on, or make any other distributions
(whether in cash, stock or property) in respect of, any of its capital
stock, except for dividends by a direct or indirect wholly owned
subsidiary of the Lambert Entities to its parent, (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, or (z) purchase, redeem or otherwise
acquire any shares of capital stock of a Lambert Entity or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber 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;
(iii) amend its articles of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) except as set forth on Schedule 4.1 (a) (iv), acquire
or agree to acquire (x) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y)
any assets that are material, individually or in the aggregate, to the
Lambert Entity;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, except in the ordinary course of business consistent with past
practice;
(vi) (y) except as set forth on Schedule 4.1(a)(vi) incur
any indebtedness for borrowed money or guarantee any such indebtedness
of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of a Lambert Entity,
guarantee any debt securities of another person, enter into any "keep
well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic
effect of any of the foregoing, except
22
<PAGE>
for short-term borrowings incurred in the ordinary course of business
consistent with past practice, or (z) except as set forth on Schedule
4.1(a)(vi), make any loans, advances or capital contributions to, or
investments in, any other person, other than (A) to a Lambert Entity or
(B) advances to employees in accordance with past practice;
(vii) except for the item listed on Schedule 4.1 (a)(vii)
or in the ordinary course of business, make or agree to make any new
capital expenditure or expenditures which, individually, is in excess
of $25,000 or, in the aggregate, are in excess of $100,000;
(viii) [intentionally omitted]
(ix) except as set forth on Schedule 4.1 (a) (ix), pay,
discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the Financial Statements (or the notes
thereto) or incurred in the ordinary course of business consistent with
past practice, or waive any material benefits of, or agree to modify in
any material respect, any confidentiality, standstill or similar
agreements to which a Lambert Entity is a party;
(x) except in the ordinary course of business, modify, amend
or terminate any material contract or agreement to which a Lambert
Entity is a party or waive, release or assign any material rights or
claims;
(xi) except as set forth in Schedule 4.1(a)(xi) or as
required to comply with applicable law, (A) adopt, enter into,
terminate or amend any Benefit Plan or other arrangement for the
benefit or welfare of any director, officer or current or former
employee, (B) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee
(except for normal increases or bonuses in the ordinary course of
business consistent with past practice), (C) pay any benefit not
provided for under any Benefit Plan, (D) except as permitted in clause
(B), grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant
of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock, or the removal
of existing restrictions in any Benefit Plans or agreement or awards
made thereunder) or (E) take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Benefit Plan;
(xii) make any change in any method of accounting or
accounting practice or policy other than those required by generally
accepted accounting principles;
(xiii) take any action that would prevent the Mergers
from qualifying as a reorganization within the meaning of Sections
368(a)(1)(A) or 368(a)(2)(E) of the Code;
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions; or
(xv) take any action that (without regard to any action
taken or agreed to be taken by Parent or any of its affiliates) would
prevent Parent from accounting for the business combination to be
effected by the Mergers as a pooling of interests.
(b) OTHER ACTIONS. None of the Lambert Entities shall take any action
that would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Mergers set forth in
23
<PAGE>
Article VI not being satisfied (subject to the Lambert Entities' rights and
obligations to comply with federal and state laws).
(c) CERTAIN TAX MATTERS. From the date hereof until the Effective
Time, (i) each of the Lambert Entities will accurately prepare and timely file
with the relevant taxing authorities all tax returns and reports ("Post-Signing
Returns") required to be filed; (ii) each of the Lambert Entities will timely
pay all taxes due and payable in connection with each Post-Signing Return; (iii)
each of the Lambert Entities will make adequate provision on its books and
records, to the extent required in accordance with generally accepted accounting
principles, for all taxes due and payable by it from the date hereof until after
the Effective Time; and (iv) each of the Lambert Entities will promptly notify
Parent of any pending or announced action, suit, proceeding, claim or audit
against or with respect to it in respect of any tax where there is a reasonable
possibility of a determination or decision which would reasonably be expected to
have a material adverse effect on its tax liabilities or tax attributes.
SECTION 4.2. CONDUCT OF BUSINESS BY THE PARENT.
(a) CONDUCT OF BUSINESS BY THE PARENT. Parent agrees that during the
period from the date of this Agreement to the Effective Time, Parent shall and
shall cause its subsidiaries to, except as expressly contemplated or permitted
by this Agreement or to the extent that the Companies shall otherwise consent in
writing, carry on their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers; lenders;
marketing companies; distributors; and others having business dealings with them
to the end that their goodwill and ongoing businesses shall not be impaired in
any material respect (individually, with respect to any subsidiary, or in the
aggregate, with respect to Parent and its subsidiaries taken as a whole) at the
Effective Time. Without limiting the generality of the foregoing, Parent agrees
that during the period from the date of this Agreement to the Effective Time,
the Parent shall not, and shall not permit any of its subsidiaries to, (except
as expressly contemplated or permitted by this Agreement or to the extent that
the Companies shall otherwise consent in writing):
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect
of, any of its capital stock, except for dividends by a direct or
indirect wholly owned subsidiary of Parent to its parent, (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, or (z) purchase, redeem
or otherwise acquire any shares of capital stock of Parent or any or
any of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber 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;
(iii) amend its articles of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) except as set forth on Schedule 4.2 (a) (iv), acquire
or agree to acquire (x) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y)
any assets that are material, individually or in the aggregate, to the
Companies and their subsidiaries taken as a whole;
24
<PAGE>
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, except in the ordinary course of business consistent with past
practice;
(vi) (y) except as set forth on Schedule 4.2(a)(vi) incur
any indebtedness for borrowed money or guarantee any such indebtedness
of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of Parent or any of its
subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice, or (z) except as set forth on Schedule
4.2(a)(vi), make any loans, advances or capital contributions to, or
investments in, any other person, other than (A) to Parent or any
direct or indirect wholly owned subsidiary of Parent or (B) advances to
employees in accordance with past practice;
(vii) except for the item listed on Schedule 4.2 (a)(vii)
or in the ordinary course of business, make or agree to make any new
capital expenditure or expenditures which, individually, is in excess
of $25,000 or, in the aggregate, are in excess of $100,000;
(viii) make any material tax election or settle or compromise
any material tax liability;
(ix) except as set forth on Schedule 4.2 (a) (ix), pay,
discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of Parent or its subsidiaries or
incurred in the ordinary course of business consistent with past
practice, or waive any material benefits of, or agree to modify in any
material respect, any confidentiality, standstill or similar agreements
to which Parent or any of its subsidiaries is a party;
(x) except in the ordinary course of business, modify, amend
or terminate any material contract or agreement to which Parent or any
subsidiary is a party or waive, release or assign any material rights
or claims;
(xi) except as required to comply with applicable law, (A)
adopt, enter into, terminate or amend any Benefit Plan or other
arrangement for the benefit or welfare of any director, officer or
current or former employee, (B) increase in any manner the compensation
or fringe benefits of, or pay any bonus to, any director, officer or
employee (except for normal increases or bonuses in the ordinary course
of business consistent with past practice), (C) pay any benefit not
provided for under any Benefit Plan, (D) except as permitted in clause
(B), grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant
of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock, or the removal
of existing restrictions in any Benefit Plans or agreement or awards
made thereunder) or (E) take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Benefit Plan;
(xii) make any change in any method of accounting or
accounting practice or policy other than those required by generally
accepted accounting principles;
(xiii) take any action that would prevent the Mergers
from qualifying as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code;
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions; or
25
<PAGE>
(xv) take any action that (without regard to any action
taken or agreed to be taken by Parent or any of its affiliates) would
prevent Parent from accounting for the business combination to be
effected by the Mergers as a pooling of interests.
(b) OTHER ACTIONS. Parent shall not, and shall not permit any of its
subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of such
party set forth in this Agreement that are qualified as to materiality becoming
untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect, or (iii) any of the
conditions to the Mergers set forth in Article VI not being satisfied (subject
to Parent's right and obligation to comply with federal and state laws).
(c) CERTAIN TAX MATTERS. From the date hereof until the Effective
Time, (i) Parent and its subsidiaries will accurately prepare and timely file
with the relevant taxing authorities all tax returns and reports ("Post-Signing
Returns") required to be filed; (ii) Parent and its subsidiaries will timely pay
all taxes due and payable in connection with each Post-Signing Return; (iii)
Parent and its subsidiaries will make adequate provision on their books and
records, to the extent required in accordance with generally accepted accounting
principles, for all taxes due and payable from the date hereof until the
Effective Time; and (iv) Parent and its subsidiaries will promptly notify the
Lambert Entities of any pending or announced action, suit, proceeding, claim or
audit against or with respect to the Lambert Entities in respect of any tax
where there is a reasonable possibility of a determination or decision which
would reasonably be expected to have a material adverse effect on Parent's tax
liabilities or tax attributes.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. PREPARATION OF PROXY STATEMENT; SHAREHOLDERS MEETING; FORM
8-K.
(a) As soon as practicable following the date of this Agreement, the
Parent shall prepare and file with the SEC the Proxy Statement and a report on
Form 8-K announcing the proposed Mergers. Parent will use its reasonable efforts
to cause the Proxy Statement to be mailed to the Parent's shareholders as
promptly as legally practicable after its filing with the SEC. Parent shall take
any action (other than qualifying to do business in any jurisdiction in which it
is not now so qualified) required to be taken under any applicable, federal and
state securities laws in connection with the issuance of Parent Common Stock in
the Mergers. Each of Parent, the Lambert Entities and the Shareholders shall
furnish all information concerning itself to the other parties as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Proxy Statement and the filing of the Form 8-K.
Each of the Parent, the Lambert Entities and the Shareholders shall, and shall
cause their respective agents to timely furnish all information concerning
itself to the Parent as may be reasonably requested in connection with the
preparation of such financial information, including pro-forma financial
information, as the Parent is required to disclose by the Exchange Act.
(b) Parent will, as soon as practicable following the date of this
Agreement, establish a record date (which will be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its shareholders (the "Shareholders Meeting") for the
purpose of approving this Agreement; PROVIDED, HOWEVER, that Parent may postpone
or adjourn any Shareholders Meeting to a date no later than June 30, 1997, in
order to facilitate the satisfaction of the condition set forth in Section
6.1(a).
SECTION 5.2. LETTERS OF THE COMPANIES' ACCOUNTANTS. (a a) With
respect to the filing of the Proxy Statement and each Form 8-K filed by the
Parent pertaining to the Mergers (which Form 8-K contains financial statements
of or pertaining to the Lambert Entities), each of the Companies shall use its
reasonable efforts to cause to be delivered to Parent a "comfort" letter of
Millward & Co., each of the Companies' independent public
26
<PAGE>
accountants. Such comfort letter shall be dated on the date of the schedule or
report filed with the SEC and shall be customary in scope and substance for
letters delivered by independent public accountants in connection with such
schedules or reports.
(b) Each of the Companies shall use its reasonable efforts to cause
to be delivered to Parent letters from Millward & Co., addressed to Parent and
the subject company, one dated the date of the Proxy Statement, stating that the
Mergers will qualify as a pooling of interests transaction under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and regulations, and
one dated as of the Closing Date, confirming as of the Closing Date the
previously delivered letter referred to above.
SECTION 5.3. LETTERS OF PARENT'S ACCOUNTANTS (a) With respect to the
filing of the Proxy Statement and each Report on Form 8-K (a "Form 8-K") filed
by the Parent pertaining to the Mergers (which Form 8-K contains financial
statements of or pertaining to the Parent and the Companies), Parent shall use
its reasonable efforts to cause to be delivered to the Companies a "comfort"
letter of Coopers & Lybrand, Parent's independent public accountants. Such
comfort letter shall be dated on the date of the schedule or report filed with
the SEC and shall be customary in scope and substance for letters delivered by
independent public accountants in connection with such schedules or reports.
(b) Parent shall use its reasonable efforts to cause to be received
by it letters from Coopers & Lybrand, L.L.P., addressed to Parent, one dated the
date of the Proxy Statement, stating that the Mergers will qualify as a pooling
of interests transaction under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and one dated as of the Closing Date,
confirming as of the Closing Date the previously delivered letter referred to
above.
SECTION 5.4. [Intentionally Omitted]
SECTION 5.5. ACCESS TO INFORMATION.
(a) Each of the Lambert Entities shall, upon reasonable notice from
Parent, afford to Parent, and to Parent's officers, employees, accountants,
counsel financial advisors and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of the Lambert Entities shall furnish promptly to
Parent upon request (i) a copy of each report, schedule, and other document
filed or received by it during such period pursuant to the requirements of
Federal, state, local or foreign tax laws and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request.
(b) Parent shall, and shall cause each of its subsidiaries to, upon
reasonable notice from the Lambert Entities, afford to the Lambert Entities, and
to the Lambert Entities' officers, employees, accountants, counsel financial
advisors and other representatives of the Lambert Entities, reasonable access
during normal business hours during the period prior to the Effective Time to
all their respective properties, books, contracts, commitments, personnel and
records and, during such period, Parent shall and shall cause each of its
subsidiaries to, furnish promptly to the Lambert Entities upon request (i) a
copy of each report, schedule, and other document filed or received by it during
such period pursuant to the requirements of Federal or state tax laws and (ii)
all other information concerning its business, properties and personnel as the
Lambert Entities may reasonably request.
(c) Each of the Lambert Entities and Parent may make copies of
documents provided to them pursuant to this Section 5.5 at their own expense.
The parties shall, and shall cause their respective officers, employees,
accountants, counsel, financial advisors and other representatives to, hold any
such information which is nonpublic in confidence on the same terms and
conditions as set forth in the letter dated November 26, 1996, as amended from
time to time, between the Lambert Entities and Parent (the "Confidentiality
Agreement").
27
<PAGE>
SECTION 5.6. REASONABLE EFFORTS; NOTIFICATION.
(a) Each of the parties hereto agrees to promptly effect all
necessary filings required to be made by it under the HSR Act and any other
domestic or foreign antitrust law, rule or regulation. Each of the Parent and
the Subs agrees to (i) promptly effect all necessary filings required to be made
by them under any domestic or foreign antitrust law, rule or regulation, and
(ii) promptly take, or cause their affiliates to take, if required by the
Federal Trade Commission or its staff, the Assistant Attorney General in charge
of the Antitrust Division or her staff, any state attorney general or its staff,
or any other Governmental Entity, in each case in order to consummate the
Mergers, all steps (including executing agreements and submitting to judicial or
administrative orders) to secure government antitrust clearance (including by
avoiding or setting aside any preliminary or permanent injunction or other order
of any Governmental Entity), including, without limitation, all steps to make
arrangements for or to effect the sale or other disposition of particular assets
or categories of assets or businesses of Parent, the Subs, any of their
affiliates and/or the Lambert Entities and to hold separate (including, without
limitation, pursuant to arrangements which restrict, limit or prohibit access to
the Lambert Entities and/or the voting of shares of capital stock of the Lambert
Entities) pending such sale or other disposition of particular assets or
categories of assets, businesses or voting securities of the Lambert Entities.
All the actions required to be taken or to be taken hereunder by Parent, the
Subs or their affiliates pursuant to this Section 5.6 will be consistent with
their respective obligations under applicable law or any agreement to which any
of such person is a party.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all other things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Mergers and the other transactions contemplated by this
Agreement, including (i) the obtaining of all other necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all other reasonable steps as
may be necessary to avoid an action or proceeding by any Governmental Entity,
(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 hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity 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. In connection with and without limiting the
foregoing, the Companies and their respective Board of Directors shall, if any
state takeover statute or similar statute or regulation is or becomes applicable
to the Mergers, this Agreement or the other transactions contemplated by this
Agreement, use all reasonable efforts to ensure that the Mergers and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Mergers and the other
transactions contemplated by this Agreement.
SECTION 5.7. FEES AND EXPENSES.
(a) All fees and expenses incurred in connection with the Mergers,
this Agreement and the transactions contemplated by this Agreement shall be
shared equally by: (i) the Parent and the Subs; and (ii) the Companies, whether
or not the Mergers are consummated. For purposes of this Section 5.7, "fees and
expenses" means all documented out-of-pocket fees and expenses incurred or paid
by or on behalf of Parent, the Subs, the Companies or Shareholders in connection
with the Mergers or any of the transactions contemplated by this Agreement,
including all fees and expenses of counsel, investment banking firms,
accountants, experts and consultants. For purposes of this Section 5.7, "fees
and expenses" shall not include fees payable pursuant to Section 5.7(b) or
5.7(c).
(b) In addition to the provisions of Section 5.7(a), if the Parent
properly elects to terminate this Agreement pursuant to Section 7.2(d)(ii) or
(iii) then the Parent shall promptly pay to the Companies a fee of $150,000 to
cover the expenses of the Lambert Entities and the Shareholders. In addition to
the provisions of
28
<PAGE>
Section 5.7(a), Parent shall pay to the Companies a fee of $10,000,000 if the
Parent enters into any written agreement with respect to a superior proposal (as
defined in Section 7.1(c)(ii)) either: (i) prior to the termination of this
Agreement; or (ii) within the six month period immediately following the
termination of this Agreement pursuant to Sections 7.1(d)(ii) or 7.1(d)(iii).
(c) In addition to the provisions of Section 5.7(a), if the Companies
properly elect to terminate this Agreement pursuant to Section 7.1(c)(iii)or
(iv), then each of the Lambert Entities agrees, jointly and severally, to
promptly pay the Parent a fee aggregating to $150,000 to cover the expenses of
the Parent. In addition to the provisions of Section 5.7(a), the Lambert
Entities agree, jointly and severally, to promptly pay the Parent a fee of
$10,000,000 if any of the Lambert Entities or the Shareholders enters into any
written agreement with respect to a superior proposal either (i) prior to the
termination of this Agreement; or (ii) within the six month period immediately
following the termination of this Agreement pursuant to Section 7.1(c)(iii) or
7.1(c)(iv).
SECTION 5.8. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand,
and the Company, on the other hand, will consult with each other before issuing,
and give each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions contemplated
by this Agreement, including the Mergers, and shall not issue any such press
release or make any such without the other party's approval unless and only to
the extent that such release or statement is required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange or the Nasdaq National Market. 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 5.9. WAIVER OF EMPLOYMENT AGREEMENT RIGHTS. The Parent shall
use its reasonable efforts to cause the individuals identified on Schedule 5.9
to waive their rights, which are more specifically identified on Schedule 5.9,
to receive certain payments from the Parent as a result of the Mergers under
their respective employment agreements with Parent.
SECTION 5.10. STOCK EXCHANGE LISTING. To the extent Parent does not
issue treasury shares in the Mergers or under Parent Plans which are already
listed, Parent shall use its reasonable efforts to cause the shares of Parent
Common Stock to be issued in the Mergers and under the Parent Stock Plans to be
approved for listing on the NASDAQ National Market System ("NMS"), subject to
official notice of issuance, prior to the Closing Date.
SECTION 5.11. CERTAIN LITIGATION. Each of the Lambert Entities
agrees that it will not settle any litigation currently pending, or commenced
after the date hereof, against it or any of its directors, without the prior
written consent of Parent. Parent agrees that it will not settle any litigation
currently pending, or commenced after the date hereof, against the Parent or any
of its directors, without the prior written consent of the Company.
SECTION 5.12. EMPLOYMENT AGREEMENTS. Subject to the consummation of
the Mergers, the Parent and Jim Lambert agree to enter into an employment
agreement pursuant to which Mr. Lambert shall agree to serve as the Parent's
Chief Executive Officer for a period of at least two years, on terms and
conditions no less favorable to Mr. Lambert than the terms and conditions of
Ralph Muller's current employment contract with Parent.
SECTION 5.13. REGISTRATION RIGHTS. As soon as practicable following
the date of this Agreement, the Parent shall prepare and file with the SEC the
Form S-1 Registration Statement. Each of the Parent, the Companies and the
Shareholders shall (i) use all reasonable efforts to have the Form S-1 declared
effective under the Securities Act as promptly as practicable after the Merger
Shares have been issued, and (ii) furnish all information concerning itself to
the other parties as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Form S-1. It is
anticipated that the Form S-1 will incorporate by reference certain financial
information regarding the Parent and the Company, which financial information
will be included in the Proxy Statement or a Form 8-K. Prior to the
effectiveness of the Form S-1 Registration Statement, the Parent and each
Shareholder of the Parent registering shares of Parent Common Stock for resale
shall enter into an underwriting agreement with respect to the distributions of
Parent Common Stock which are the subject of the Form
29
<PAGE>
S-1 Registration Statement. Parent's obligation to register certain of the
Merger Shares for resale by the Shareholders is contingent upon the issuance of
the Merger Shares.
SECTION 5.14. STOCK OPTION PLAN. Upon consummation of the Mergers,
the Parent shall establish an additional incentive stock option plan (the
"Parent Incentive Stock Option Plan") pursuant to which the Parent may issue
options to purchase up to 750,000 shares of Parent Common Stock.
SECTION 5.15. POOLING OF INTERESTS. Each of the parties to this
Agreement agrees to use its reasonable efforts to qualify the Mergers for
pooling of interests treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGERS. The respective obligation of each party to effect the Mergers is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been approved by
the affirmative vote of such number of the outstanding shares of Parent Common
Stock as are sufficient to approve the Agreement and the transactions
contemplated thereby under the FBCA.
(b) NMS LISTING. The shares of Parent Company Stock issuable to the
Company's shareholders pursuant to this Agreement and the Parent Incentive Stock
Option Plan shall have been approved for listing on the NMS, subject to official
notice of issuance.
(c) HSR ACT. The waiting period applicable to the Mergers under the HSR
Act shall have been terminated or shall have expired.
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. None of the parties
hereto shall be subject to any statute, rule, regulation, decree, ruling,
injunction or other order issued by any Governmental Entity of competent
jurisdiction (an "Injunction") which prohibits, restrains, enjoins or restricts
the consummation of the transactions contemplated by this Agreement; provided,
however, that each of Parent and Sub shall have used its best efforts, to the
extent required pursuant to Section 5.7(a), to prevent any such injunction or
other order, and to appeal as promptly as practicable any injunction or other
order that may have been entered, including, without limitation, by proffering
its willingness to accept an order embodying any arrangement required to be made
by Parent or Sub pursuant to clause (a)(ii) of Section 5.7 (and notwithstanding
anything in this subsection (d) to the contrary, no terms, conditions or
provisions of an order embodying such an arrangement shall constitute a basis
for Parent or Sub asserting nonfulfillment of the conditions contained in this
subsection (d)).
(e) FAIRNESS OPINION. The Parent's Board of Directors shall have
received prior to the date the Proxy Statement is submitted to the SEC, and the
Parent shall have included in the Proxy Statement, the written opinion of
Montgomery (hereinafter, the "Fairness Opinion"), independent financial advisor
to the Parent, to the effect that the financial terms of the Mergers are fair to
the shareholders of the Parent from a financial point of view, in form and
substance reasonably satisfactory to Parent.
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF THE PARENT AND SUBS. The
obligations of the Parent and the Subs to effect the Mergers are further subject
to the following conditions:
30
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Lambert Entities and the Shareholders set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of the Lambert Entities set forth in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, and Parent shall have received a
certificate signed on behalf of each of the Lambert Entities by the chief
executive officer and the chief financial officer of each Lambert Entity to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE LAMBERT ENTITIES. Each of the
Lambert Entities shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and Parent shall have received a certificate signed on behalf of each of
the Lambert Entities by the chief executive officer and the chief financial
officer of each of the Lambert Entities to such effect.
(c) NO MATERIAL ADVERSE CHANGE. At any time on or after the date of
this Agreement there shall not have occurred any material adverse change in the
business, properties, assets, financial condition or results of operations of
the Lambert Entities taken as a whole.
(d) TAX OPINION. On or prior to ______________ the Parent shall have
received the opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., counsel to the Parent to the effect that, based on certain representation
letters provided to counsel by the Parent, the Subs, the Lambert Entities and
the Shareholders and based on the assumptions and qualifications set forth in
that opinion, with respect to each of the Companies (i) the Mergers involving
the Company will be treated for Federal Income tax purposes as reorganizations
within the meaning of Section 368(a) of the Code, (ii) the Parent, the relevant
Sub, and the Company will be a party to the reorganization within the meaning of
Section 368(b) of the Code, (iii) no income, gain or loss will be recognized for
Federal income tax purposes by the Parent, the relevant Sub or the Company as a
result of the Merger, and (iv) no income, gain or loss will be recognized for
Federal income tax purposes by the Shareholders upon the exchange in the Merger
of shares of the Company solely for shares of Parent. The opinion shall take
into account any securities distributions that are the subject of the S-1
Registration Statement.
SECTION 6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANIES AND THE
SHAREHOLDERS. The obligation of the Companies and the Shareholders to effect the
Mergers is further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and the Subs set forth in this Agreement that are qualified
as to materiality shall be true and correct, and the representations and
warranties of Parent and the Subs set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, except as otherwise contemplated by this Agreement,
and the Companies shall have received a certificate signed on behalf of Parent
by the chief executive officer and the chief financial officer of Parent to such
effect
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND THE SUBS. Parent and the
Subs shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date, and
the Companies shall have received a certificate signed on behalf of Parent by
the chief executive officer and the chief financial officer of Parent to such
effect.
(c) NO MATERIAL ADVERSE CHANGE. At any time on or after the date of
this Agreement there shall not have occurred any material adverse change in the
business, properties, assets, financial condition or results of operations of
the Parent and its subsidiaries, taken as a whole.
31
<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated, and the
Mergers contemplated hereby may be abandoned, at any time prior to the Effective
Time:
(a) by mutual written consent of Parent, the Subs, the Companies and
the Shareholders;
(b) by either Parent or the Companies:
(i) if, upon a vote taken at a duly held Shareholders Meeting
or any adjournment thereof, the approval of the shareholders of the
Parent shall not have been obtained;
(ii) if the Mergers shall not have been consummated on or
before June 1, 1997, unless the failure to consummate the Mergers is
the result of a breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof during which any party
shall be subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the consummation of the
Mergers or the calling or holding of the Shareholders Meeting; or
(iii) if any Governmental Entity of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Mergers
and such order, decree, ruling or other action shall have become final
and nonappealable;
(c) by the Companies:
(i) if, prior to the Shareholders Meeting, a takeover
proposal is commenced, publicly proposed, publicly disclosed or
communicated to the Parent (or the willingness of any person to make a
takeover proposal is publicly disclosed or communicated to the Parent)
and the Board of Directors of the Parent or any committee thereof shall
have withdrawn or modified in a manner adverse to the Companies its
approval or recommendation of the Mergers or this Agreement, or
approved or recommended any takeover proposal, or resolved to take any
of the foregoing actions (For purposes of this Agreement, "takeover
proposal" means and inquiry, proposal or offer from any person relating
to any direct or indirect acquisition or purchase of 15% or more the
consolidated assets of the Parent and its subsidiaries or 20% or more
of any class of equity securities of the Parent or any of its
significant subsidiaries or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more
of any class of equity securities of the Parent or any of its
significant subsidiaries, or any merger, consolidation, business
combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving the Parent or
any of its subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of which
could reasonably be expected to impede, interfere with, prevent or
materially delay the Mergers or which would reasonably be expected to
dilute materially the benefits the Shareholders of the transactions
contemplated hereby);
(ii) if the Parent shall have entered into any agreement
with respect to any superior proposal (For purposes of this Agreement,
"superior proposal" means a bona fide proposal made by a third party to
acquire, directly or indirectly, for consideration of cash and/or
securities, more than 50% of the shares of the subject company common
stock then outstanding or all or substantially all the assets of the
subject company, and otherwise on terms which a majority of the
disinterested members of the Board of Directors of the subject company
determines in its good faith judgment (based on the advice of a
financial advisor) to be more favorable to the subject company's
shareholders than the Mergers and for which financing, to the
32
<PAGE>
extent required, is then committed or which financing, in the good
faith judgment of a majority of such disinterested members, is
reasonably capable of being obtained by such third party);
(iii) within ten (10) days of any amendment or
modification of the Schedules to this Agreement, if as a direct result
of any disclosure or disclosures taken as a whole on any one or more
Schedules made after the date hereof, but on or before the Schedule
Date (as hereinafter defined in Section 10.10), the Companies become
aware of a circumstance or condition that would have a material adverse
effect; or,
(iv) if at any time during the period from the date hereof
to a date twenty days hereafter (such period, the "Termination
Period"), if the Companies in their judgment determine, based on their
due diligence review of the Parent and the Subs, that it is inadvisable
to proceed with the Mergers;
(d) by the Parent:
(i) if, prior to the approval of this Agreement by
Shareholders of Parent, the Parent shall have entered into any
agreement with respect to any superior proposal;
(ii) if at any time during the period from the date hereof
to a date twenty days hereafter (such period, the "Termination
Period"), if Parent in its sole judgment determines, based on its due
diligence review of the Lambert Entities, that it is inadvisable to
proceed with the Mergers;
(iii) within ten (10) days of any amendment or
modification of the Schedules to this Agreement, if as a direct result
of any disclosure or disclosures taken as a whole on any one or more
Schedules made after the date hereof, but on or before the Schedule
Date (as hereinafter defined in Section 10.10), Parent becomes aware of
a circumstance or condition that would have a material adverse effect;
(iv) if the Berkley Group Employee Stock Ownership Plan and
Trust does not execute and deliver this Agreement by December 2, 1996;
or
(v) if any of the Lambert Entities shall have entered into any
agreement with respect to any superior proposal.
SECTION 7.2. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Companies 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, the Subs or the Lambert Entities,
other than the provisions of the first sentence of Section 3.1(p), the second
sentence of Section 5.5(c), Section 5.7, this Section 7.2 and Article X and
except to the extent that such termination results from the willful and 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
hereto at any time before or after any required approval of matters presented in
connection with the Mergers by the shareholders of the Parent; PROVIDED,
HOWEVER, that after any such approval, there shall be made no amendment that by
law requires further approval by such shareholders without the further approval
of such shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 7.4. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso of Section 7.3, waive compliance
with any of the agreements or conditions contained herein. 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
33
<PAGE>
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.
ARTICLE VIII
INTENTIONALLY OMITTED
ARTICLE IX
TAXES
SECTION 9.1. REPRESENTATIONS AND OBLIGATIONS REGARDING TAXES. Each of
the Companies represents, warrants and agrees with respect to itself, and each
of the Shareholders individually represents, warrants and agrees with respect to
itself and, to the best of its knowledge, with respect to each of the Companies
in which its owns capital stock, to and with Parent as follows:
(a) Except as set forth in Schedule 9.1(a), (i) all returns and
reports, including without limitation, information and withholding returns and
reports ("Tax Returns") of or relating to any foreign, federal, state or local
tax assessment or other governmental charge (all herein referred to collectively
as "Taxes" or singularly as a "Tax") that are required to be filed by or with
respect to the income, business, operations or property of any of the Lambert
Entities have been duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each such Tax
Return have been so included, (iii) all information provided in each such Tax
Return is true, correct and complete, (iv) all Taxes that have become due with
respect to the taxable years covered by each such Tax Returns (whether or not
shown on any Tax Return) have been timely paid in full, (v) no penalty, interest
or other charge is or will become due with respect to the late filing of any
such Tax Return or late payment of any such Tax, and (vi) all withholding Tax
requirements imposed on any of the Lambert Entities for all taxable periods have
been satisfied in full in all respects. Schedule 9.1(a) lists all federal,
state, local and foreign income Tax Returns filed with respect to each of the
Lambert Entities for taxable periods ended on or after December 31, 1993,
indicates those Tax Returns that have been audited and indicates those Tax
Returns that currently are the subject of the audit. The Shareholders shall
deliver to the Parent correct and complete copies of all federal income Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by any of the Lambert Entities since December 31, 1993.
(b) There is no claim against any of the Lambert Entities with
respect to any Taxes and no assessment, deficiency or adjustment has been
asserted or proposed with respect to any Tax Return of or with respect to any of
the Lambert Entities, other than those disclosed (and to which are attached true
and complete copies of all audit or similar reports) in Schedule 9.1(b). No
claim has ever been made by any taxing authority in a jurisdiction where any of
the Lambert Entities does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of any of the Lambert Entities that arose in connection with any failure
(or alleged failure) to pay any Tax.
(c) Except as set forth in Schedule 9.1(c), there is not in force any
extension of time with respect to the date on which any Tax Return of or with
respect to any of the Lambert Entities is to be filed. None of the Lambert
Entities has waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.
(d) Except as set forth in Schedule 9.1(d), the total amounts set up
as liabilities for Taxes in the Financial Statements for each of the Lambert
Entities are sufficient to cover the payment of all Taxes, including any related
penalties, interest or other amounts and whether or not assessed or disputed,
which are, or are hereafter
34
<PAGE>
found to be, or to have been, due with respect to the conduct of the business of
such Lambert Entity for the taxable periods covered thereby.
(e) Except as set forth on Schedule 9.1(e), the consummation of the
Mergers will not result in any Tax liability to the Parent or any of the Subs
arising from the business operations of any of the Lambert Entities prior to the
Mergers.
(f) None of the Lambert Entities has at any time consented to have
the provisions of section 341(f) of the Code apply with respect to its stock.
None of the Lambert Entities has made any payments, is obligated to make any
payments or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code ss.
280G.
(g) None of the Shareholders of any Lambert Entity that is a United
States real property holding corporation within the meaning of Code ss. 897 (c)
(2) during the applicable period specified in Code ss. 897 (c) (1) (A) (ii) is a
foreign person subject to the withholding of tax pursuant to Code ss. 1445.
(h) None of the Lambert Entities is a party to any Tax allocation or
sharing agreement. None of the Lambert Entities (a) has been a member of an
affiliated group filing a consolidated federal income Tax Return or (b) has any
liability for the Taxes of any person under Treasury regulation section 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise.
(i) None of the Lambert Entities nor the Shareholders has taken or
will take any action which could result in a deemed election under section 338
of the Code with respect to any of the Lambert Entities.
(j) Intentionally omitted.
(k) Each of Williamsburg and Westview has been duly qualified as an
"S" corporation under the Code, and has maintained at all times since its
organization, a valid "S" corporation election under the Code.
(l) After the date of the Closing, the Shareholders who own capital
stock of Williamsburg or Westview shall prepare and file Federal "S" corporation
income Tax Returns (and, if applicable, state and local income Tax Returns) on
behalf of Williamsburg and/or Westview reflecting all items of income, gain,
loss, deduction, credit and other items required to be included in such Tax
Returns for the periods on to the date of the Closing (collectively, the
"Short-Year Tax Returns"). All income Taxes due with respect to the Short-Year
Tax Returns shall be borne by the Shareholders. The Short-Year Tax Returns shall
be subject to approval by Parent prior to filing, which approval shall not be
unreasonably withheld or delayed.
(m) Notwithstanding the foregoing, any Tax assessed against the value
of assets owed by WILLIAMSBURG AND WESTVIEW for the taxable period that includes
the date of the Closing shall be borne by the PARENT. The parties hereto agree
that they shall use their reasonable efforts to minimize any Tax assessed
against the value of assets owned by Williamsburg and Westview.
(n) The Parent shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of each of the Lambert Entities for taxable
periods that begin before the Closing Date and end after the Closing Date.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement shall survive the Effective
Time.
35
<PAGE>
SECTION 10.2. NOTICES. Except as otherwise provided in Section
4.3(f), all notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
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 the Subs, to:
Vacation Break U.S.A., Inc.
6400 N. Andrews Ave.
Ft. Lauderdale, Florida 33309
Attention: Ralph Muller,
Chief Executive Officer
with a copy to:
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Gary M. Epstein, Esq.
(b) if to any of the Lambert Entities:
The Berkley Group
3015 N. Ocean Blvd., Suite 121
Ft. Lauderdale, Florida 33308
Attention: Mr. Jim Lambert
with a copy to:
Greenspoon Marder Hirschfeld Rafkin
Ross & Berger
Trade Center South, Suite 700
100 West Cypress Creek Road
Ft. Lauderdale, Florida 33309
Attention: Gerald Greenspoon, Esq.
(c) if to the Shareholders, to the names and addresses identified
on Exhibit A.
SECTION 10.3. 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;
(b) an "environmental law" means any law, statute, regulation, rule,
order, decree, judgment, consent decree, settlement agreement or governmental
requirement, which relates to or otherwise imposes liability or standards of
conduct concerning mining or reclamation of mined land, discharges, emissions,
releases or threatened
36
<PAGE>
releases of noises, odors or any pollutants, contaminants or hazardous or toxic
wastes, substances or materials, whether as matter or energy, into ambient air,
water, or land, or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, disposal, cleanup, transport
or handling of pollutants, contaminants, or hazardous wastes, substances or
materials, including (but not limited to) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act
of 1977, as amended, any so-called "Superlien" law, and any other similar
Federal, state or local statutes.
(c) "knowledge" of any person means actual knowledge of the directors
and executive officers of such person;
(d) "material adverse change" or "material adverse effect" means,
when used in connection with the Company or Parent, any change or effect that is
materially adverse to the business, properties, assets, financial condition or
results of operations of such party and its subsidiaries taken as a whole;
(e) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
(f) "superior proposal" has the meaning assigned thereto in Section
7.1; and
(g) "takeover proposal" has the meaning assigned thereto in Section
7.1.
SECTION 10.4. INTERPRETATION. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule 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".
SECTION 10.5. 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 signet by
each of the parties and delivered to the other parties.
SECTION 10.6. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the Confidentiality Agreement, (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
and the Confidentiality Agreement and (b) except for the provisions of Article
II, are not intended to confer upon any person other than the parties any rights
or remedies.
SECTION 10.7. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Florida, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.8. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct wholly owned corporate subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
37
<PAGE>
SECTION 10.9. 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 in any court of the United States
located in the State of Florida or in Florida state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Florida or
any Florida state court in the event any dispute arises out of this Agreement or
the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court sitting in the State of Florida or a
Florida state court.
SECTION 10.10. SCHEDULES. The parties hereto acknowledge and agree
that, as of the date hereof, the Schedules to this Agreement are incomplete and,
therefore, inaccurate in certain respects. The parties hereto further
acknowledge and agree that (i) the parties hereto shall be permitted to finalize
the Schedules to this Agreement within ten (10) days of the date hereof (the
"Schedule Date"), with the further right to revise said Schedules prior to the
Closing to correct any other inaccuracy or omission therein and (ii) any
inaccuracy or omission in any of the Schedules on or before the Schedule Date
shall not subject the parties hereto to any liability or claim for damages,
notwithstanding any provision to the contrary contained herein.
38
<PAGE>
IN WITNESS WHEREOF, the Parent, the Subs, the Companies and the
Shareholders have caused this Agreement to be signed personally or by their
respective officers thereunto duly authorized, all as of the date first written
above.
VACATION BREAK U.S.A., INC.
By: /s/ RALPH MULLER
-------------------------------------
Name: Ralph Muller
Title: Chief Executive Officer
VACATION BREAK MERGER I CORP.
By: /s/ RALPH MULLER
-------------------------------------
Name: Ralph Muller
Title: Chief Executive Officer
VACATION BREAK MERGER II CORP.
By: /s/ RALPH MULLER
-------------------------------------
Name: Ralph Muller
Title: Chief Executive Officer
VACATION BREAK MERGER III CORP.
By: /s/ RALPH MULLER
-------------------------------------
Name: Ralph Muller
Title: Chief Executive Officer
VACATION BREAK MERGER IV CORP.
By: /s/ RALPH MULLER
-------------------------------------
Name: Ralph Muller
Title: Chief Executive Officer
WILLIAMSBURG PLANTATION, INC.
By: /s/ DANIEL LAMBERT
-------------------------------------
Name: Daniel Lambert
Title: President
39
<PAGE>
WESTVIEW RESORTS CORPORATION
By: /s/ DANIEL LAMBERT
-------------------------------------
Name: Daniel Lambert
Title: President
OCEAN RANCH DEVELOPMENT INC.
By: /s/ DANIEL LAMBERT
-------------------------------------
Name: Daniel Lambert
Title: President
THE BERKLEY GROUP, INC.
By: /s/ JAMES E. LAMBERT
-------------------------------------
Name: James E. Lambert
Title: Chief Executive Officer
SHAREHOLDERS:
/s/ JAMES E. LAMBERT
-------------------------------------
Name: James E. Lambert
/s/ DANIEL LAMBERT
-------------------------------------
Name: Daniel Lambert
/s/ JAMES E. LAMBERT
-------------------------------------
Name: James R. Lambert
THE BERKLEY GROUP EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST
By: /s/ REBECCA FOSTER
-------------------------------------
Name: Rebecca Foster, Trustee
By: /s/ MARC J. LANDAU
-------------------------------------
Name: Marc J. Landau, Trustee
40
<PAGE>
SHAREHOLDER AGREEMENT
Ralph Muller, in his capacity of shareholder of Parent, does hereby
agree with the Companies to vote in favor of the Mergers and the transactions
contemplated by the Agreement and Plan of Merger. Mr. Muller's obligation to
vote as indicated above is subject to: (i) his obligations to faithfully
discharge his duties as a director, officer and/or principal shareholder of
Parent; (ii) his unilateral right not to vote in favor of the Mergers if, at any
time during the period from the date hereof to a date twenty days hereafter
(such period, the "Termination Period"), Mr. Muller determines, based on his due
diligence review of the Lambert Entities, that it is inadvisable to proceed with
the Mergers; and (iii) his unilateral right not to vote in favor of the Mergers
if, within ten days of any amendment or modification of the Schedules to this
Agreement, if as a direct result of any disclosure or disclosures taken as a
whole on any one or more Schedules, but on or before the Schedule Date, Mr.
Muller becomes aware of a circumstance or a condition that would have a material
adverse effect on the Parent.
/s/ RALPH MULLER
-----------------------------
Ralph Muller
41
