EXHIBIT 2.1
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AGREEMENT AND PLAN OF ORGANIZATION
dated as of March [___], 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
HOTEL ACQUISITION CORP.
(a subsidiary of Vacation Properties International, Inc.)
HOTEL CORPORATION OF THE PACIFIC, INC.
and
the STOCKHOLDER named herein
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TABLE OF CONTENTS
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Page
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AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Articles of Incorporation, Bylaws and Board of Directors of
Surviving Corporation...............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, VPI and NEWCO..............................................4
1.5 Effect of Merger.....................................................4
2. CONVERSION OF STOCK......................................................5
2.1 Manner of Conversion.................................................5
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................7
4. CLOSING..................................................................8
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER................9
(A) Representations and Warranties of COMPANY and STOCKHOLDER............9
5.1 Due Organization.................................................10
5.2 Authority........................................................11
5.3 Capital Stock of the COMPANY.....................................11
5.4 Transactions in Capital Stock....................................11
5.5 No Bonus Shares..................................................11
5.6 Subsidiaries.....................................................12
5.7 Predecessor Status; etc..........................................12
5.8 Spin-off by the COMPANY..........................................12
5.9 Financial Statements.............................................12
5.10 Liabilities and Obligations.....................................13
5.11 Accounts and Notes Receivable...................................14
5.12 Permits and Intangibles.........................................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers...........................................17
5.16 Material Contracts and Commitments..............................17
5.17 Real Property...................................................18
5.18 Insurance.......................................................19
5.19 Compensation; Employment Agreements; Organized Labor Matters....19
5.20 Employee Plans..................................................20
5.21 Compliance with ERISA...........................................21
5.22 Conformity with Law; Litigation.................................23
5.23 Taxes...........................................................23
5.24 No Violations...................................................25
5.25 Government Contracts............................................26
5.26 Absence of Changes..............................................26
5.27 Accounts; Powers of Attorney....................................28
5.28 Validity of Obligations.........................................28
5.29 Relations with Governments......................................29
5.30 Disclosure......................................................29
5.31 Prohibited Activities...........................................30
(B) Representations and Warranties of STOCKHOLDER.......................30
5.32 Authority; Ownership............................................30
5.33 Preemptive Rights...............................................30
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5.34 No Intention to Dispose of VPI Stock...............................30
6. REPRESENTATIONS OF VPI AND NEWCO........................................31
6.1 Due Organization....................................................31
6.2 Authorization.......................................................32
6.3 Capital Stock of VPI and NEWCO......................................32
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................33
6.6 Financial Statements................................................33
6.7 Liabilities and Obligations.........................................33
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................34
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................35
6.12 No Side Agreements.................................................35
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................36
6.15 Completion of Due Diligence........................................38
6.16 Disclosure........................................................38
6.17 Tax Treatment......................................................38
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................40
7.3 Prohibited Activities...............................................41
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................43
7.6 Agreements..........................................................43
7.7 Notification of Certain Matters.....................................44
7.8 Amendment of Schedules..............................................44
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................47
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY..........49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................49
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................50
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO....................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
9.5 No Material Adverse Effect..........................................53
9.6 STOCKHOLDER's Release...............................................53
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9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
9.18 Termination of Defined Benefit Plans...............................55
9.19 License Grant......................................................55
10. COVENANTS OF VPI AND THE STOCKHOLDER AFTER CLOSING.....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
10.8 Grant of License to VPI............................................58
11. INDEMNIFICATION........................................................59
11.1 General Indemnification by the STOCKHOLDER.........................59
11.2 Indemnification by VPI.............................................60
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................63
12. TERMINATION OF AGREEMENT...............................................64
12.1 Termination........................................................64
12.2 Liabilities in Event of Termination................................65
13. NONCOMPETITION.........................................................67
13.1 Prohibited Activities..............................................67
13.2 Damages............................................................69
13.3 Reasonable Restraint...............................................69
13.4 Severability; Reformation..........................................70
13.5 Independent Covenant...............................................70
13.6 Materiality........................................................70
13.7 Limitation.........................................................70
13.8 COMPANY Noninterference............................................70
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................70
14.1 STOCKHOLDER........................................................70
14.2 VPI AND NEWCO......................................................71
14.3 Damages............................................................71
14.4 Survival...........................................................72
14.5 Return of Data Submitted...........................................72
15. TRANSFER RESTRICTIONS..................................................72
15.1 Transfer Restrictions..............................................72
15.2 Certain Transfers..................................................73
16. SECURITIES LAW REPRESENTATIONS.........................................73
16.1 Compliance with Law................................................74
16.2 Economic Risk; Sophistication......................................74
17. REGISTRATION RIGHTS....................................................74
17.1 Piggyback Registration Rights......................................74
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17.2 Demand Registration Rights.........................................75
17.3 Registration Procedures............................................76
17.4 Underwriting Agreement.............................................77
17.5 Availability of Rule 144...........................................77
17.6 Registration Rights Indemnification................................77
18. GENERAL................................................................82
18.1 Press Releases.....................................................82
18.2 Cooperation........................................................83
18.3 Successors and Assigns; Third Party Beneficiaries..................83
18.4 Entire Agreement...................................................83
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................84
18.7 Expenses...........................................................84
18.8 Notices............................................................85
18.9 Governing Law......................................................86
18.10 Exercise of Rights and Remedies...................................86
18.11 Time..............................................................86
18.12 Reformation and Severability......................................86
18.13 Remedies Cumulative...............................................87
18.14 Captions..........................................................87
18.15 Amendments and Waivers............................................87
18.16 Incorporation by Reference........................................87
18.17 Defined Terms.....................................................87
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI-A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI-B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDER
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), HCP ACQUISITION CORP., a Delaware corporation ("NEWCO"),
HOTEL CORPORATION OF THE PACIFIC, INC., a Hawaii corporation (the "COMPANY"),
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "STOCKHOLDER").
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1998,
solely for the purpose of completing the transactions set forth herein, and
is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and the State in
which the COMPANY is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of B&B On The
Beach, Inc., a North Carolina corporation, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Realty &
Development, Inc., a North Carolina corporation, Coastal Resorts Realty
L.L.C., a Delaware limited liability company, Coastal Resorts Management,
Inc., a Delaware corporation, Collection of Fine Properties, Inc., a
Colorado corporation, Ten Mile Holdings, Ltd., a Colorado corporation,
First Resort Software, Inc., a Colorado corporation, Houston and ▇'▇▇▇▇▇
Company, a Colorado corporation, Jupiter Property Management at Park City,
Inc., a Utah corporation, Maui Condominium & Home Realty, Inc., a Hawaii
corporation, The Maury People, Inc., a
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Massachusetts corporation, ▇▇▇▇▇ Acquisition, Inc., a Florida corporation,
Realty Consultants, Inc., a Florida corporation, Resort Property
Management, Inc., a Utah corporation, Telluride Resort Accommodations,
Inc., a Colorado corporation, ▇▇▇▇▇-▇▇▇▇▇▇▇ Enterprises, Inc., a Georgia
corporation, THE Management Company, a Georgia corporation, and Whistler
Chalets Limited, a British Columbia corporation, and their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which VPI has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDER and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDER and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDER and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the VPI Plan of Organization
in order to transfer the capital stock of the COMPANY to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State or the
Director of the Department of Commerce and Consumer Affairs, as applicable, of
the State in which the COMPANY is incorporated and will deliver stamped receipt
copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger (the COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger will be effected in a single
transaction.
1.3 ARTICLES OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF SURVIVING
CORPORATION. At the Effective Time of the Merger:
(i) the Articles of Incorporation of the COMPANY then in effect shall
be the Articles of Incorporation of the Surviving Corporation until changed
as provided by law;
(ii) the Bylaws of NEWCO then in effect shall become the Bylaws of the
Surviving Corporation; and subsequent to the Effective Time of the Merger,
such Bylaws shall be the Bylaws of the Surviving Corporation until they
shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that the
Chief Executive Officer of VPI shall be elected as a director of the
Surviving Corporation effective as of the Effective Time of the Merger; the
Board of Directors of the Surviving Corporation shall hold office subject
to the provisions of the laws of the state in which the Surviving
Corporation is located and of the Articles of Incorporation and Bylaws of
the Surviving Corporation; and
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(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger the person designated by VPI to be such
officer shall be appointed as a vice president of the Surviving Corporation
and the person designated by VPI to be such officer shall be appointed as
an Assistant Secretary of the Surviving Corporation, each of such officers
to serve, subject to the provisions of the Articles of Incorporation and
Bylaws of the Surviving Corporation, until his or her successor is duly
elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
VPI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the COMPANY, VPI and
NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1000 shares of NEWCO stock, of which ten (10) shares
are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which the COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of the COMPANY shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
NEWCO shall be merged with and into
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the COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully
vested therewith. At the Effective Time of the Merger, the separate existence of
NEWCO shall cease and, in accordance with the terms of this Agreement, the
Surviving Corporation shall possess all of the rights, privileges, immunities
and franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all Taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to NEWCO and the COMPANY shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all and
every other interest shall be thereafter as effectively the property of the
Surviving Corporation as they were of NEWCO and the COMPANY; and the title to
any real estate, or interest therein, whether by deed or otherwise, under the
laws of the states of incorporation vested in NEWCO and the COMPANY, shall not
revert or be in any way impaired by reason of the Merger. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all of the liabilities and obligations of NEWCO and the COMPANY and
any claim existing, or action or proceeding pending, by or against NEWCO or the
COMPANY may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of NEWCO or the COMPANY shall be impaired by the
Merger, and all debts, liabilities and duties of NEWCO and the COMPANY shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and
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outstanding immediately prior to the Effective Time of the Merger, respectively,
into shares of (x) VPI Stock and (y) common stock of the Surviving Corporation,
respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (l) the right to receive the
number of fully paid and nonassessable shares of VPI Stock set forth on
Annex III hereto with respect to such holder and/or (2) the right to
receive the amount of cash, subject to adjustment pursuant to Section 3.3
hereof, set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of VPI, automatically be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding shares
of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All VPI Stock received by the STOCKHOLDER pursuant to this Agreement shall,
except for restrictions on resale or transfer described in Sections 15 and 16
hereof, have the same rights as all of the other shares of outstanding VPI Stock
by reason of the provisions of the Certificate of Incorporation of VPI or as
otherwise provided by the Delaware GCL. All voting rights of such VPI Stock
received by the STOCKHOLDER shall be fully exercisable by the STOCKHOLDER and
the STOCKHOLDER shall not be deprived nor restricted in exercising those rights.
At the Effective Time
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of the Merger, VPI shall have no class of capital stock (including preferred
stock) issued and outstanding other than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Merger and
on the Closing Date the STOCKHOLDER, who is the holder of certificates
representing 75% of the outstanding shares of COMPANY Stock, shall, upon
surrender of such certificates and the certificates held by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇") representing 25% of the outstanding shares of COMPANY Stock,
receive the number of shares of VPI Stock and the amount of cash (subject to
adjustment pursuant to Section 3.3) set forth on Annex III hereto, said cash to
be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDER shall deliver and shall
cause ▇▇▇▇▇▇▇▇ to deliver to VPI at the Pre-Closing (subject to Section 4) the
certificates representing COMPANY Stock, duly endorsed in blank by the holders
thereof, or accompanied by blank stock powers, and with all necessary transfer
tax and other revenue stamps, acquired at the STOCKHOLDER's expense, affixed and
canceled. The STOCKHOLDER agrees promptly to cure and to cause to be cured any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, the COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDER pursuant to this Section 3 shall
be reduced by the amount required to cure any such failure.
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Indebtedness of the COMPANY in excess of the amount set forth on Annex III that
was incurred in connection with the acquisition of the COMPANY by the
STOCKHOLDER, or the acquisition of nonoperating assets by the COMPANY or the
STOCKHOLDER, shall result in a corresponding dollar-for-dollar reduction in the
cash portion of the consideration paid to the STOCKHOLDER pursuant to this
Section 3. If necessary, a post-Closing adjustment shall be made to effect the
intent of this Section 3.3.
Certain indebtedness of affiliates of the STOCKHOLDER to the COMPANY and of
the STOCKHOLDER to the COMPANY shall be reduced to unsecured promissory notes
bearing interest at a rate of ____% per annum payable to the COMPANY or its
order with interest-only payments over a ten-year term. STOCKHOLDER shall be the
primary obligor on or shall personally guarantee all such indebtedness. Four
million dollars ($4,000,000) in principal under these unsecured notes payable to
the COMPANY shall be treated as good assets of the COMPANY for purposes of
determination of whether the COMPANY has a positive net worth under clause (i)
above and the cash portion of the consideration to be paid to STOCKHOLDER shall
not be reduced on account of these receivables payable by the STOCKHOLDER.
STOCKHOLDER may, prior to or upon the Closing Date, assume selected
liabilities of the COMPANY evidenced by promissory notes or contracts. Any such
assumption shall be treated as being in repayment of the indebtedness of the
STOCKHOLDER to the COMPANY. STOCKHOLDER shall indemnify the COMPANY with respect
to all such liabilities of the COMPANY which may be so assumed by STOCKHOLDER.
Notwithstanding anything set forth above, VPI acknowledges (i) that the
COMPANY has established a reserve in the amount of $500,000 on its balance sheet
relating to contingent liabilities and (ii) that this reserve shall be deemed to
have not been established (i.e., shall be ignored and not counted) when
conducting the above-referenced balance sheet tests, including positive net
working capital, positive net worth and fully funded customer deposits.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Merger) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Merger or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
NEWCO hereby covenant and agree to do all things required by Delaware law and
all things which counsel for the COMPANY advise VPI and/or NEWCO are required by
applicable laws of the State in which the COMPANY is incorporated in order to
rescind the effects, if any, of the filing of the Articles of Merger as
described in this Section and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Pre-Closing") shall take place on the pre-closing date
(the "Pre-Closing Date") at the offices of Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇,
L.L.P., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇. On the Closing
Date (x) the Articles of Merger shall have been filed with the appropriate state
authorities so that they shall be or, as of 8:00 a.m. New York City time on the
Closing Date, shall become effective and the Merger shall thereby be effected,
(y) all transactions contemplated by this Agreement, including the conversion
and delivery of shares,
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the delivery of a certified check or checks or wire transfer(s) in an amount
equal to the cash portion of the consideration which the STOCKHOLDER shall be
entitled to receive and which shall be paid to ▇▇▇▇▇▇▇▇ pursuant to the Merger
referred to in Section 3 hereof shall occur and (z) the closing with respect to
the IPO shall be completed. The taking of the actions described in the preceding
clauses (x), (y) and (z) shall constitute the closing of the transactions
hereunder (the "Closing"), and the date on which the actions described in the
preceding clauses (x), (y) and (z) occur shall be referred to as the "Closing
Date." Except as provided in Sections 8 and 9 hereof with respect to actions to
be taken on the Closing Date, during the period from the Pre-Closing Date to the
Closing Date this Agreement may only be terminated by a party if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Closing
Date has not occurred within 15 business days of the Pre-Closing Date. Time is
of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER.
Each of the COMPANY and the STOCKHOLDER jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANY and the STOCKHOLDER agrees that such representations and warranties
shall survive the Closing Date for a period of two years (the last day of such
period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.23 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Closing Date, which shall be deemed to be the Expiration Date for Section 5.23
and (ii) solely for purposes of determining whether a claim for indemnification
under Section 11.1(iii) hereof has been made on a timely basis, and solely to
the extent that in connection with the IPO, VPI actually
9
incurs liability under the 1933 Act, the 1934 Act or any other federal or state
securities laws as a result of a breach of a representation or warranty by the
COMPANY or the STOCKHOLDER, the representations and warranties set forth herein
shall survive until the expiration of any applicable limitations period, which
shall be deemed to be the Expiration Date for such purposes. For purposes of
this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all
of its Subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and the COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of the COMPANY or the STOCKHOLDER, prospects of the COMPANY
taken as a whole (as used herein with respect to the COMPANY, or with respect to
any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
such jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Articles of Incorporation and
Bylaws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to VPI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or any stockholder of the
COMPANY which have not been made available to VPI, and all of such minutes are
correct and complete in all material respects. Except as set forth on Schedule
5.1, the most recent minutes of the COMPANY, which are dated no earlier than ten
business days prior to the date hereof, affirm and ratify all prior acts of the
COMPANY, and of its officers and directors on behalf of the COMPANY.
10
5.2 AUTHORITY. The COMPANY has the full legal right, power and authority to
enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDER and
▇▇▇▇▇▇▇▇ in the amounts set forth in Annex IV and further, except as set forth
on Schedule 5.3, are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of the capital stock of the
COMPANY have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the STOCKHOLDER and
▇▇▇▇▇▇▇▇ and further, such shares were offered, issued, sold and delivered by
the COMPANY in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present stockholder of the
COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4, the
COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as set
forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
capital stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its respective stockholders has been
altered or changed in contemplation of the Merger and/or the VPI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
11
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANY,
free and clear of all liens, security interests, pledges, voting trusts,
equities, restrictions, encumbrances and claims of every kind. Except as set
forth on Schedule 5.6, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there has
not been any sale, spin-off or split-up of material assets of the COMPANY since
January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's audited (i) Balance Sheets, if any, as of December 31,
1997 and 1996; (ii) Statements of Operations, if any, for each of the years in
the two-year period ended December 31, 1997 (December 31, 1997 being hereinafter
referred to as the "Balance Sheet Date"); (iii) Statements of Changes in
Stockholders' Equity, if any, for each of the years in the two-year period ended
on the Balance Sheet Date; and (iv) Statements of Cash Flows, if any, for each
of the years in the two-year period ended on the Balance
12
Sheet Date. Except as set forth on Schedule 5.9, such Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance
Sheets as of December 31, 1997 and 1996 present fairly the financial position of
such COMPANY as of the dates indicated thereon, and such Statements of
Operations, Statements of Changes in Stockholders' Equity and Statements of Cash
Flows present fairly the results of operations for the periods indicated
thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected in the COMPANY
Financial Statements at the Balance Sheet Date, (ii) any material liabilities of
the COMPANY (including all liabilities in excess of $10,000) and (iii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges
or other security agreements, together with true, correct and complete copies of
such documents. Except as set forth on Schedule 5.10, since the Balance Sheet
Date the COMPANY has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to VPI on Schedule 5.10, in the case
of those contingent liabilities related to pending or, to the knowledge of the
COMPANY, threatened litigation, or other liabilities which are not fixed or are
being contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
13
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to VPI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
stockholders of the COMPANY. The COMPANY shall also provide to VPI (x) an
accurate list of all receivables obtained subsequent to the Balance Sheet Date
up to the Pre-Closing Date and (y) an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except
to the extent reflected on Schedule 5.11 or as disclosed by the COMPANY to VPI
in a writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
the COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. Except as set forth on Schedule 5.12, the
COMPANY holds all licenses, franchises, permits and other governmental
authorizations that are necessary for the operation of the business of the
COMPANY as now conducted, and the COMPANY has delivered to VPI an accurate list
and summary description (which is set forth on Schedule 5.12) of all such
licenses, franchises, permits and other governmental authorizations, including
permits, titles, licenses, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the COMPANY
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
5.13). The licenses, franchises, permits and other
14
governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any
of the foregoing, except for inadvertent, immaterial noncompliance with such
requirements, standards, criteria and conditions (provided that any such
noncompliance shall be deemed a breach of this Section 5.12 for purposes of
Section 11 hereof). Except as specifically provided on Schedule 5.12, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the COMPANY by, any such licenses, franchises, permits or government
authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY
15
except as permitted by Environmental Laws; (iv) the COMPANY knows of no on-site
or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the COMPANY, VPI or NEWCO for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) the COMPANY has no contingent liability in connection with any release of
any Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
in "depreciable plant, property and equipment" on the balance sheet of the
COMPANY as of the Balance Sheet Date or that will be included on any balance
sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other
personal property (except cash and cash equivalents) owned by the COMPANY with a
value in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date and (z) all leases and agreements in respect of
personal property used in the operation of the COMPANY's business as now
conducted, including, true, complete and correct copies of all such leases and
agreements. The COMPANY shall indicate on Schedule 5.14 those assets listed
thereon that are currently owned, or that were formerly owned, by the
stockholders of the COMPANY, relatives of the stockholders of the COMPANY, or
Affiliates of the COMPANY. Except as set forth on Schedule 5.14, (i) all
personal property used by the COMPANY in its business is either owned by the
COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.14,
(ii) all of the personal property listed on Schedule 5.14 is in good working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on Schedule 5.14 are in full force and effect and, assuming
due execution and delivery thereof by the parties thereto other than the
COMPANY, the stockholders of the COMPANY and their respective Affiliates,
constitute valid and binding agreements
16
of the COMPANY, the STOCKHOLDER and, to the knowledge of the COMPANY or the
STOCKHOLDER, the other parties (and their successors) thereto in accordance with
their respective terms.
5.15 SIGNIFICANT CUSTOMERS. The COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
the COMPANY's annual revenues as of the Balance Sheet Date. Except to the extent
set forth on Schedule 5.15, none of the COMPANY's significant customers (or
persons or entities that are sources of a significant number of customers) have
canceled or substantially reduced or, to the knowledge of the COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. The COMPANY has listed on Schedule
5.16 all material contracts, commitments and similar agreements to which the
COMPANY currently is a party or by which it or any of its properties are bound
(including, but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. The COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the COMPANY.
17
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet Date, and all other real property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located (or with the Bureau of
Conveyances of the State of Hawaii or the Assistant Registrar of the Land
Court of the State of Hawaii, as applicable) which do not adversely affect
the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to VPI an accurate list of real property
leased by the COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by the stockholders of the
COMPANY or business or personal affiliates of the COMPANY or the stockholders of
the COMPANY. Except as set forth on Schedule 5.17, all of such leases included
on Schedule 5.17 are in full force and effect and, assuming due execution and
delivery thereof by the parties thereto other than the COMPANY, the stockholders
18
of the COMPANY and their respective affiliates, constitute valid and binding
agreements of the COMPANY, the STOCKHOLDER and, to the knowledge of the COMPANY
or the STOCKHOLDER, the other parties (and their successors) thereto in
accordance with their respective terms.
5.18 INSURANCE. The COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date. No insurance carried by the COMPANY has
ever been canceled by the insurer and the COMPANY has never been unable to
obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) the COMPANY is not bound by or
subject to) and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no
19
employees of the COMPANY are represented by any labor union or covered by any
collective bargaining agreement, (iii) to the best of the COMPANY's knowledge,
no campaign to establish such representation is in progress and (iv) there is no
pending or, to the best of the COMPANY's knowledge, threatened labor dispute
involving the COMPANY and any group of its employees nor has the COMPANY
experienced any labor interruptions over the past three years. The COMPANY
believes its relationship with employees to be good.
The COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. The COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of the COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20, the
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) nor has the
20
COMPANY any obligation to contribute to or accrue or pay any benefits under any
deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of ERISA) or any non-qualified deferred compensation
arrangement). The COMPANY has not sponsored, maintained or contributed to any
employee pension benefit plan other than the plans, agreements, arrangements and
trusts set forth on Schedule 5.20, nor is the COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
COMPANY's employees.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No plan listed
on Schedule 5.20, nor the COMPANY, nor the
21
STOCKHOLDER with respect to any such plan or the COMPANY, has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such plan listed on Schedule 5.20 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the COMPANY has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The COMPANY and STOCKHOLDER further
represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) the COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which the COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes the COMPANY.
22
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, the COMPANY is not in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be deemed a breach of this Section 5.22 for purposes of Section 11
hereof); and except to the extent set forth on Schedules 5.10 or 5.13, there are
no claims, actions, suits or proceedings, commenced or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the COMPANY and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations, and is not in
violation of any of the foregoing.
5.23 TAXES.
(a) The COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANY or its officers or employees
responsible for maintaining the financial records of the COMPANY subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 5.23, there are no examinations in
progress (and the COMPANY and its employees are not aware of any proposed
examinations) or claims against the COMPANY (including liens against the
COMPANY's assets) for federal, state, local and other Taxes (including penalties
and interest) for any period or periods prior to and including the Balance Sheet
23
Date and no notice of any claim for Taxes, whether pending or threatened, has
been received. Except as set forth on Schedule 5.23, neither the COMPANY nor any
stockholder of the COMPANY have entered into an agreement or waiver or have been
requested to enter into an agreement or waiver extending any statute of
limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by the COMPANY, any member of an affiliated or
consolidated group which includes or included the COMPANY, or with respect to
any payment made or deemed made by the COMPANY, required to be paid by the date
hereof, have been paid. All amounts required to be deposited, withheld or
collected under applicable federal, state, local or other Tax laws and
regulations by the COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth in Schedule 5.23, the COMPANY has not been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). The COMPANY is not a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth in Schedule 5.23, the COMPANY (i) has not
assumed or is not liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
the COMPANY or such person or entity was the surviving corporation or a
consolidation) and (ii) has not indemnified any other person or entity or
otherwise agreed to pay on
24
behalf of any other person or entity any Taxes arising from or which may be
asserted on the basis of any Tax treatment adopted with respect to all or any
aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of COMPANY for its last three (3) fiscal years or such
shorter period of time as the COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) The COMPANY has a taxable year ended on the date set forth as such
on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, the COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) The COMPANY is not an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting the COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) The COMPANY has not filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code and has not agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by the COMPANY.
5.24 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16
25
or 5.17, or any other material agreement to which it is a party or by which its
properties are bound (the "Material Documents"); and, except as set forth on
Schedule 5.24, (a) the rights and benefits of the COMPANY under the Material
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any violation or breach or constitute a default under, any of the
terms or provisions of the Material Documents or the Charter Documents. Except
as set forth on Schedule 5.24, none of the Material Documents requires notice
to, or the consent or approval of, any governmental agency or other third party
with respect to any of the transactions contemplated hereby in order to remain
in full force and effect, and consummation of the transactions contemplated
hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit. Except as set forth on Schedule
5.24, none of the Material Documents prohibits the use or publication by the
COMPANY, VPI or NEWCO of the name of any other party to such Material Document,
and none of the Material Documents prohibits or restricts the COMPANY from
freely providing services to any other customer or potential customer of the
COMPANY, VPI, NEWCO or any Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
26
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANY to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person (other
than VPI), including, without limitation, the stockholders of the COMPANY
and their respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the stockholders of the COMPANY or any
affiliate thereof, except for inadvertent, immaterial cancellations of or
agreements to cancel any such indebtedness or obligation (provided that any
such cancellation or agreement to cancel shall be deemed a breach of this
Section 5.26 for purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of the COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
27
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.27 ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to VPI an
accurate schedule (which is set forth on Schedule 5.27) as of the date of the
Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms except as may be limited by (i)
bankruptcy, insolvency or other similar laws of general application relating to
or affecting
28
the enforcement of creditors' rights generally or (ii) the discretionary power
of a court exercising equity jurisdiction. The individual signing this Agreement
on behalf of the COMPANY has the legal power, authority and capacity to bind the
COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause the COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of the COMPANY for
the time periods with respect to which such information was requested. The
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which the COMPANY is a party, or to which its properties are subject, or (ii)
any other fact or circumstance regarding the COMPANY (which fact or circumstance
was, or should reasonably, after due inquiry, have been known to the COMPANY)
that is not disclosed pursuant to this Agreement or to such delivered documents.
(b) The COMPANY and the STOCKHOLDER acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDER or any other person
29
affiliated or associated with the COMPANY for any failure of the Registration
Statement to become effective, the IPO to occur at a particular price or within
a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
The STOCKHOLDER represents and warrants that the representations and
warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. The STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. The STOCKHOLDER and ▇▇▇▇▇▇▇▇ own
beneficially and of record all of the shares of the COMPANY Stock identified on
Annex IV as being owned by the STOCKHOLDER and ▇▇▇▇▇▇▇▇, and, except as set
forth on Schedule 5.3, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.33 PREEMPTIVE RIGHTS. The STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
No other stockholder of the COMPANY has any preemptive or other right to acquire
shares of COMPANY Stock or VPI Stock.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDER does not have
any present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
30
6. REPRESENTATIONS OF VPI AND NEWCO
VPI and NEWCO jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDER or the COMPANY actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws, each as amended, of VPI and NEWCO (the "VPI Charter
Documents") are all attached hereto as Annex II. The VPI
31
Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and NEWCO
executing this Agreement have the authority to enter into and bind VPI and NEWCO
to the terms of this Agreement and (ii) VPI and NEWCO have the full legal right,
power and authority to enter into and perform this Agreement and the Merger, and
all required approvals of the shareholders and board of directors of VPI and
NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCO. Immediately prior to the Closing Date,
the authorized capital stock of VPI and NEWCO is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of NEWCO are owned by VPI and all of the issued and outstanding
shares of the capital stock of VPI are owned by the persons set forth on Annex V
hereof, and further are owned, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. Upon consummation of the IPO, the number of
outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and NEWCO
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by VPI and the persons set forth on Annex
V, respectively, and further, such shares were offered, issued, sold and
delivered by VPI and NEWCO in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of the preemptive rights of any past or present stockholder
of VPI or NEWCO.
32
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or NEWCO to issue any
of their respective authorized but unissued capital stock; and (ii) neither VPI
nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list, accurate as of the date hereof, of all outstanding
options, warrants or other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. VPI has no subsidiaries except
for NEWCO and each of the companies identified as "NEWCO" in each of the Other
Agreements. Except as set forth in the preceding sentence, neither VPI nor NEWCO
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is VPI or NEWCO,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this
33
Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor NEWCO is in violation of any law or regulation, or
of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth on Schedule
6.8, there are no material claims, actions, suits or proceedings, pending or, to
the knowledge of VPI or NEWCO, threatened, against or affecting VPI or NEWCO, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. VPI and NEWCO
have conducted and are conducting their respective businesses in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor NEWCO is in violation of any VPI Charter
Document. None of VPI, NEWCO, or, to the knowledge of VPI and NEWCO, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit to which VPI or NEWCO is a party, or by which VPI or NEWCO, or any of
their respective properties, are bound (collectively, the "VPI Documents"); and
(a) the rights and benefits of VPI and NEWCO under the VPI Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the VPI Documents or the VPI Charter Documents. Except as set
forth on Schedule 6.9, none of the VPI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated
34
hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
VPI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of VPI
and NEWCO, enforceable against each of VPI and NEWCO in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individuals signing this Agreement on behalf of VPI
and NEWCO have the legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDER pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDER pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or VPI other than the Other Agreements and the
agreements specifically contemplated by each of the Other Agreements, including
the employment agreements referred to therein, and none of VPI, NEWCO, their
equity owners or affiliates have received any cash compensation or payments in
connection with this transaction except for reimbursement of out-of-pocket
expenses which are necessary or appropriate to this transaction.
35
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor NEWCO
has conducted any operations or business since inception other than activities
related to the VPI Plan of Organization. Neither VPI nor NEWCO owns or has at
any time owned any real property or any material personal property or is a party
to any other agreement, except as listed on Schedule 6.13 and except that VPI is
a party to the Other Agreements and the agreements contemplated thereby and to
such agreements as will be filed as Exhibits to the Registration Statement.
6.14 TAXES.
(a) VPI and NEWCO have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or NEWCO or their officers or employees
responsible for maintaining the financial records of VPI and NEWCO subsequent to
the filing of such Tax Returns to the contrary of any information contained
therein. Except as set forth on Schedule 6.14, there are no examinations in
progress (and VPI and NEWCO and their employees are not aware of any proposed
examinations) or claims against VPI or NEWCO (including liens against assets of
VPI or NEWCO) for federal, state, local and other Taxes (including penalties and
interest) for any period or periods prior to and including the date hereof and
no notice of any claim for Taxes, whether pending or threatened, has been
received. Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
entered into an agreement or waiver or have been requested to enter into an
agreement or waiver extending any statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and NEWCO, any member of an affiliated or
consolidated group which includes or included VPI or NEWCO, or with respect to
any payment made or deemed made by VPI or NEWCO, required to be paid by the date
hereof, have been paid. All amounts required to
36
be deposited, withheld or collected under applicable federal, state, local or
other Tax laws and regulations by VPI and NEWCO for Taxes have been so
deposited, withheld or collected, and such deposit, withholding or collection
has either been paid to the respective governmental agencies or set aside and
secured in accounts for such purpose or secured and reserved against and entered
on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor NEWCO has
been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor NEWCO is a party to or
bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor NEWCO (i)
has assumed or is liable for any Taxes of any other person or entity, including
any predecessor corporation or partnership, as a result of any purchase of
assets or other business acquisition transaction (other than a merger in which
VPI or NEWCO or such person or entity was the surviving corporation or a
consolidation) and (ii) has indemnified any other person or entity or otherwise
agreed to pay on behalf of any other person or entity any Taxes arising from or
which may be asserted on the basis of any Tax treatment adopted with respect to
all or any aspect of such business acquisition transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and NEWCO for their last three (3) fiscal years or
such shorter period of time as VPI or NEWCO shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
37
(g) VPI and NEWCO have a taxable year ended on the date set forth as
such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor NEWCO's
methods of accounting have changed in the past five years. No adjustment to
taxable income by reason of a change of accounting method is required in respect
of any period for which the statute of limitations has not expired.
(i) Neither VPI nor NEWCO is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and NEWCO as of the date hereof are disclosed on Schedule
6.14.
(k) Neither VPI nor NEWCO has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or NEWCO.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANY as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDER of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDER set
38
forth in the letter of representations (referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof) are true and correct in all
material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of VPI and the Other Founding Companies (including
the Underwriters and their counsel) access to all of the COMPANY's sites,
properties, books and records and will furnish VPI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as VPI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will reasonably cooperate with VPI and
the Other Founding Companies and their respective representatives, including
VPI's auditors and counsel, in the preparation of any documents or other
material (including the Registration Statement) which may be required in
connection with any documents or materials required by this Agreement. VPI,
NEWCO, the STOCKHOLDER and the COMPANY shall treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Other Founding Companies
as confidential in accordance with the provisions of Section 14 hereof. In
addition, VPI will cause each of the Other Founding Companies to enter into a
provision similar to this Section 7.1 requiring each such Other Founding
Company, its stockholders, directors, officers, representatives, employees and
agents to keep confidential any information regarding the COMPANY obtained by
such Other Founding Company.
39
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of the COMPANY access to
all of VPI's and NEWCO's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and NEWCO as the COMPANY may from time to time reasonably request. VPI and NEWCO
will cooperate with the COMPANY, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. VPI will
provide complete access to its operations and key officers and employees to the
COMPANY, its representatives and advisors on a continuing basis through the
Closing Date. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, the COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with the COMPANY;
40
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, the COMPANY shall not, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANY to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or, if not in the
normal course of business, involves an amount not in excess of $10,000;
41
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANY,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of
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any kind with respect to the COMPANY's capital stock or the purchase or
other reacquisition of any outstanding shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDER, the COMPANY, or any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide VPI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDER and the COMPANY shall terminate or cause to
be terminated, on or prior to the Closing Date, (i) any stockholders agreements,
voting agreements, voting trusts, options, warrants and employment agreements
between the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any
existing agreement between the COMPANY and any stockholder of the COMPANY not
reflecting fair market terms, except such existing agreements as are set forth
on Schedule 9.7. Such termination agreements are listed on Schedule 7.6 and
copies thereof are attached hereto.
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7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDER and the COMPANY shall
give prompt notice to VPI of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDER contained herein to
be untrue or inaccurate in any material respect at or prior to the Pre-Closing
and (ii) any material failure of the STOCKHOLDER or the COMPANY to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. VPI and NEWCO shall give prompt notice to the COMPANY
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of VPI or NEWCO contained herein to be untrue or inaccurate in any material
respect at or prior to the Pre-Closing and (ii) any material failure of VPI or
NEWCO to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. The delivery of any notice pursuant
to this Section 7.7 that is not accompanied by a proposed amendment or
supplement to a schedule pursuant to Section 7.8 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.8, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by the COMPANY that constitutes
or reflects an event or
44
occurrence that would have a Material Adverse Effect may be made unless VPI and
a majority of the Founding Companies other than the COMPANY consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a schedule prepared by VPI or NEWCO that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the Other
Founding Companies seeks to amend or supplement a schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, VPI shall give the COMPANY notice promptly after it
has knowledge thereof. If VPI and a majority of the Founding Companies consent
to such amendment or supplement, but the COMPANY does not give its consent, the
COMPANY may terminate this Agreement pursuant to Section 12.l(iv) hereof. In the
event that the COMPANY seeks to amend or supplement a Schedule pursuant to this
Section 7.8, and VPI and a majority of the Other Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that VPI or NEWCO seeks to amend or supplement a Schedule pursuant to this
Section 7.8 and a majority of the Founding Companies do not consent to such
amendment or supplement, this Agreement shall be deemed terminated by mutual
consent as set forth in Section 12.1(i) hereof. No party to this Agreement shall
be liable to any other party if this Agreement shall be terminated pursuant to
the provisions of this Section 7.8. No amendment of or supplement to a Schedule
shall be made later than 24 hours prior to the anticipated effectiveness of the
Registration Statement. For purposes of this Section 7.8, consent to an
amendment or supplement to a schedule pursuant to Section 7.8 of this Agreement
or one of the Other Agreements shall have been deemed given by VPI or any
Founding Company if no response is received within 24 hours
45
following receipt of notice of such amendment or supplement (or sooner if
required by the circumstances under which such consent is requested and so
requested in the notice). The provisions of this Section 7.8 shall be contained
in the Other Agreements executed in connection with the VPI Plan of
Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDER shall furnish or cause to be furnished to VPI and the Underwriters
all of the information concerning the COMPANY and the stockholders of the
COMPANY required for inclusion in, and will cooperate with VPI and the
Underwriters in the preparation of, the Registration Statement and the
prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement). The
COMPANY and the STOCKHOLDER agree promptly to advise VPI if, at any time during
the period in which a prospectus relating to the offering is required to be
delivered under the 1933 Act, any information contained in the prospectus
concerning the COMPANY or the stockholders of the COMPANY becomes incorrect or
incomplete in any material respect, and to provide the information needed to
correct such inaccuracy. VPI will give the COMPANY and the STOCKHOLDER an
opportunity and a reasonable amount of time to review and comment on a
substantially final draft of the Registration Statement prior to filing, and
with respect to all amendments thereto, VPI will give the COMPANY and
STOCKHOLDER an opportunity to review and comment on those portions of such
amendments that relate to the COMPANY. Insofar as the information contained in
the Registration Statement relates solely to the COMPANY or the stockholders of
the COMPANY, as of the effective date of the Registration Statement the COMPANY
represents and warrants as to such information with respect to itself, and the
STOCKHOLDER represents and warrants, as to such information with respect to the
COMPANY and himself or ▇▇▇▇▇▇▇▇, that the Registration Statement will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading and that the
46
STOCKHOLDER and the COMPANY have had the opportunity to review and approve such
information. If, prior to the 25th day after the date of the final prospectus of
VPI utilized in connection with the IPO, the COMPANY or the STOCKHOLDER become
aware of any fact or circumstance which would change (or, if after the Closing
Date, would have changed) a representation or warranty of the COMPANY or the
STOCKHOLDER in this Agreement or would affect any document delivered pursuant
hereto in any material respect, the COMPANY and the STOCKHOLDER shall
immediately give notice of such fact or circumstance to VPI. However, subject to
the provisions of Section 7.8, such notification shall not relieve either the
COMPANY or the STOCKHOLDER of their respective obligations under this Agreement,
and, subject to the provisions of Section 7.8, at the sole option of VPI, the
truth and accuracy of any and all warranties and representations of the COMPANY,
or on behalf of the COMPANY and of STOCKHOLDER at the date of this Agreement and
on the Pre-Closing Date and on the Closing Date, contained in this Agreement
(including the Schedules and Annexes hereto) shall be a precondition to the
consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANY as of the end of all fiscal quarters
following the Balance Sheet Date, and the unaudited consolidated statement of
income, cash flows and retained earnings of the COMPANY for all fiscal quarters
ended after the Balance Sheet Date, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements as of the Balance Sheet Date. For the fiscal quarter ending
March 31, 1998, such financial statements shall be delivered to VPI on or before
April 30, 1998, unless the Closing Date shall have occurred on or before April
30, 1998. Except as set forth on Schedule 7.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the
47
COMPANY for the periods indicated thereon and shall be for such dates and time
periods as required by Regulation S-X under the 1933 Act and the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for
such changes in authorized capital stock as are made to respond to comments made
by the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business of VPI as
described in the Registration Statement. In connection with the closings of the
transactions under the Other Agreements, VPI agrees that it will not waive any
closing condition under any Other Agreement that would result in a Material
Adverse Effect to VPI.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY
The obligations of the STOCKHOLDER and the COMPANY with respect to actions
to be taken on the Pre-Closing Date are subject to the satisfaction or waiver on
or prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDER and the COMPANY with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and NEWCO contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and NEWCO contained in Section 6 shall be true and correct in all material
respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDER.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and NEWCO on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDER.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
49
8.4 OPINION OF COUNSEL. The COMPANY and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash
and/or the number of shares of VPI Stock to be received by the STOCKHOLDER and
▇▇▇▇▇▇▇▇ is not less than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each
state in which VPI or NEWCO is authorized to do business, showing that each of
VPI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for VPI and NEWCO,
respectively, for all periods prior to the Pre-Closing Date have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or NEWCO which would constitute a Material Adverse
Effect, and VPI and/or NEWCO shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of VPI
and/or NEWCO to conduct its business.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings
50
before taxes of at least $8 million for the 12-month period ended December 31,
1997, pursuant to the Other Agreements shall have occurred simultaneously with
the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a certificate
or certificates, dated the Pre-Closing Date and signed by the secretary of VPI
and of NEWCO, certifying the truth and correctness of attached copies of VPI's
and NEWCO's respective Certificates of Incorporation (including amendments
thereto), Bylaws (including amendments thereto), and resolutions of the boards
of directors and, if required, the stockholders of VPI and NEWCO approving VPI's
and NEWCO's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate or certificates also shall be
addressed to the Underwriters and copies thereof shall be delivered to the
Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The terms set forth in the preceding sentence and all other terms of
the options shall be no less favorable than the options made available to the
Other Founding Companies.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCO
The obligations of VPI and NEWCO with respect to actions to be taken on the
Pre-Closing Date are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date of all of the following conditions. The obligations of VPI and
NEWCO with respect to actions to be taken on the Closing Date are subject to the
satisfaction or waiver on or prior to the Closing Date of the conditions set
forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the Pre-Closing Date
or, with respect to the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13,
from and after the Closing Date, all conditions not satisfied shall be deemed to
have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the COMPANY contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDER and the COMPANY contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDER shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDER (including
but not limited to the delivery to VPI of stock certificates representing all of
the issued and outstanding Stock of the COMPANY) and the COMPANY on or before
the Pre-Closing Date or the Closing Date, as the case may be, shall have been
duly performed or complied with in all material respects; and the STOCKHOLDER
shall have delivered to VPI certificates dated the Pre-Closing Date and the
Closing Date, respectively, and signed by them to such effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of VPI as a result of which the
management of VPI deems it inadvisable to proceed with the transactions
hereunder.
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9.4 SECRETARY'S CERTIFICATE. VPI shall have received a certificate, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
the COMPANY, certifying the truth and correctness of attached copies of the
COMPANY's Charter Documents and resolutions of the board of directors and the
stockholders of the COMPANY approving the COMPANY's entering into this Agreement
and the consummation of the transactions contemplated hereby. Such certificate
also shall be addressed to the Underwriters and a copy thereof shall be
delivered to the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDER'S RELEASE. The STOCKHOLDER shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANY and VPI from (i) any
and all claims of the STOCKHOLDER against the COMPANY and VPI and (ii)
obligations of the COMPANY and VPI to the STOCKHOLDER, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDER, (y) continuing obligations to the STOCKHOLDER
relating to his employment by the COMPANY and (z) obligations arising under this
Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the stockholders
of the COMPANY not reflecting fair market terms shall have been canceled
effective prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDER, dated the Pre-Closing Date, substantially in
the form annexed hereto as Annex VII, and the Underwriters shall have received a
copy of the same opinion addressed to them.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to VPI a
certificate, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. The STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. Except as set forth on Schedule 9.15, VPI shall have been
named as an additional insured on all insurance policies of the COMPANY, and
certificates of insurance to that effect shall have been delivered to VPI. VPI
shall reimburse the COMPANY for the incremental cost of having VPI so named as
an additional insured.
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9.16 LOCKUP AGREEMENT. Each of the COMPANY and the STOCKHOLDER shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDER covenants to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDER and/or immediate family members, who agree
to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. The STOCKHOLDER shall have delivered the
letter of representations referenced in the tax opinion letter to be delivered
pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. The COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
9.19 LICENSE GRANT. The COMPANY shall have been granted, for a period of
twenty (20) years following the Closing Date, a royalty-free exclusive license
(pursuant to the License Agreement attached to Schedule 9.19) to use the name
"Aston" in Hawaii in connection with the vacation property management business
operated in Hawaii.
10. COVENANTS OF VPI AND THE STOCKHOLDER AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDER released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that he
personally guaranteed and from any and all pledges of assets that he pledged to
secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANY relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDER from the payment of any
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guaranties on any indebtedness or contractual obligations that the STOCKHOLDER
had incurred prior to the Pre-Closing Date provided that such indebtedness or
obligations are related to the business of the COMPANY as being conducted at the
Pre-Closing Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDER.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. The STOCKHOLDER shall pay or cause to be
paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
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(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANY, as defined in Section 1563 of the Code, to, provide to each of the
other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide explanation
of any documents or information so provided. Subject to the preceding
sentence, each party required to file Tax Returns pursuant to this
Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANY, NEWCO, VPI and the STOCKHOLDER shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as an
exchange pursuant to which gain is not recognized under Section 351(a) of
the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDER hereby designates ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ to serve as a director of VPI effective as of the Closing Date. Such
designated person also shall be a member of the Executive Committee of the Board
of Directors effective as of the Closing Date, to serve subject to and in
accordance with the Certificate of Incorporation and Bylaws of VPI.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at the COMPANY until such time
57
as VPI is able to replace such plan with a plan that is applicable to VPI and
all of its then existing subsidiaries. VPI shall have no obligation to provide
replacement plans that have the same terms and provisions as the existing plans,
except as may be required by ERISA or other applicable law; provided, however,
that any new health insurance plan shall provide for coverage for preexisting
conditions for employees of the COMPANY who were covered by the COMPANY's health
insurance plan immediately prior to the Closing Date or as otherwise required by
law.
10.6 MAINTENANCE OF BOOKS. VPI will cause the COMPANY (a) to maintain the
books and records of the COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDER for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDER pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
10.8 GRANT OF LICENSE TO VPI. Upon the payment of $400,000 to AST Brands,
LLC (which is wholly-owned by the STOCKHOLDER) in cash or shares of VPI Stock
(valued at the IPO price per share), or any combination thereof at the election
of the STOCKHOLDER, VPI shall have the exclusive right to negotiate, for a
period of eighteen (18) months following the Closing, an exclusive license to
use the name "Aston" in the mainland United States in connection with the
vacation management business. The parties hereto agree that they shall negotiate
in good faith and that such exclusive license shall be on commercially
reasonable terms. If VPI does not exercise this right by payment of $400,000 in
cash and/or stock to AST Brands, LLC at or prior to the Closing, or if VPI makes
such payment but VPI and AST Brands, LLC are unable in good faith to enter into
a license agreement within such eighteen-month period, AST Brands, LLC shall
have the right to license the name "Aston" in connection with the vacation
property management business to any third party.
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Nothing herein shall prohibit AST Brands, LLC from licensing the name "Aston"
for use to any third party outside the United States.
11. INDEMNIFICATION
The STOCKHOLDER, VPI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The STOCKHOLDER covenants
and agrees that he will indemnify, defend, protect and hold harmless VPI, NEWCO
and the COMPANY (as the Surviving Corporation) at all times, from and after the
date of this Agreement until the Expiration Date, from and against all losses,
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by VPI, NEWCO and the
COMPANY (as the Surviving Corporation) as a result of or arising from (i) any
breach of the representations and warranties of the STOCKHOLDER or the COMPANY
set forth herein or on the Schedules or certificates delivered in connection
herewith, (ii) any breach of any agreement on the part of the STOCKHOLDER or the
COMPANY under this Agreement, (iii) any liability under the 1933 Act, the 1934
Act or other federal or state law or regulation, at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating solely to the COMPANY or the stockholders of the
COMPANY, and provided to VPI or its counsel by the COMPANY or the STOCKHOLDER,
contained in the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
relating solely to the COMPANY or the stockholders of the COMPANY required to be
stated therein or necessary to make the statements therein not misleading, or
(iv) the matters described on Schedule 11.1(iv) (relating to specifically
identified matters such as ongoing claims and/or litigation), which Schedule
shall be prepared by VPI, provided, however, that in the case of any indemnity
arising pursuant to clause (iii)
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such indemnity shall not inure to the benefit of VPI, NEWCO, the COMPANY or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the STOCKHOLDER provided, in writing, corrected
information to VPI counsel and to VPI for inclusion in the final prospectus, and
such information was not so included or properly delivered.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDER at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDER as a result of or arising from (i) any breach by VPI or NEWCO of
their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
VPI or NEWCO under this Agreement, (iii) any liabilities which the STOCKHOLDER
may incur due to VPI's or NEWCO's failure to be responsible for the liabilities
and obligations of the COMPANY as provided in Section 1 hereof (except to the
extent that VPI or NEWCO has claims against the STOCKHOLDER under Section 11.1
hereof by reason of such liabilities); (iv) any liability under the 1933 Act,
the 1934 Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to VPI, NEWCO or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified
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Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person"), or the commencement of any action or
proceeding by a Third Person, the Indemnified Party shall, as a condition
precedent to a claim with respect thereto being made against any party obligated
to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter
the "Indemnifying Party"), give the Indemnifying Party written notice of such
claim or the commencement of such action or proceeding. Such notice shall state
the nature and the basis of such claim and a reasonable estimate of the amount
thereof. The Indemnifying Party shall have the right to defend and settle
(subject to the consent of the Indemnified Party, as hereinafter provided), at
its own expense and by its own counsel, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by the Indemnifying Party, provided that if
counsel to the Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and the Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. Further,
absent a conflict, the Indemnified Party may select counsel and have such
counsel participate in such matter at the sole cost of the Indemnified Party.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such
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asserted liability, except (i) as set forth in the preceding sentence and (ii)
to the extent such participation is requested in writing by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim in which no admission of wrongdoing is
required of the Indemnified Party and the Indemnified Party refuses to consent
to such settlement, then the Indemnifying Party's liability under this Section
with respect to such Third Person claim shall be limited to the amount so
offered in settlement by said Third Person. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed. All settlements hereunder shall effect a complete
release of the Indemnified Party, unless the Indemnified Party otherwise agrees
in writing. The parties hereto will make appropriate adjustments for insurance
proceeds in determining the amount of any indemnification obligation under this
Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
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11.5 LIMITATIONS ON INDEMNIFICATION. VPI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the STOCKHOLDER until
such time as, and solely to the extent that, the aggregate of all claims which
such persons may have against the STOCKHOLDER shall exceed 2.0% of the sum of
(i) the cash paid to the STOCKHOLDER and ▇▇▇▇▇▇▇▇ and (ii) the value of the VPI
Stock delivered to the STOCKHOLDER (the "Indemnification Threshold"), provided,
however, that VPI, NEWCO, the Surviving Corporation and the other persons or
entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.l(iv) at any time, regardless of
whether the aggregate of all claims which such persons may have against the
STOCKHOLDER exceeds the Indemnification Threshold, it being understood that the
amount of any such claim under Section 11.1(iv) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDER shall not assert any claim for
indemnification hereunder against VPI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which the STOCKHOLDER may have
against VPI and NEWCO shall exceed $50,000, provided, however, that the
STOCKHOLDER and the other persons or entities indemnified pursuant to Section
11.2 may assert and shall be indemnified for any claim under Section 11.2(v) at
any time, regardless of whether the aggregate of all claims which such persons
may have against any of VPI and NEWCO exceeds $50,000, it being understood that
the amount of any such claim under Section 11.2(v) shall not be counted towards
such $50,000 amount. No person shall be entitled to indemnification under this
Section 11 if and to the extent that: (a) such person's claim for
indemnification is directly or indirectly related to a breach by such person of
any representation, warranty, covenant or other agreement set forth in this
Agreement; or (b) such person receives a tax benefit as a result of the claim or
loss for which indemnification is sought (i.e., the amount of such claim or loss
for which indemnification is provided hereunder shall be reduced by the amount
of such tax benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), STOCKHOLDER shall not be liable under this Section 11 for an
amount which exceeds the amount of
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proceeds received by the STOCKHOLDER and ▇▇▇▇▇▇▇▇ in connection with the Merger,
provided that the STOCKHOLDER's indemnification obligations pursuant to Section
11.1(iv) shall not be limited. Indemnity obligations hereunder may be satisfied
through the payment of cash or the delivery of VPI Stock, or a combination
thereof, at the STOCKHOLDER's election. For purposes of calculating the value of
the VPI Stock received or delivered by the STOCKHOLDER (for purposes of
determining the Indemnification Threshold, the limitation on indemnity set forth
in the second preceding sentence and the amount of any indemnity paid), VPI
Stock shall be valued at its initial public offering price as set forth in the
Registration Statement. Any indemnification payment made by the STOCKHOLDER
pursuant to this Section 11 shall be deemed to be a reduction in the
consideration received by the STOCKHOLDER pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the
COMPANY;
(ii) by the STOCKHOLDER or the COMPANY (acting through its board of
directors), on the one hand, or by VPI (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
June 30, 1998, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement
to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Closing Date;
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(iii) by the STOCKHOLDER or COMPANY, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein (including but not
limited to the condition that the aggregate value of the cash and the
number of shares of VPI Stock to be received by the STOCKHOLDER is not less
than the Minimum Value set forth on Annex III), which breach or default has
a Material Adverse Effect, and the curing of such default shall not have
been made on or before the Closing Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth therein), (iv) or
(v), provided, however (and notwithstanding anything in Section 18.7 to the
contrary), that VPI shall reimburse the COMPANY for the reasonable documented
fees and expenses of its attorneys and accountants incurred in connection with
the transactions contemplated by this Agreement in the event that this Agreement
is terminated by the COMPANY or the STOCKHOLDER pursuant to Section 12.1(iii);
and further provided, however (and notwithstanding anything in Section 18.7 to
the contrary), that the COMPANY and the STOCKHOLDER shall reimburse VPI for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement in
the event that this Agreement is terminated by VPI pursuant to Section
12.1(iii).
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13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDER shall have received payment in full of the consideration described
in Section 3, the STOCKHOLDER shall not, during the Noncompetition Period, for
any reason whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any condominium property management business in the
United States or hotel management business in the State of Hawaii (with
respect to condominium property management business in the United States or
hotel management business in the State of Hawaii, as applicable, the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of VPI (including the
subsidiaries thereof), provided that the STOCKHOLDER shall be permitted to
call upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
condominium property management services or hotel management services to
property owners and/or renters in direct competition with VPI within the
Territory;
(iv) call upon any prospective acquisition candidate, on the
STOCKHOLDER's own behalf or on behalf of any competitor, with respect to
business in the Territory, in the condominium property management or hotel
management business, which candidate, to the
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actual knowledge of the STOCKHOLDER after due inquiry, was called upon by
VPI (including the subsidiaries thereof) or for which, to the actual
knowledge of the STOCKHOLDER after due inquiry, VPI (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring such
entity, unless VPI (or any subsidiary thereof) has expressly declined to
pursue such acquisition candidate or at least one (1) year has elapsed
since VPI (or any subsidiary thereof) has taken any action with respect to
pursuing such acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the STOCKHOLDER from (a) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter, (b) engaging in any
business, other than the business of the COMPANY, currently owned by such
STOCKHOLDER, including the business of AST International, L.L.C. or Northwest
Lodging, Inc., (c) engaging in the hotel management business outside the State
of Hawaii or (d) engaging in licensing or franchising activities through AST
Brands, LLC or any other business entity, including licensing of the name "Aston
Hotels & Resorts," provided that such licensing or franchising activities do not
contravene the provisions of Section 10.8 hereof.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, the STOCKHOLDER agrees that the foregoing covenant may be
enforced by VPI in the event of breach by the STOCKHOLDER, by injunctions and
restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDER in light of the activities and
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business of VPI (including the subsidiaries thereof) on the date of the
execution of this Agreement and the current plans of VPI (including VPI's
subsidiaries); but it is also the intent of VPI and the STOCKHOLDER that such
covenants be construed and enforced in accordance with the changing locations of
VPI (including VPI's other subsidiaries) from the date hereof through the
Noncompetition Period. For example, if, during the Noncompetition Period, VPI
(including VPI's other subsidiaries) establishes new locations for its current
activities or business in addition to the locations currently established
therefor, then the STOCKHOLDER will be precluded from soliciting customers or
employees from such new location and from directly competing within 100 miles of
such new location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that the
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of the STOCKHOLDER's obligations under this Section 13, if any, the
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of the STOCKHOLDER against
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VPI (including the subsidiaries thereof), whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by VPI of such
covenants. It is specifically agreed that the Noncompetition Period, during
which the agreements and covenants of the STOCKHOLDER made in this Section 13
shall be effective, shall be computed by excluding from such computation any
time during which a court of competent jurisdiction or other arbitrator or
mediator has determined that the STOCKHOLDER is in violation of any provision of
this Section 13. The covenants contained in Section 13 shall have no effect if
the transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDER hereby agree that the
covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 LIMITATION. In the event that the STOCKHOLDER who is employed by VPI
or the COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if the STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
13.8 COMPANY NONINTERFERENCE. The parties hereto agree that the Surviving
Corporation and the surviving corporations under the Other Agreements that
operate in the State of Hawaii shall cooperate with each other and shall not
interfere with each other's business relationships. This provision shall be
included in the Other Agreements of the Other Founding Companies that operate in
the State of Hawaii.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
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14.1 STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that he had
in the past, currently has, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDER agrees that he
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDER as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDER, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDER shall, if possible, give two days'
prior written notice thereof to VPI and provide VPI with the opportunity within
such two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by the STOCKHOLDER of the provisions of this Section, VPI
shall be entitled to an injunction restraining the STOCKHOLDER from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting VPI from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated, the STOCKHOLDER
shall have none of the above-mentioned restrictions on his ability to
disseminate confidential information with respect to the COMPANY.
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14.2 VPI AND NEWCO. VPI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. VPI and NEWCO
agree that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, they will not use, except in connection with the
transactions contemplated hereby, or disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except disclosures (a) to authorized representatives of the
COMPANY, (b) to counsel and other advisors; provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 14.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of VPI or NEWCO, (ii) disclosure is required
by law or the order of any governmental authority under color of law; provided,
however, that prior to disclosing any information pursuant to this clause (ii),
VPI and NEWCO shall, unless otherwise required by law or such order, give two
days' prior written notice thereof to the COMPANY and the STOCKHOLDER and
provide the COMPANY and the STOCKHOLDER with the opportunity within such two-day
period to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. VPI will disclose confidential information
relating to the COMPANY to the Other Founding Companies only if such companies
have agreed, in advance, to treat such information as confidential. In the event
of a breach or threatened breach by VPI or NEWCO of the provisions of this
Section, the COMPANY and the STOCKHOLDER shall be entitled to an injunction
restraining VPI and NEWCO from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANY and the STOCKHOLDER from pursuing any other available remedy for as such
breach or threatened breach, including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and
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irreparable damage that would be caused for which they would have no other
adequate remedy, the parties hereto agree that, in the event of a breach by any
of them of the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANY of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDER or family members, the trustees of
which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, the STOCKHOLDER shall not sell, assign, exchange,
transfer, distribute or otherwise dispose of any shares of VPI Stock received by
the STOCKHOLDER pursuant to Section 3.1. The certificates evidencing the VPI
Stock delivered to the STOCKHOLDER pursuant to Section 3 of this Agreement shall
bear a legend substantially in the form set forth below and containing such
other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO
[first anniversary of Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
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15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDER or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDER shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDER pursuant to
Section 3.1 except in accordance with this Section 15.2. If the STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and the STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
of the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
the STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock, and the
STOCKHOLDER shall be entitled to pledge his shares of VPI Stock in increments of
such amounts as STOCKHOLDER, in his sole discretion, may determine. Any
restrictive legend placed upon the certificates of VPI Stock shall indicate this
ability to pledge the VPI Stock subject to any other restriction set forth
therein. VPI shall cooperate with the STOCKHOLDER and issue or cause to be
issued such certificates of shares representing the VPI Stock promptly and in
such amounts as requested by the STOCKHOLDER. VPI agrees to acknowledge any
pledge of the VPI Stock made by the STOCKHOLDER and comply with the terms of the
security agreement or other instrument creating or evidencing such pledge to the
extent not inconsistent with this Agreement or law, including without limitation
(a) providing the pledgee/secured party with appropriate financial information
concerning VPI, (b) notifying the pledgee/secured party of the amount of VPI
Stock previously sold or to be sold by the STOCKHOLDER and (c) allowing the
pledgee/secured party to rely on VPI for a determination of whether a transfer
of such VPI Stock would not violate Rule 144(e)(2) of the 1933 Act in the event
VPI authorizes the transfer by the pledgee/secured party of the pledged VPI
Stock. VPI agrees to respond promptly to requests by the STOCKHOLDER or any
pledgee/secured party to transfer or sell the VPI Stock; provide that VPI
receives customary broker's representations and opinion of counsel that such
transfer or sales are exempt from registration under the 1933 Act. STOCKHOLDER
shall reimburse VPI for reasonable costs incurred by VPI in complying with any
obligation relating to a pledgee/secured party arising under this Section 15.2.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDER acknowledges that the shares of VPI Stock to be delivered
to the STOCKHOLDER pursuant to this Agreement have not been registered under the
1933 Act and therefore may not be resold without compliance with the 1933 Act.
The VPI Stock to be acquired by the STOCKHOLDER pursuant to this Agreement is
being acquired solely for his own account,
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for investment purposes only, and with no present intention of distributing,
selling or otherwise disposing of it in connection with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDER covenants, warrants and
represents that none of the shares of VPI Stock issued to the STOCKHOLDER will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDER is able to bear the
economic risk of an investment in the VPI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the proposed investment in the VPI Stock. The
STOCKHOLDER has had an adequate opportunity to ask questions and receive answers
from the officers of VPI concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of VPI, the plans
for the operations of the business of VPI, the business, operations and
financial condition of the Other Founding Companies, and any plans for
additional acquisitions and the like. The STOCKHOLDER has asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to his satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than
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(i) any shelf registration of shares to be used as consideration for
acquisitions of additional businesses by VPI and (ii) registrations relating to
employee benefit plans, VPI shall give the STOCKHOLDER prompt written notice of
its intent to do so. Upon the written request of the STOCKHOLDER given within 30
days after receipt of such notice, VPI shall cause to be included in such
registration all of the VPI Stock issued to the STOCKHOLDER pursuant to this
Agreement which the STOCKHOLDER requests, provided that VPI shall have the right
to reduce the number of shares included in such registration to the extent that
inclusion of such shares could, in the reasonable opinion of tax counsel to VPI
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Registration Statement as an exchange pursuant to
which gain is not recognized under Section 351(a) of the Code. In addition, if
VPI is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 17.1 that the number of shares to be
sold by persons other than VPI is greater than the number of such shares which
can be offered without adversely affecting the offering, VPI may reduce pro rata
the number of shares offered for the accounts of such persons (based upon the
number of shares desired to be sold by such person) to a number deemed
satisfactory by such managing underwriter, provided, however, that for each such
offering made by VPI after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than VPI, the
STOCKHOLDER and the stockholders of the Other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements (collectively, the
STOCKHOLDER and the stockholders of the other Founding Companies who receive
shares of VPI Stock pursuant to the Other Agreements being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the Founding
Stockholders on a pro rata basis based on the number of shares proposed to be
registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders
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pursuant to this Agreement and the Other Agreements which have not been
previously registered or sold and which are not entitled to be sold under Rule
144(k) (or any similar or successor provision) promulgated under the 1933 Act
may request in writing (the "Demand Registration Request") that VPI file a
registration statement under the 1933 Act covering the registration of up to all
of the shares of VPI Stock issued to the STOCKHOLDER pursuant to this Agreement
and the Other Agreements then held by such Founding Stockholders (a "Demand
Registration"). Within ten (10) days of the receipt of the Demand Registration
Request, VPI shall give written notice of such request to all other Founding
Stockholders and shall, as soon as practicable but in no event later than 45
days after the Demand Registration Request, file and use its best efforts to
cause to become effective a registration statement covering all shares requested
to be registered pursuant to this Section 17.2. VPI shall be obligated to effect
only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
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registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by the STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to the STOCKHOLDER with respect to the
STOCKHOLDER's VPI Stock.
17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDER pursuant to this Agreement (the "Registrable Securities") are
included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who
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controls such seller or any such underwriter within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller or any such director or officer or underwriter or controlling Person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
1933 Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and VPI will
reimburse such seller and each such director, officer, underwriter and
controlling Person for any expenses (including but not limited to reasonable
attorneys' fees) reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
VPI shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to VPI by such seller expressly for use in the preparation thereof, and provided
further that VPI shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the 1933
Act, in any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the same may
be then supplemented or amended, to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission
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was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, underwriter or controlling Person and
shall survive the transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of any underwriter, VPI or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller. In no event shall
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the liability of any selling holder of Registrable Securities under this Section
17.6(b) be greater in amount than the dollar amount of the proceeds received by
such holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of
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securities under any federal or state law or regulation of any governmental
authority other than the 1933 Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 17.6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall
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be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to consummate the transactions contemplated
hereby and by the Other Agreements. VPI, the COMPANY and the STOCKHOLDER hereby
agree that they shall not issue any press release or otherwise make any public
announcement (including communications with trade publications and other media),
or disclose information to any third party (except those agents or
representatives of a party directly involved in the transactions contemplated
hereby and except as required by law) concerning VPI, the Founding Companies or
the transactions contemplated hereby or by the Other Agreements without the
prior approval of VPI, the COMPANY and the STOCKHOLDER.
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18.2 COOPERATION. The COMPANY, the STOCKHOLDER, VPI and NEWCO shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDER. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDER, the
COMPANY, NEWCO and VPI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDER, the COMPANY, NEWCO and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP (including such fees and expenses in connection with the
audit of the COMPANY's financial statements), Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇,
L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDER shall pay the fees,
expenses and disbursements of the STOCKHOLDER, the COMPANY and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by the COMPANY and the STOCKHOLDER under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDER. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, VPI shall reimburse the STOCKHOLDER for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$50,000. In addition, the STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger, other than
Transfer Taxes, if any, imposed by the State of Delaware. The STOCKHOLDER shall
file all necessary documentation and Tax Returns with respect to such Transfer
Taxes. In addition, the STOCKHOLDER acknowledges that he, and not the COMPANY or
VPI, shall pay all taxes due upon receipt of the consideration payable pursuant
to Section 3 hereof, and shall
84
assume all tax risks and liabilities of the STOCKHOLDER in connection with the
transactions contemplated hereby; provided, however, that the foregoing shall
not in any way prejudice the ability of the STOCKHOLDER and the COMPANY to rely
upon the opinions contained in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or NEWCO, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copies to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
(b) If to the STOCKHOLDER, addressed to him at his address set forth on
Annex IV, with copies to such counsel as is set forth with respect to the
STOCKHOLDER on such Annex IV;
85
(c) If to the COMPANY, addressed to it at:
Hotel Corporation of the Pacific, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
and marked "Personal and Confidential"
with copies to:
Cades ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining
86
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, NEWCO, the COMPANY and STOCKHOLDER (as defined in the
introductory paragraph of this Agreement). Any amendment or waiver effected in
accordance with this Section 18.15 shall be binding upon each of the parties
hereto, any other person receiving VPI Stock in connection with the Merger and
each future holder of such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by VPI prior to the Closing Date.
87
"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
88
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or the COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANY.
"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
89
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect
to a limited liability company unless the context otherwise requires, the
membership interests of such limited liability company, and otherwise have their
respective ordinary meanings.
"STOCKHOLDER" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability
90
company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
HCP ACQUISITION CORP.
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
HOTEL CORPORATION OF THE PACIFIC, INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: President
------------------------------
STOCKHOLDER:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇