[CONFORMED]
STOCK PURCHASE AGREEMENT
BY AND AMONG
HFS INCORPORATED,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and
RESORT CONDOMINIUMS INTERNATIONAL, INC.
Dated as of
October 6, 1996
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND TERMS............................................ 1
Section 1.1 Certain Definitions...................................... 1
Section 1.2 Other Terms.............................................. 12
Section 1.3 Other Definitional Provisions............................ 12
ARTICLE II PURCHASE AND SALE OF SHARES..................................... 13
Section 2.1 Purchase and Sale of the Company Shares and the Seller Affili-
ate Shares............................................... 13
Section 2.2 Purchase and Sale of the Trust Shares.................... 13
Section 2.3 Conveyance............................................... 13
Section 2.4 Consideration............................................ 13
ARTICLE III CLOSING........................................................ 14
Section 3.1 Closing.................................................. 14
Section 3.2 Estimated Cash Consideration............................. 14
Section 3.3 Deliveries by Seller and the Company..................... 14
Section 3.4 Deliveries by Acquiror................................... 15
Section 3.5 Simultaneous Transactions................................ 16
ARTICLE IV PROCEEDS TO SELLER; ADJUSTMENT; CONTINGENT PAYMENTS..............16
Section 4.1 Proceeds to Seller....................................... 16
Section 4.2 Purchase Price Adjustment................................ 17
Section 4.3 Contingent Payments...................................... 18
Section 4.4 Acquiror's Right of Offset............................... 24
ARTICLE V RELATED MATTERS.................................................. 24
Section 5.1 Registration Statement................................... 24
Section 5.2 Representation on Acquiror Board......................... 24
Section 5.3 Long-Term Securities..................................... 25
Section 5.4 Seller Lease............................................. 25
Section 5.5 Transferred Liquid Securities............................ 25
Section 5.6 UK Securities............................................ 25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
COMPANY.............................................................. 26
Section 6.1 Authority; Binding Effect................................ 26
Section 6.2 Organization............................................. 27
Section 6.3 Records.................................................. 28
Section 6.4 Capitalization........................................... 28
Section 6.5 No Violation; Consents and Approvals..................... 30
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PAGE
Section 6.6 Absence of Litigation.................................... 31
Section 6.7 Related Party Agreements................................. 31
Section 6.8 Permits; Compliance with Laws............................ 32
Section 6.9 Financial Statements/Undisclosed Liabilities/Receivables. 32
Section 6.10 Absence of Certain Changes or Events............... 34
Section 6.11 Employee Benefit Plans; ERISA...................... 35
Section 6.12 Contracts.......................................... 38
Section 6.13 Environmental Matters.............................. 39
Section 6.14 Personal Property.................................. 40
Section 6.15 Real Property...................................... 40
Section 6.16 Labor Matters...................................... 41
Section 6.17 Insurance Policies................................. 42
Section 6.18 Intellectual Property.............................. 42
Section 6.19 Bank Accounts; Powers of Attorney.................. 43
Section 6.20 Taxes.............................................. 43
Section 6.21 Developers/Suppliers............................... 46
Section 6.22 Acquisition of the Acquiror Common Stock for Investment;
Securities Act..................................... 46
Section 6.23 Timeshare Exchange Business........................ 46
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF ACQUIROR..................... 47
Section 7.1 Authority; Binding Effect................................ 47
Section 7.2 Organization............................................. 47
Section 7.3 SEC Documents and Other Reports.......................... 47
Section 7.4 Capitalization........................................... 48
Section 7.5 No Violation; Consents and Approvals..................... 48
Section 7.6 Acquisition of Shares for Investment..................... 49
ARTICLE VIII COVENANTS..................................................... 49
Section 8.1 Access to Information; Confidentiality................... 49
Section 8.2 Conduct of Business...................................... 50
Section 8.3 Reasonable Best Efforts.................................. 53
Section 8.4 Consents................................................. 53
Section 8.5 Antitrust Notification................................... 54
Section 8.6 No Solicitation.......................................... 54
Section 8.7 Further Assurances....................................... 54
Section 8.8 Notification of Certain Matters.......................... 55
Section 8.9 Certain Tax Matters...................................... 55
Section 8.10 Intercompany Obligations; Affiliate Agreements..... 60
Section 8.11 Supplements to Disclosure Schedule................. 61
Section 8.12 Resignations....................................... 61
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PAGE
Section 8.13 Non-Competition.................................... 61
Section 8.14 Access to Books and Records Following the Closing.. 62
Section 8.15 Nominee Shareholders............................... 62
Section 8.16 Amendments to Organizational Documents............. 62
ARTICLE IX CONDITIONS TO CLOSING........................................... 62
Section 9.1 Mutual Conditions to the Obligations of the Parties...... 62
Section 9.2 Conditions to the Obligations of Acquiror................ 63
Section 9.3 Conditions to the Obligations of Seller and the Company.. 64
ARTICLE X INDEMNIFICATION OBLIGATIONS; SURVIVAL............................ 65
Section 10.1 The Seller's Agreement to Indemnify................ 65
Section 10.2 Seller's Limitation of Liability................... 65
Section 10.3 Acquiror's Agreement to Indemnify.................. 66
Section 10.4 Acquiror's Limitation of Liability................. 66
Section 10.5 Conditions of Indemnification...................... 67
Section 10.6 Survival of Representations........................ 68
Section 10.7 Exclusive Remedy................................... 68
ARTICLE XI TERMINATION..................................................... 68
Section 11.1 Termination........................................ 68
Section 11.2 Effect of Termination.............................. 68
ARTICLE XII MISCELLANEOUS.................................................. 69
Section 12.1 Notices............................................ 69
Section 12.2 Amendment; Waiver.................................. 70
Section 12.3 Assignment......................................... 70
Section 12.4 Entire Agreement................................... 70
Section 12.5 Fulfillment of Obligations......................... 70
Section 12.6 Parties in Interest................................ 71
Section 12.7 Expenses........................................... 71
Section 12.8 Brokers............................................ 71
Section 12.9 Governing Law; Jurisdiction........................ 71
Section 12.10 Counterparts....................................... 71
Section 12.11 Headings........................................... 71
Section 12.12 Further Assurances................................. 71
Section 12.13 Specific Performance............................... 72
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SCHEDULES AND EXHIBITS
Schedule I.................................................Affiliated Entities
Schedule II........................................................EBITDA Test
Schedule III......................................................Members Test
Schedule IV.......................................................Revenue Test
Schedule V...............Capital Expenditures relating to BPR Computer Project
Exhibit A........................................Registration Rights Agreement
Exhibit B..............................................Seller Lease Term Sheet
Exhibit C.........................................Form of Seller Legal Opinion
Exhibit D.......................................Form of Acquiror Legal Opinion
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STOCK PURCHASE AGREEMENT, dated as of October 6, 1996, by and among HFS
Incorporated, a Delaware corporation ("Acquiror"), ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, an
individual resident of the State of Indiana ("Seller"), and Resort Condominiums
International, Inc., an Indiana corporation (the "Company").
W I T N E S S E T H :
WHEREAS, Seller is the record and beneficial owner of all of the issued and
outstanding shares of common stock, without par value, of the Company (the
"Company Shares") and, except as otherwise noted on Schedule I hereto, is the
record and beneficial owner, directly or indirectly, of all of the issued and
outstanding shares (the "Seller Affiliate Shares") of capital stock of the
Affiliated Entities (as hereinafter defined);
WHEREAS, Acquiror desires to acquire from Seller and Seller desires to sell
to Acquiror the Company and each of the Affiliated Entities through a purchase
of all of the Company Shares and the Seller Affiliate Shares from Seller (the
"Stock Purchase"), each on the terms and subject to the conditions contained
herein; and
WHEREAS, the respective Board of Directors of each of the Company and
Acquiror has approved this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants and undertak- ings
contained herein, and subject to and on the terms and conditions herein set
forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
"Acquiror" shall have the meaning set forth in the recitals hereto.
"Acquiror Borrowing Rate" shall mean Acquiror's average weighted cost of
debt capital.
"Acquiror Claims" shall have the meaning set forth in Section 10.3 hereof.
"Acquiror Common Stock" shall mean the common stock, par value $.01 per
share, of Acquiror.
"Acquiror Group" shall have the meaning set forth in Section 10.1 hereof.
"Acquiror SEC Documents" shall have the meaning set forth in Section 7.3
hereof.
"Acquiror Subsidiary" shall mean a wholly owned subsidiary of Acquiror that
shall issue the Preferred Stock pursuant to Section 5.6 hereof.
"Acquiror Taxes" shall have the meaning set forth in Section 8.9(e)(iii)
hereof.
"Adjustment Cash" shall mean the amount, if any, by which the Realizable
Value of the Liquid Securities plus the Book Value of the Long-Term Securities
(before giving effect to any Bonus Payments), each as set forth on the Closing
Statement, exceeds the sum of $280,000,000 plus the amount of the UK Taxes;
provided, however, that in no event shall the amount of the Adjustment Cash
exceed $10,000,000.
"Affiliate" shall mean, as to any Person (as hereinafter defined), any
other Person which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. The term "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as applied to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or other
ownership interest, by contract or otherwise.
"Affiliate Agreements" shall have the meaning set forth in Section 8.10(b)
hereof.
"Affiliate Shares" shall mean the Company Affiliate Shares, the Seller
Affiliate Shares and the equity interests of Persons other than Seller in the
Affiliated Entities.
"Affiliated Entities" shall mean the Affiliates of the Company listed on
Schedule I hereto, which entities include the Combined Entities (other than
Resort Capital Corporation) and the Related Entities.
"Aggregate Purchase Price" shall mean the sum of the Cash Consideration,
the Common Stock Consideration and the Contingent Payments, if any, paid to
Seller.
"Agreement" shall mean this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Balance Sheet" shall have the meaning set forth in Section 6.9(a) hereof.
"Base Amount" shall have the meaning set forth in Section 4.1(a)(i) hereof.
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"Bonus Payments" shall mean all bonus or similar payments payable by the
Company or any of the Affiliated Entities to any director, officer, employee or
consultant subsequent to the date of this Agreement.
"BPR Computer Project" shall mean the Business Process Reengineering and
Information Architecture programs of the Company.
"Book Value" shall mean, with respect to Long-Term Securities, the book
value of such Long-Term Securities, as to Long-Term Securities owned as of the
date of the Balance Sheet, as reflected on the Balance Sheet and, as to
Long-Term Securities acquired after the date of the Balance Sheet, as determined
in a manner consistent with the Financial Statements, net of all applicable
reserves. As to the Book Value of the RCC Stock, such Book Value shall be the
book value of RCI's 49% investment in RCC (approximately $1.1 million).
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks in the City of New York are authorized or obligated by law or
executive order to close.
"Cash and Equivalents" shall mean cash and cash equivalents of the Company
and the Affiliated Entities, including, without limitation, the proceeds of any
liquidation of all or a portion of the Liquid Securities, held by the Company or
any of the Affiliated Entities.
"Cash Consideration" shall have the meaning set forth in Section 4.1(a)(i)
hereof.
"Claims" shall have the meaning set forth in Section 10.3 hereof.
"Closing" shall mean the closing of the transactions contemplated by this
Agreement, as provided for in Section 3.1 hereof.
"Closing Cash Amount" shall have the meaning set forth in Section 4.2
hereof.
"Closing Date" shall have the meaning set forth in Section 3.1 hereof.
"Closing Statement" shall have the meaning set forth in Section 4.2(a)
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Combined Entities" shall mean the Affiliates of the Company engaged in the
Timeshare Exchange Business and included in the Financial Statements, as listed
on Schedule I hereto.
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"Common Stock Consideration" shall have the meaning set forth in Section
4.1(a)(ii) hereof.
"Company" shall have the meaning set forth in the recitals hereto.
"Company Affiliate Shares" shall mean the shares of common stock of the
Affiliated Entities held by the Company.
"Company Shares" shall have the meaning set forth in the recitals hereto.
"Competition Laws" shall mean foreign statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines, and other foreign laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopoliza- tion, lessening of competition or restraint of
trade, including, without limitation, the Investment Canada Act and the Canadian
Competition Act.
"Compliance Costs" shall have the meaning set forth in Section 5.6(b)
hereof.
"Confidentiality Agreement" shall mean the Confidentiality Agreement, dated
July 24, 1996, between Acquiror and the Company.
"Consents" shall have the meaning set forth in Section 6.5(c) hereof.
"Contingent Payment" shall have the meaning set forth in Section 4.3(a)
hereof.
"Contracts" shall have the meaning set forth in Section 6.12(b) hereof.
"Damages" shall have the meaning set forth in Section 10.1 hereof.
"Developer Contracts" shall have the meaning set forth in Section 6.12(b)
hereof.
"Earnings Baseline" shall mean EBITDA (as hereinafter defined) of the
Timeshare Exchange Business for the fiscal year ended December 31, 1996, as
reflected in the audited financial statements for such fiscal year of the
Timeshare Exchange Business.
"Earn-Out Period" shall mean the period commencing on the Closing Date and
ending on December 31, 2001.
"Earn-Out Schedule" shall have the meaning set forth in Section 4.3(a)
hereof.
"EBITDA" shall mean, for any period, the sum of the amounts for such period
of (a) net income, as adjusted for any expensed portion of the BPR Computer
Project, plus
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(b) to the extent net income is reduced thereby, (i) all charges for
amortization of intangibles and depreciation, (ii) interest expense, (iii)
income tax expense and (iv) extraordinary losses, minus (c) interest income,
extraordinary gains (net of taxes), in each case, as reflected in the audited
financial statements for such period of the Timeshare Exchange Business
(prepared in accordance with GAAP).
"EBITDA Test" shall mean the standard under which EBITDA Payments will be
made under Section 4.3(c) hereof.
"Elections" shall have the meaning set forth in Section 8.9(b)(i) hereof.
"Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any person or entity alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of, based on or
resulting from (a) the presence or Release of any Hazardous Materials at any
location, whether or not owned or operated by the Seller, the Company or any
Affiliated Entity, or (b) circumstances forming the basis of any violation of
any Environmental Law.
"Environmental Laws" shall mean all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment, including laws relating to Releases or threatened Releases of
Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials and all laws and regulations with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorpo- rated) that together with the Company would be deemed to be a "single
employer" within the meaning of Section 4001 of ERISA.
"ERISA Plans" shall have the meaning set forth in Section 6.11(a) hereof.
"Estimated Cash Consideration" shall have the meaning set forth in Section
3.2 hereof.
"Estimated Statement" shall have the meaning set forth in Section 3.2
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Financial Statements" shall have the meaning set forth in Section 6.9(a)
hereof.
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"Foreign Plans" shall have the meaning set forth in Section 6.11(n) hereof.
"GAAP" shall mean United States generally accepted accounting principles
and practices in effect from time to time as consistently applied.
"Governmental Authority" shall have the meaning set forth in Section 6.5(c)
hereof.
"Hazardous Materials" shall mean all materials regulated by law as capable
of causing harm or injury to human health or the environment, including (a)
Hazardous Sub- stances (as hereinafter defined), (b) friable asbestos containing
material, (c) polychlorinated biphenyls, (d) highly toxic materials as defined
by OSHA in 29 C.F.R. Para. 1910.1200, (e) radioactive materials and (f) all
substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Para. 300.5, or defined as such by, or regulated as such under, any
Environmental Law.
"Hazardous Substances" shall mean any hazardous substances within the
meaning of Section 101(14) of CERCLA, 42 U.S.C. Para. 9601(14), or any pollutant
or constituent that is regulated under any Environmental Law.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Indebtedness" of any Person at any date shall include (a) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (b) any
other indebtedness of such Person that is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations of such Person under leases required
in accordance with GAAP to be capitalized on a balance sheet of the lessee, (d)
all obligations of such Person in respect of acceptances issued or created for
the account of such Person, (e) all liabilities secured by any Lien (as
hereinafter defined) on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment thereof and
(f) all direct or indirect guarantees of any of the foregoing for the benefit of
another Person.
"Indemnity Credit" shall mean, at any point in time, (a) in the case of
Seller's indemnity obligations under Section 8.9(e) hereof, (i) an amount equal
to any Adjustment Cash in excess of $5 million, less (ii) the amount by which
any Adjustment Cash shall have previously been applied to reduce Seller's
indemnity obligations under either Section 8.9 or Section 10.1 hereof and (b) in
the case of Seller's indemnity obligations under Section 10.1 hereof, (i) an
amount equal to any Adjustment Cash, less (ii) the amount by which any
Adjustment Cash shall have previously been applied to reduce Seller's indemnity
obligations under either Section 8.9 or Section 10.1 hereof.
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"Intellectual Property" shall have the meaning set forth in Section 6.18
hereof.
"IRS" shall mean the Internal Revenue Service of the United States.
"Labor Laws" shall have the meaning set forth in Section 6.16 hereof.
"Laws" shall mean any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order, judgment or decree, administrative order or
decree, administrative or judicial decision, and any other executive or
legislative proclamation.
"Leased Realty" shall have the meaning set forth in Section 6.15(b) hereof.
"Leases" shall have the meaning set forth in Section 6.15(c) hereof.
"Liens" shall mean any lien, encumbrance, security interest, mortgage,
pledge, charge, claim, option, right of first refusal or call, or restriction of
any kind.
"Liquidation Costs" shall have the meaning set forth in Section 5.5(b)
hereof.
"Liquid Securities" shall mean (a) Cash and Equivalents and (b) securities
of a character that would be treated as "available-for-sale securities", as such
term is used in the Financial Statements, held by the Company or any of the
Affiliated Entities.
"Litigation" shall have the meaning set forth in Section 6.6(a) hereof.
"Long-Term Securities" shall mean (a) collateralized resort mortgage
obliga- tions, securitized timeshare receivables, notes issued by or on behalf
of developers, related party notes and other securities of a character that
would be treated as "held-to-maturity" securities, as such term is used in the
Financial Statements, held by the Company or any of the Affiliated Entities, and
(b) the outstanding shares of capital stock of Resort Capital Corporation.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on the business, results of operations, assets,
liabilities, net worth, sales, income, prospects, operations or condition
(financial or otherwise) of such Person.
"Material Affiliate" shall mean those Affiliated Entities marked with an
asterisk on Schedule-I hereto.
"Members" shall mean those Persons for whom annual subscription or
membership fees shall have been paid for the right to participate in the
exchange of vacation ownership interests through the Timeshare Exchange
Business. As of any determination date, the aggregate number of Members shall be
determined by the independent auditors of
7
the Timeshare Exchange Business using methods consistent with those applied
during fiscal 1995.
"Members Baseline" shall mean the aggregate number of Members as of
December 31, 1996, as determined by the independent auditors of the Timeshare
Exchange Business.
"Members Conversion" shall have the meaning set forth in Section 4.3(f)
hereof.
"Members Target Amount" shall mean $62.5 million minus an amount equal to
50% of all Excess EBITDA Payments, if any.
"Members Test" shall mean the standard under which the Members Payments
will be made under Section 4.3(d) hereof.
"Net Revenue" shall mean, for any period, the sum of (a) the amounts
recognized during such period of (i) subscription income, (ii) exchange fees,
(iii) travel and related income, (iv) advertising income, (v) resort related
income, (vi) foreign license income, (vii) management fees, (vii) software
license fees and other computer related revenues, (viii) consulting fees and
(ix) other items of revenue net of (b) returns, credits and allowances relating
to the items referred to in clauses (i)-(ix) above, in each case, as reflected
in the audited financial statements of the Timeshare Exchange Business for such
period, which are prepared on a basis consistent with the Financial Statements.
"Net Revenues Test" shall mean the standard under which the Revenue
Payments will be made under Section 4.3(e) hereof.
"1995 Combined Balance Sheet" shall mean the audited combined balance sheet
of the Company and the Combined Entities as of December 31, 1995.
"Nominee Shareholders" shall have the meaning set forth in Section 6.4(i)
hereof.
"Nominee Shares" shall have the meaning set forth in Section 6.4(i) hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Other Contracts" shall have the meaning set forth in Section 6.12(b)
hereof.
"Owned Realty" shall have the meaning set forth in Section 6.15(b) hereof.
"PBGC" shall have the meaning set forth in Section 6.11(c) hereof.
8
"Permits" shall have the meaning set forth in Section 6.8 hereof.
"Permitted Liens" means (i) mechanics', carriers', workmen's, repairmen's
or other like Liens arising or incurred in the ordinary course of business with
respect to liabilities that are not yet due or delinquent, (ii) Liens for Taxes
(as hereinafter defined), as- sessments and other governmental charges which are
not due and payable or which may hereafter be paid without penalty or which are
being contested in good faith by appropriate proceedings (for which reserves
have been made in the Financial Statements in accordance with GAAP) and
(iii) other imperfections of title or encumbrances, if any, which imperfec-
tions of title or other encumbrances, individually or in the aggregate, would
not materially detract from the value of the property or asset to which it
relates or materially impair the ability of the Company (as hereinafter defined)
to use the property or asset to which it relates in substantially the same
manner as it was used prior to the Closing Date.
"Person" shall mean an individual, a corporation, a partnership, an
associa- tion, a trust or other entity or organization.
"Plans" shall have the meaning set forth in Section 6.11(a) hereof.
"Post-Closing Periods" shall have the meaning set forth in Section
8.9(e)(iii) hereof.
"Post-Closing Taxes" shall have the meaning set forth in Section
8.9(e)(iii) hereof.
"Pre-Closing Periods" shall have the meaning set forth in Section 8.9(e)(i)
hereof.
"Pre-Closing Taxes" shall have the meaning set forth in Section 8.9(e)(i)
hereof.
"Preferred Stock" shall have the meaning set forth in Section 5.6 hereof.
"Prime Rate" shall mean the prime lending rate of interest as published
from time to time in The Wall Street Journal.
"Proposed Adjustments" shall have the meaning set forth in Section 4.3(f)
hereof.
"RCC Stock" shall have the meaning set forth in Section 5.3 hereof.
"RCI Europe" shall mean RCI Europe Limited.
9
"Realizable Value" shall mean (a) with respect to cash, the actual amount
of such cash; (b) with respect to securities (other than open-end mutual funds)
the fair market value of such securities based upon the last closing sales price
on the date of determination of the value of such securities on the principal
securities exchange or other market on which such securities are primarily
traded and sold; and (c) with respect to securities held through open-end mutual
funds, the fair market value of such securities based upon the net asset value
per share on the date of redemption of such securities.
"Registration Rights Agreement" shall have the meaning set forth in Section
5.1 hereof.
"Related Entities" shall mean the affiliates of the Company engaged in the
Timeshare Exchange Business but not included in the Financial Statements, as
listed on Schedule I hereto.
"Related Entity Financial Statements" shall have the meaning set forth in
Section 6.9(b) hereof.
"Related Party Agreements" shall have the meaning set forth in Section 6.7
hereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including ambient air, surface water,
groundwater and surface or subsurface strata), or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
"Revenue Baseline" shall mean the Net Revenue of the Timeshare Exchange
Business for the fiscal year ended December 31, 1996, as reflected in the
audited financial statements of the Timeshare Exchange Business for such fiscal
year.
"Revenue Target Amount" shall mean $62.5 million minus an amount equal to
50% of all Excess EBITDA Payments, if any.
"Reviewing Accountants" shall have the meaning set forth in Section 4.2(c)
hereof.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the recitals hereto.
"Seller Affiliate Shares" shall have the meaning set forth in the recitals
hereto.
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"Seller Claims" shall have the meaning set forth in Section 10.1 hereof.
"Seller Disclosure Schedule" shall mean the disclosure schedule being
delivered by Seller and the Company concurrently with the execution of this
Agreement.
"Seller Group" shall have the meaning set forth in Section 10.3 hereof.
"Seller Lease" shall have the meaning set forth in Section 5.4 hereof.
"Seller Payment Amounts" shall have the meaning set forth in Section 4.4(b)
hereof.
"Seller Tax Returns" shall have the meaning set forth in Section 8.9(c)(i)
hereof.
"Stock Purchase" shall have the meaning set forth in the recitals hereto.
"Straddle Periods" shall have the meaning set forth in Section 8.9(e)(i)
hereof.
"Straddle Taxes" shall have the meaning set forth in Section 8.9(e)(i)
hereof.
"Structural Change" shall have the meaning set forth in Section 4.3(f)
hereof.
"Structural Change Notice" shall have the meaning set forth in Section
4.3(f) hereof.
"Tax Basket" shall have the meaning set forth in Section 8.9(e)(i) hereof.
"Tax Claim" shall have the meaning set forth in Section 8.9(e)(v) hereof.
"Tax Law" shall mean any Law relating to Taxes.
"Tax Return" shall mean any return, report, information return or other
docu- ment (including any related or supporting information) with respect to
Taxes.
"Taxes" shall mean all taxes, charges, fees, duties, levies, penalties or
other assessments imposed by any federal, state, local or foreign Governmental
Authority, includ- ing, but not limited to, income, gross receipts, excise,
property, sales, gain, use, license, capital stock, transfer, franchise,
payroll, withholding, social security, value added or other taxes, including any
interest, penalties or additions attributable thereto.
"Timeshare Exchange Business" shall mean the worldwide condominium and
resort timeshare exchange business, subscription business, travel business, and
other businesses conducted by the Company or any of the Affiliated Entities.
11
"Transfer Taxes" shall have the meaning set forth in Section 8.9(d) hereof.
"Transferred Liquid Securities" shall have the meaning set forth in Section
5.5 hereof.
"Treasury Regulations" shall mean the United States Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as in effect on the
date hereof.
"Trust" shall have the meaning set forth in Section 2.2 hereof.
"Trust Shares" shall have the meaning set forth in Section 2.2 hereof.
"UK Cash and Equivalents" shall have the meaning set forth in Section 5.6
hereof.
"UK Securities" shall have the meaning set forth in Section 5.5 hereof.
"UK Tax" shall mean the United Kingdom tax incurred by RCI Europe upon the
liquidation of the UK Securities in accordance with Section 5.6 hereof related
to the gain on the sale of such securities.
"Unearned EBITDA Payments" shall have the meaning set forth in Section
4.3(f) hereof.
"Unearned Net Revenues Payments" shall have the meaning set forth in
Section 4.3 hereof.
"Updated Information" shall have the meaning set forth in Section 8.11
hereof.
"WARN Act" shall have the meaning set forth in Section 6.16 hereof.
Section 1.2 Other Terms. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
Section 1.3 Other Definitional Provisions.
(a) As used herein, "knowledge of the Company" shall mean the best
knowledge, after due inquiry, of each of (i) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, (ii) L. ▇▇▇▇▇▇
▇▇▇▇▇▇, (iii) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, (iv) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., (v) ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, (vi) ▇▇▇▇▇ ▇▇▇▇▇▇▇, (vii) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (viii) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
(ix) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, (x) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (xi) ▇▇▇▇▇ ▇▇▇▇▇▇, (xii) ▇▇▇▇
▇▇▇▇▇▇▇▇, (xiii) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and (xiv) ▇▇▇▇▇▇ ▇▇▇▇▇▇.
12
(b) The words "hereof", "herein", "hereto", "hereunder" and "herein- after"
and words of similar import, when used in this Agreement, shall refer to this
Agree- ment as a whole and not to any particular provision of this Agreement.
(c) The terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
(d) The term "dollars" and character "$" shall mean United States dollars.
(e) The word "including" shall mean including, without limitation, and the
words "include" and "includes" shall have corresponding meanings.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of the Company Shares and the Seller
Affiliate Shares. Upon the terms and subject to the conditions of this
Agreement, at the Closing, Seller shall sell, convey, assign, transfer and
deliver to Acquiror, and Acquiror shall pur- chase, acquire and accept from
Seller, all right, title and interest in and to the Company Shares and the
Seller Affiliate Shares, free and clear of any and all Liens.
Section 2.2 Purchase and Sale of the Trust Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, Seller shall
deliver to Acquiror, and Acquiror shall accept from Seller, all right, title and
interest in and to all shares (the "Trust Shares") of any Affiliated Entity
owned by the Trust created under the Irrevocable Trust Agreement Of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ For The Benefit Of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, dated March 25, 1993 (the "Trust"),
free and clear of any and all Liens.
Section 2.3 Conveyance. Such sale, conveyance, assignment, transfer and
delivery shall be effected by delivery to Acquiror or, at Acquiror's request, to
any other designee of Acquiror, of stock certificates representing the Company
Shares, the Seller Affiliate Shares and the Trust Shares, duly endorsed or
accompanied by stock powers duly executed in blank with appropriate transfer
stamps, if any, affixed, and any other documents that are necessary to transfer
title to the Company Shares, the Seller Affiliate Shares and the Trust Shares to
Acquiror (or any designee of Acquiror), free and clear of any and all Liens.
Section 2.4 Consideration. In consideration of such sale, conveyance,
assignment, transfer and delivery of the Company Shares, the Seller Affiliate
Shares and the Trust Shares by Seller (and, in the case of the Trust Shares, the
Trust), Acquiror shall pay or cause to be paid to Seller, on behalf of Seller
and the Trust, as their respective interests may
13
appear, the Aggregate Purchase Price in accordance with, and subject to the
terms and condi- tions of, Article IV hereof.
ARTICLE III
CLOSING
Section 3.1 Closing. The closing of the Stock Purchase (the "Closing")
shall take place at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M., New York City time, on
the second Business Day following the satisfaction or waiver of the conditions
precedent specified in Article IX, or at such other time and place as the
parties hereto may mutually agree. The date on which the Closing occurs is
called the "Closing Date".
Section 3.2 Estimated Cash Consideration. Two (2) Business Days prior to
the Closing Date, the Company shall deliver to Acquiror a statement (the
"Estimated State- ment") setting forth its good faith estimate of the Cash
Consideration payable by Acquiror in accordance with Section 4.1(a)(i) hereof.
Such Estimated Statement shall include in reason- able detail the calculation of
(i) all Bonus Payments to be made as of the Closing Date, (ii) the Realizable
Value of any Transferred Liquid Securities as of the Closing Date, (iii) the
Realizable Value of the Liquid Securities as of the Closing Date, (iv) the
aggregate Book Value of the Long-Term Securities as of the Closing Date and (v)
the adjustment to the Purchase Price in accordance with Section 4.2(d)(i) hereof
and shall be certified by the Chief Financial Officer of the Company and be
reasonably acceptable to Acquiror. The amount of the Cash Consideration, as set
forth on the Estimated Statement, shall be referred to herein as the "Estimated
Cash Consideration."
Section 3.3 Deliveries by Seller and the Company. At the Closing, Seller
and the Company, as applicable, shall deliver or cause to be delivered to
Acquiror and Acquisi- tion, as applicable (unless delivered previously), the
following:
(a) the stock certificate or stock certificates representing the Company
Shares, duly endorsed or accompanied by stock powers duly executed in blank with
appropri- ate transfer stamps, if any, affixed, and any other documents that are
reasonably necessary to transfer title to the Company Shares;
(b) the stock certificates representing the Seller Affiliate Shares, duly
endorsed or accompanied by stock powers duly executed in blank with appropriate
transfer stamps, if any, affixed, and any other documents that are reasonably
necessary to transfer title to the Seller Affiliate Shares;
(c) the stock certificate or stock certificates representing the Trust
Shares, duly endorsed or accompanied by stock powers duly executed in blank with
appropri-
14
ate transfer stamps, if any, affixed, and any other documents that are
reasonably necessary to transfer title to the Trust Shares;
(d) the resignations of certain officers and directors of the Company and
the Seller Affiliates referred to in Section 8.12 hereof;
(e) the officer's certificate referred to in Section 9.2(d) hereof;
(f) the opinion(s) of counsel to Seller referred to in Section 9.2(e)
hereof;
(g) duly executed counterparts of any Consents referred to in Section
9.2(f) hereof;
(h) the Registration Rights Agreement;
(i) the Seller Lease; and
(j) all other documents, certificates, instruments or writings required to
be delivered by Seller or the Company at or prior to the Closing pursuant to
this Agreement or otherwise reasonably required in connection herewith.
Section 3.4 Deliveries by Acquiror. At the Closing, Acquiror shall deliver
or cause to be delivered to Seller and the Company, as applicable (unless
delivered previously), the following:
(a) a stock certificate or stock certificates representing the shares of
Acquiror Common Stock to be delivered to Seller in payment of the Common Stock
Consideration, free and clear of any and all Liens, other than the terms of, and
bearing the legend referred to in, the Registration Rights Agreement;
(b) a wire transfer of federal or other immediately available funds to a
single account at a bank located in the United States designated at least two
(2) Business Days prior to the Closing Date by Seller in an amount equal to the
sum of (i) the Estimated Cash Consideration plus (ii) fifty percent (50%) of the
Liquidation Costs plus (iii) fifty percent (50%) of the Compliance Costs;
(c) the officer's certificate referred to in Section 9.3(c) hereof;
(d) the opinion of counsel to Acquiror referred to in Section 9.3(d)
hereof;
(e) the Registration Rights Agreement; and
15
(f) all other documents, certificates, instruments or writings reasonably
required to be delivered by Acquiror at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
Section 3.5 Simultaneous Transactions. All of the transactions contemplated
by this Agreement shall be deemed to occur simultaneously, and no such
transaction shall be deemed to have been consummated until all such transactions
have been consummated.
ARTICLE IV
PROCEEDS TO SELLER; ADJUSTMENT; CONTINGENT PAYMENTS
Section 4.1 Proceeds to Seller.
(a) Purchase Price. The Aggregate Purchase Price to be paid by Acquiror in
respect of the Stock Purchase shall be comprised of the following:
(i) cash in an amount equal to $550,000,000 (the "Base Amount") less the
sum of: (A) the aggregate amount of all Bonus Payments plus (B) an amount equal
to the aggregate Book Value of the Long-Term Securities transferred to Seller
pursuant to Section 5.3 hereof plus (C) the Realizable Value of any Transferred
Liquid Securities transferred to Seller pursuant to Section 5.5 hereof, subject
to adjustment as set forth in Section 4.2(d) hereof (the "Cash Consideration");
(ii) that number of shares of Acquiror's Common Stock (the "Common Stock
Consideration") determined by dividing $75,000,000 by the average of the per
share closing prices of the Acquiror Common Stock on the NYSE Composite
Transaction Reporting System for the 20 consecutive trading days immediately
preceding the third trading day prior to the Closing Date; and
(iii) the amount of the Contingent Payments, if any, payable to Seller in
accordance with Section 4.3 hereof.
(b) Assets Transferred to Seller. At the Closing, the Company or the
appropriate Affiliated Entity shall transfer to Seller the following:
(i) the Long-Term Securities (including the RCC Stock) in accordance with
Section 5.3 hereof; and
(ii) the Transferred Liquid Securities in accordance with Section 5.5
hereof.
16
Section 4.2 Purchase Price Adjustment.
(a) Within forty-five (45) days following the Closing Date, Acquiror shall
cause the Company to prepare and deliver to Seller a statement (the "Closing
State- ment") setting forth the Cash Consideration determined in accordance with
Section 4.1(a)(i) hereof. Such Closing Statement shall include in reasonable
detail the calculation of (i) all Bonus Payments, (ii) the Realizable Value of
any Transferred Liquid Securities as of the Closing Date, (iii) the Realizable
Value of the Liquid Securities as of the Closing Date, (iv) the aggregate Book
Value of the Long-Term Securities as of the Closing Date and (v) the adjustment
to the Purchase Price in accordance with Section 4.2(d)(i) hereof.
(b) If Seller disagrees with all or part of the Closing Statement, Seller
may, within ten (10) Business Days after receipt thereof, deliver a written
notice to Acquiror setting forth its disagreement. Any such notice of
disagreement shall specify in reasonable detail those items or amounts as to
which Seller disagrees and the basis of such disagree- ment. If no such notice
of disagreement is timely delivered, the Closing Statement shall be final,
conclusive and binding on the parties hereto.
(c) If a notice of disagreement shall be timely delivered by Seller
pursuant to Section 4.2(b) hereof, the parties shall, during the ten (10)
Business Days following such delivery, use their reasonable best efforts to
reach agreement on the disputed items. If such an agreement is reached, the
Closing Statement, as so agreed, shall be final and binding on the parties
hereto. If the parties are unable to reach such agreement, Price Waterhouse LLP
or such other nationally recognized "Big Six" accounting firm on which the
parties mutually agree (the "Reviewing Accountants") shall be retained to
resolve such dispute. In connection therewith, the Reviewing Accountants shall
address only those items or amounts in the Closing Statement as to which Seller
has disagreed. The Reviewing Accountants shall deliver to Seller and Acquiror,
as promptly as practicable, but in no event later than thirty (30) days after
submission of the disputed items, a report setting forth its ad- justments, if
any, to the Closing Statement and the calculations supporting such adjustments.
Such report shall be final and binding upon the parties hereto and the Closing
Statement, as adjusted pursuant to such report, shall be final and binding on
the parties hereto. The cost of the Reviewing Accountants' review and report
shall be borne equally by Seller and Acquiror.
(d) Upon finalization of the Closing Statement, either upon acceptance by
Seller or, in the event of a dispute, upon agreement of the parties or
resolution by the Re- viewing Accountants, the Cash Consideration payable by
Acquiror to Seller shall be finally determined as set forth below in this
Section 4.2(d).
(i) If the sum of the Realizable Value of the Liquid Securities plus the
Book Value of the Long-Term Securities (before giving effect to any Bonus
Payments), each as set forth on the Closing Statement, is less than the sum of
$280,000,000 plus the amount of the UK Taxes, then the Cash Consideration shall
be decreased by the amount of such shortfall. If the sum of the Realizable Value
of the Liquid Securities plus the
17
Book Value of the Long-Term Securities (before giving effect to any Bonus
Payments), each as set forth on the Closing Statement, exceeds the sum of
$290,000,000, then the Cash Consideration shall be increased by the amount of
such excess.
(ii) The adjustment to the Base Amount provided for in Section 4.1(a)(i)
hereof shall be determined based upon the amounts set forth on the Closing
Statement.
(e) In the event that the Estimated Cash Consideration is less than the
Cash Consideration, as finally determined in accordance with Section 4.2(d)
hereof, then Acquiror shall pay to Seller an amount in cash equal to such
shortfall.
(f) In the event that the Estimated Cash Consideration exceeds the Cash
Consideration, as finally determined in accordance with Section 4.2(d) hereof,
then Seller shall pay to Acquiror an amount in cash equal to such excess.
(g) Any payments required to be made pursuant to subparagraph (e) or (f) of
this Section 4.2 shall be made by wire transfer of immediately available funds
to a single account at a bank located in the United States designated in writing
by Acquiror or Seller, as the case may be, on the second Business Day following
the date on which the amount of such payments is finally determined. The amount
of any such payment shall bear interest for the period from and including the
Closing Date to but excluding the payment date at the Acquiror Borrowing Rate
calculated on the basis of a 365-day year and the actual number of days elapsed.
Section 4.3 Contingent Payments.
(a) No later than 90 days following the end of each fiscal year of the
Company during the Earn-Out Period, commencing with the fiscal year ending
December 31, 1997, Acquiror shall, subject to Section 4.5 hereof, pay or cause
to be paid to Seller, by wire transfer of immediately available funds to a
single account at a bank in the United States designated by Seller, an aggregate
amount up to a maximum of $200,000,000 equal to the sum of all amounts payable,
if any, under the EBITDA Test, the Members Test and the Net Revenues Test
(collectively, "Contingent Payment"). Such Contingent Payment shall be
accompanied by (or if no such Contingent Payment is payable, Seller shall
receive in lieu thereof) (i) the financial statements of the Timeshare Exchange
Business for the relevant fiscal year-end and (ii) a reasonably detailed
schedule certified by the Chief Financial Officer of Acquiror (an "Earn-Out
Schedule") setting forth (A) the computation of each of the EBITDA Test, the
Members Test and the Net Revenues Test for the relevant period, (B) any
deductions from or offsets to the Contingent Payment pursuant to Section 4.5
hereof and (C) the calculation of imputed interest or original issue discount
for U.S. federal tax purposes.
(b) If Seller disputes any calculations shown in the Earn-Out Schedule,
Seller shall give written notice thereof to Acquiror no later than 30 days after
receipt thereof
18
accompanied by the Earn-Out Schedule for the relevant period. Such notice
of dispute shall include a reasonably detailed description of the disputed
items. If the parties are unable to resolve such dispute within 30 days of
receipt by Acquiror of Seller's notice of dispute, then such dispute shall be
finally resolved by the Reviewing Accountants in accordance with the procedures
set forth in Section 4.2(c) hereof.
(c) EBITDA Test. Seller shall be entitled to receive, as a component of the
Contingent Payments, cash in an amount determined in accordance with this
Section 4.3(c), in respect of growth in EBITDA ("EBITDA Payments").
(i) Seller shall be entitled to receive EBITDA Payments in the event that
EBITDA for the fiscal year ended December 31, 1997 ("1997 EBITDA") exceeds the
Earnings Baseline in accordance with the following:
1997 EBITDA
as a Percentage
of Earnings Baseline Amount of EBITDA Payments
less than 108% $0
108% $37.5 million
greater than 108% but equal to or less inear increase from $37.5 million (at
than 110% 108%) to $75 million (at 110%)
greater than 110% but equal to or less linear increase from $75 million (at
than 112% 110%) to $100 million (at 112%)
greater than 112% $100 million
(ii) if 1997 EBITDA is less than 108% of the Earnings Baseline, but EBITDA
for the fiscal year ended December 31, 1998 ("1998 EBITDA") is an amount equal
to or greater than 116% of the Earnings Baseline, then EBITDA Payments shall be
made in the amount of $75 million in respect of such period;
(iii) if (x) 1997 EBITDA is less than 108% of the Earnings Baseline, (y)
1998 EBITDA is an amount less than 116% of the Earnings Baseline, and (z) EBITDA
for the fiscal year ended December 31, 1999 ("1999 EBITDA") is equal to or
greater than 124% of the Earnings Baseline, then EBITDA Payments shall be made
in the amount of $75 million in respect of such period;
(iv) if at least $37.5 million but less than $75 million is paid to Seller
as EBITDA Payments in respect of the fiscal year ended December 31, 1997, then
(x) if 1998 EBITDA is an amount equal to or greater than 116% of the Earnings
Baseline, then EBITDA Payments shall be made in an amount such that the
aggregate EBITDA Payments equals $75 million; or (y) if 1998 EBITDA is less than
116% of the Earnings Baseline, but
19
1999 EBITDA is an amount equal to or greater than 124% of the Earnings
Baseline, then EBITDA Payments shall be made in an amount such that the
aggregate EBITDA Payments equals $75 million;
(v) To the extent the aggregate EBITDA Payments made to Seller exceed $75
million, such excess is referred to herein as "Excess EBITDA Payments"; and
(vi) Set forth on Schedule II hereto is an example of application of the
EBITDA Test to hypothetical facts.
(d) Members Test. Seller shall be entitled to receive, as a component of
the Contingent Payments, cash in an amount determined in accordance with this
Section 4.3(d), in respect of growth in the number of Members over the Earn-Out
Period ("Members Payments"). Seller shall be entitled to receive Members
Payments in the event that the number of Members in each of the fiscal years
referred to below exceeds the Members Baseline in accordance with the following:
(i) for the fiscal year ended December 31, 1997, no Members Payments shall
be made;
(ii) for the fiscal year ended December 31, 1998 (the "1998 Period"), (x)
if the aggregate number of Members as of such date ("1998 Members") is less than
114% of the Members Baseline, then no Members Payments shall be made in respect
of the 1998 Period; or (y) if the number of 1998 Members is equal to or greater
than 114% of the Members Baseline, then Members Payments in respect of the 1998
Period shall be made in an amount equal to 25% of the Members Target Amount;
(iii) for the fiscal year ended December 31, 1999 (the "1999 Period"), (x)
if the aggregate number of Members as of such date ("1999 Members") is less than
121% of the Members Baseline, then no Members Payments shall be made in respect
of the 1999 Period; provided, however, that, if the number of 1999 Members is
equal to or greater than 107% of the number of 1998 Members, then Members
Payments in respect of the 1999 Period shall be made in an amount equal to 25%
of the Members Target Amount; or (y) if the number of 1999 Members is equal to
or greater than 121% of the Members Baseline, then Members Payments in respect
of the 1999 Period shall be made in an amount equal to 25% of the Members Target
Amount; provided, however, that, if no Members Pay- ments were made in respect
of the 1998 Period, then Members Payments in respect of the 1999 Period shall be
made in an amount equal to 50% of the Members Target Amount;
(iv) for the fiscal year ended December 31, 2000 (the "2000 Period"), (x)
if the aggregate number of Members as of such date ("2000 Members") is less than
128% of the Members Baseline, then no Members Payments shall be made in respect
of the 2000 Period; provided, however, that, if the number of 2000 Members is
equal to or
20
greater than 107% of the number of 1999 Members, then Members Payments in
respect of the 2000 Period shall be made in an amount equal to 25% of the
Members Target Amount; or (y) if the number of 2000 Members is equal to or
greater than 128% of the Members Baseline, then Members Payments in respect of
the 2000 Period shall be made in an amount equal to 25% of the Member Target
Amount; provided, however, that, if no Members Pay- ments were made in respect
of the 1998 and 1999 Periods, then Members Payments in respect of the 2000
Period shall be made in an amount equal to 75% of the Members Target Amount;
provided, further, however, that, if aggregate Members Payments in respect of
the 1998 and 1999 Periods were made in an amount equal to 25% of the Members
Target Amount, then Members Payments in respect of the 2000 Period shall be made
in an amount equal to 50% of the Members Target Amount;
(v) for the fiscal year ended December 31, 2001 (the "2001 Period"), (x) if
the aggregate number of Members as of such date ("2001 Members") is less than
128% of the Members Baseline, then no Members Payments shall be made in respect
of the 2001 Period; provided, however, that, if the number of 2001 Members is
equal to or greater than 107% of the number of 2000 Members, then Members
Payments in respect of the 2001 Period shall be made in an amount equal to 25%
of the Members Target Amount; or (y) if the number of 2001 Members is equal to
or greater than 128% of the Members Baseline, then Members Payments in respect
of the 2001 Period shall be made in an amount equal to 25% of the Members Target
Amount; provided, however, that, if no Members Payments were made in respect of
the 1998, 1999 and 2000 Periods, then the Members Pay- ment in respect of the
2001 Period shall be in an amount equal to 100% of the Members Target Amount;
provided, further, however, that, if aggregate Members Payments in respect of
the 1998, 1999 and 2000 Periods were made in an amount equal to 25% of the
Members Target Amount, then the Members Payments in respect of the 2001 Period
shall be made in an amount equal to 75% of the Members Target Amount; provided,
further, however, that, if aggregate Members Payments in respect of the 1998,
1999 and 2000 Periods were made in an amount equal to 50% of the Members Target
Amount, then Members Payments in respect of the 2001 Period shall be made in an
amount equal to 50% of the Members Target Amount; and
(vi) Set forth on Schedule III hereto is an example of applica- tion of the
Members Test to hypothetical facts.
(e) Net Revenues Test. Seller shall be entitled to receive, as a compo-
nent of the Contingent Payments, cash in an amount determined in accordance with
this Section 4.3(e), in respect of growth in Net Revenue over the Earn-Out
Period ("Revenue Payments"). Seller shall be entitled to receive Revenue
Payments in the event that the Net Revenue in each of the fiscal years referred
to below exceeds the Revenue Baseline in accor- dance with the following:
(i) for the fiscal year ended December 31, 1997, no Revenue Payments shall
be made;
21
(ii) for the 1998 Period, (x) if the Net Revenue for such period ("1998
Revenue") is less than 120% of the Revenue Baseline, then no Revenue Payments
shall be made in respect of the 1998 Period; or (y) if 1998 Revenue is equal to
or greater than 120% of the Revenue Baseline, then Revenue Payments in respect
of the 1998 Period shall be made in an amount equal to 25% of the Revenue Target
Amount;
(iii) for the 1999 Period, (x) if Net Revenue for such period ("1999
Revenue") is less than 130% of the Revenue Baseline, then no Revenue Payments
shall be made in respect of the 1999 Period; provided, however, that, if 1999
Revenue is equal to or greater than 110% of 1998 Revenue, then Revenue Payments
in respect of the 1999 Period shall be made in an amount equal to 25% of the
Revenue Target Amount; or (y) if 1999 Revenue is equal to or greater than 130%
of the Revenue Baseline, then Revenue Payments in respect of the 1999 Period
shall be made in an amount equal to 25% of the Revenue Target Amount; provided,
however, that, if no Revenue Payments were made in re- spect of the 1998 Period,
then Revenue Payments in respect of the 1999 Period shall be made in an amount
equal to 50% of the Revenue Target Amount;
(iv) for the 2000 Period, (x) if the Net Revenue for such period ("2000
Revenue") is less than 140% of the Revenue Baseline, then no Revenue Payments
shall be made in respect of the 2000 Period; provided, however, that, if 2000
Revenue is equal to or greater than 110% of the 1999 Revenue, then Revenue
Payments in respect of the 2000 Period shall be made in an amount equal to 25%
of the Revenue Target Amount; or (y) if 2000 Revenue is equal to or greater than
140% of the Revenue Baseline, then Revenue Payments in respect of the 2000
Period shall be made in an amount equal to 25% of the Revenue Target Amount;
provided, however, that, if no Revenue Payments were made in re- spect of the
1998 and 1999 Periods, then Revenue Payments in respect of the 2000 Period shall
be made in an amount equal to 75% of the Revenue Target Amount; provided,
further, however, that, if aggregate Revenue Payments in respect of the 1998 and
1999 Periods were made in an amount equal to 25% of the Revenue Target Amount,
then Revenue Payments in respect of the 2000 Period shall be made in an amount
equal to 50% of the Revenue Target Amount;
(v) for the 2001 Period, (x) if the Net Revenue for such period ("2001
Revenue") is less than 140% of the Revenue Baseline, then no Revenue Payments
shall be made in respect of the 2001 Period; provided, however, that, if the
2001 Revenue is equal to or greater than 110% of 2000 Revenue, then Revenue
Payments in respect of the 2001 Period shall be made in an amount equal to 25%
of the Revenue Target Amount; or (y) if 2001 Revenue is equal to or greater than
140% of the Revenue Baseline, then Revenue Payments in respect of the 2001
Period shall be made in an amount equal to 25% of the Revenue Target Amount;
provided, however, that, if no Revenue Payments were made in re- spect of the
1998, 1999 and 2000 Periods, then the Revenue Payment in respect of the 2001
Period shall be in an amount equal to 100% of the Revenue Target Amount;
provided, further, however, that, if aggregate Revenue Payments in respect of
the 1998, 1999 and 2000 Periods were made in an amount equal to 25% of the
Revenue Target Amount, then the
22
Revenue Payments in respect of the 2001 Period shall be made in an amount
equal to 75% of the Revenue Target Amount; provided, further, however, that, if
aggregate Revenue Payments in respect of the 1998, 1999 and 2000 Periods were
made in an amount equal to 50% of the Revenue Target Amount, then Revenue
Payments in respect of the 2001 Period shall be made in an amount equal to 50%
of the Revenue Target Amount; and
(vi) Set forth on Schedule IV hereto is an example of applica- tion of the
Revenue Test to hypothetical facts.
(f) Changes Affecting Contingent Payments. It is the mutual intention of
the parties that, during the Earn-Out Period (i) the Contingent Payments to be
received by Seller shall be determined as though no change in the structure of
the Timeshare Exchange Business will occur, and (ii) Acquiror shall not be
restricted in exercising its business judgment as to the management of the
Timeshare Exchange Business. Acquiror shall not implement any Structural Changes
that would materially adversely affect the ability of Seller to earn the then
unearned Contingent Payments under the Members Test, other than changes
consistent with the historic practices of the Company. During the period
commencing January 1, 1998 and ending on the first to occur of (i) the payment
to Seller of the full amount of the Contingent Payments or (ii) December 31,
2001, Acquiror shall give Seller at least thirty (30) days' prior written notice
(a "Structural Change Notice") of any other Structural Change. Such Structural
Change Notice shall include (i) a description of the Structural Change and of
Acquiror's proposal for adjusting the terms of the EBITDA Test and/or the Net
Revenues Test, as appropriate, so that, after implementation of such Struc-
tural Change, the economic basis of such tests shall mirror the economic basis
of such tests as set forth herein (the "Proposed Adjustments") and (ii)
pro-forma financial information of the Timeshare Exchange Business giving effect
to such Structural Change for the most recent fiscal year ending prior to the
implementation of such Structural Change. Within thirty (30) days of receipt of
such Structural Change Notice, Seller shall either (i) consent in writing to
such Proposed Adjustments, or (ii) inform Acquiror in writing that Seller
objects to such Proposed Adjustments. In the event that Seller objects to the
Proposed Adjustments, Seller and Acquiror shall negotiate in good faith to
resolve such dispute. If such dispute can not be resolved within fifteen (15)
days of receipt by Acquiror of Seller's notice of objection, Seller may, at her
election, either (i) consent to the Proposed Adjustments or (ii) convert the
unearned portion of the Contingent Payments under either or both of the EBITDA
Test (the "Unearned EBITDA Payments") and the Net Revenues Test (the "Unearned
Net Revenues Payments") to the Members Test (a "Members Conversion"). Following
any Members Con- version, in addition to the application of the Members Test to
the Members Target Amount the following adjustments shall be made, as
applicable: (i) the Members Test shall be applied to the Unearned Net Revenues
Payments for the year in which the Members Conver- sion occurs and all
subsequent years of the Earn-Out Period and (ii) in the event that any payment
becomes due under the Members Test, the Unearned EBITDA Payments shall become
due. As used herein, a "Structural Change" shall mean a material change in the
organization, operation or financial reporting of the Timeshare Exchange
Business that has an
adverse effect on the interest of Seller in the Contingent Payments other
than changes consistent with the historic practices of the Company.
Section 4.4 Acquiror's Right of Offset.
(a) Acquiror may, in its sole discretion, exercise a right of offset
against any Contingent Payments required to be made by or on behalf of Acquiror
pursuant to Section 4.3 hereof by deducting from the amount of any Contingent
Payments owed to Seller under this Agreement (i) the amount of any payment
required to be made by Seller pursuant to Section 4.2 hereof that has not been
timely made and (ii) the amount of any indemnity obligation of Seller to any
member of the Acquiror Group pursuant to Section 8.9(e), Section 9.2(f) or
Section 10.1 hereof.
(b) In the event that any Contingent Payments become due and payable to
Seller pursuant to Section 4.3 hereof at a time when there is an unresolved
dispute as to any amounts owed by Seller to Acquiror pursuant to Section 4.2,
8.9(e) or 10.1 hereof ("Seller Payment Amounts"), then Acquiror may hold such
Contingent Payments (up to the amount of the disputed Seller Payment Amount) as
security for the payment by Seller of the Seller Payment Amount upon resolution
of such dispute in accordance with Section 4.2, 8.9(e) or 10.1 hereof, as the
case may be.
(c) Any Contingent Payments not paid when due shall bear interest at the
Prime Rate.
ARTICLE V
RELATED MATTERS
Section 5.1 Registration Statement. At the Closing, Acquiror and Seller
shall enter into a registration rights agreement in substantially the form of
Exhibit A hereto (the "Registration Rights Agreement") relating to the shares of
Acquiror Common Stock issued to Seller as the Common Stock Consideration.
Section 5.2 Representation on Acquiror Board. At the Closing, Acquiror
shall use its best efforts and shall exercise all authority under applicable
Laws to (i) if necessary, increase the size of its Board of Directors by one
member and (ii) cause Seller to be elected as a member of the Board of Directors
of Acquiror until the next annual Meeting of Stockholders. Subject to its
fiduciary duties under applicable law, Acquiror shall nomi- nate Seller as part
of management's slate of nominees for election as a member of the Board of
Directors of Acquiror at each Annual Meeting of Stockholders held in 1997, 1998
and 1999.
24
Section 5.3 Long-Term Securities. At the Closing, (a) all Long-Term Securi-
ties held by the Company or any Affiliated Entity and (b) all of the capital
stock of Resort Capital Corporation ("RCC Stock") owned by the Company shall be
assigned and transferred to Seller, who thereupon shall receive all right, title
and interest to such Long-Term Securities and to such RCC Stock. The Cash
Consideration to be paid to Seller by Acquiror shall be reduced by an amount
equal to the Book Value of such Long-Term Securities in accordance with Section
4.1(a) hereof.
Section 5.4 Seller Lease. Prior to the Closing, the Company shall assign
and transfer to Seller, by a recordable deed in appropriate form, the real
property presently owned by the Company in Indianapolis, Indiana on which the
Woodview Trace building is situated, whereupon the Seller shall receive all
right, title and interest to such real property. At the Closing, Seller and the
Company shall enter into a mutually acceptable lease agree- ment (the "Seller
Lease") relating to the lease by the Company from Seller of the Woodview Trace
property and building, with substantially the terms set forth on Exhibit B
hereto.
Section 5.5 Transferred Liquid Securities. (a) Prior to the close of
business on the Business Day immediately preceding the Closing Date, Seller (i)
may, subject to clause (ii) hereof, cause the Company or the appropriate
Affiliated Entity to liquidate all or a portion of the Liquid Securities (other
than Cash and Equivalents), and (ii) shall cause RCI Europe to liquidate all of
the Liquid Securities (other than Cash and Equivalents) held by RCI Europe ("UK
Securities"). At the Closing, the Company or the appropriate Affiliated Entity,
as the case may be, shall assign and transfer any of the Liquid Securities
(other than Cash and Equivalents) not so liquidated (the "Transferred Liquid
Securities") to Seller, who thereupon shall receive all right and title to and
interest in such Transferred Liquid Securi- ties. The Cash Consideration to be
paid to Seller by Acquiror shall be reduced by the Realizable Value of the
Transferred Liquid Securities in accordance with Section 4.1(a) hereof.
(b) Seller and the Company shall cause such liquidation of the Liquid
Securities pursuant to Section 5.5(a) hereof to be conducted in a commercially
reasonable manner. On the Business Day immediately preceding the Closing Date,
the Company shall provide to Acquiror a written statement setting forth the
brokerage fees, commissions and other out-of-pocket costs incurred in connection
with such liquidation (the "Liquidation Costs"). At the Closing, Acquiror shall
reimburse Seller for fifty percent (50%) of the Liquidation Costs.
Section 5.6 UK Securities. (a) On the Business Day immediately preceding
the Closing Date, Acquiror Subsidiary shall issue to RCI Europe shares of its
preferred stock (the "Preferred Stock"), in exchange for all Cash and
Equivalents held by RCI Europe, including the gross Cash and Equivalents
realized by RCI Europe upon liquidation of the UK Securities pursuant to Section
5.5 hereof, but excluding any restricted cash ("UK Cash and Equivalents"). The
liquidation value of the Preferred Stock shall be equal to the UK Cash and
Equivalents. The Preferred Stock shall (i) be redeemable after an agreed upon
25
period of time at the option of RCI Europe and (ii) accrue dividends at a
mutually agreed upon rate.
(b) Prior to the Business Day immediately preceding the Closing Date, the
Company shall cause RCI Europe to comply with the requirements of Section 151 of
the Companies ▇▇▇ ▇▇▇▇ of the United Kingdom. On the Business Day immediately
preceding the Closing Date, the Company shall provide to Acquiror a written
statement setting forth the legal and accounting fees incurred by RCI Europe in
effecting such compliance ("Compliance Costs"). At the Closing, Acquiror shall
reimburse Seller for fifty percent (50%) of the Compliance Costs.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE COMPANY
Seller and the Company, jointly and severally, hereby represent and warrant
to Acquiror as follows:
Section 6.1 Authority; Binding Effect.
(a) The Company has all requisite corporate power and corporate au- thority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Company. No other corporate action on the part of the Company or any of the
Affiliated Entities or their respective stockholders is re- quired to authorize
the execution, delivery and performance hereof, and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforce- able against the Company in accordance with its terms, except
that such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium or other laws now or hereafter in effect relating to
or limiting creditors' rights generally and the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the Court before which any proceedings
therefor may be brought.
(b) Seller has the requisite power, capacity and authority to execute and
deliver this Agreement, to perform her obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except that such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium or other laws now or hereafter in effect relating to or
26
limiting creditors' rights generally and the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the Court before which any proceedings
therefor may be brought.
Section 6.2 Organization.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Indiana, and has all requisite
corporate power and authority to own, lease and operate all of its properties
and assets and to conduct its business as it is now being conducted. Except as
set forth in Section 6.2(a) of the Seller Disclosure Schedule, the Company is
duly qualified or licensed and in good standing to do business as a foreign
corporation in each jurisdiction in which the nature of its business, or the
ownership, leasing or operation of its properties or assets, makes such
qualification necessary, except in those jurisdictions where the failure to have
such power and authority or to be so qualified or licensed and in good standing
would not, individually or in the aggre- gate, reasonably be expected to have a
Material Adverse Effect on the Company and the Affiliated Entities considered as
a whole. Seller has delivered or made available to Acquiror a complete and
correct copy of the Company's Articles of Incorporation and By-Laws, each as
amended to date. Each of the Company's Articles of Incorporation and the
Company's By-Laws is in full force and effect, and the Company is not in
violation of any provision thereof.
(b) Section 6.2(b) of the Seller Disclosure Schedule sets forth the name,
jurisdiction of organization, capitalization and ownership of all outstanding
capital stock of each Affiliated Entity. Except as set forth in Section 6.2(b)
of the Seller Disclosure Schedule, each Affiliated Entity (i) is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization, (ii) has all requisite corporate power and
authority to own, lease and operate all of its properties and assets and to
conduct its business as it is now being conducted and (iii) is duly qualified
and in good stand- ing to do business as a foreign corporation in each
jurisdiction in which the nature of its business, or the ownership, leasing or
operation of its properties or assets, makes such qualification necessary,
except in those jurisdictions where the failure to have such power and authority
or to be so qualified or licensed and in good standing would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company and the Affiliated Entities considered as a whole. Seller has
delivered or made available (or prior to Closing will deliver or make available)
to Acquiror a complete and cor- rect copy of the certificate or articles of
incorporation and by-laws or comparable charter or organizational documents,
each as amended to date, of each Affiliated Entity. All such organizational
documents are in full force and effect, and none of the Affiliated Entities is
in violation of any provision of its certificate or articles of incorporation or
by-laws or compa- rable charter or organizational documents.
27
(c) The Material Affiliates constitute each of the Affiliated Entities that
generated net revenues (on the basis of management statements), individually, in
excess of $8,000,000 in fiscal 1995.
Section 6.3 Records.
(a) The respective corporate record books of the Company and each
Affiliated Entity contain accurate and complete records of all material meetings
and accu- rately reflect all other material actions taken by the stockholders,
Boards of Directors and all material committees of the Boards of Directors of
the Company and each Affiliated Entity. Except as set forth in Section 6.3 of
the Seller Disclosure Schedule, all such record books have been made available
by Seller to Acquiror.
(b) The books and records of the Company and each Affiliated Entity are
complete, have been maintained in accordance with applicable laws and good
business practices, and, as a whole, accurately reflect, in all material
respects, the basis for the financial condition and results of operations of the
Company and the Affiliated Entities set forth in the Financial Statements or the
Related Entity Financial Statements, as the case may be.
Section 6.4 Capitalization.
(a) The authorized capital stock of the Company consists of 2,000 shares of
common stock, without par value, of which 1,000 shares are issued and outstand-
ing. No shares of capital stock of the Company are held in the treasury of the
Company. Each issued and outstanding share of capital stock of the Company has
been duly authorized and validly issued, is fully paid and nonassessable, and
has not been issued in violation of, and is not subject to, any preemptive or
subscription rights.
(b) The capitalization information contained in Section 6.2(b) of the
Seller Disclosure Schedule represents a true, correct and complete description
of the authorized and outstanding capitalization of each Affiliated Entity. No
shares of capital stock of any Affiliated Entity are held in the treasury of
such Affiliated Entity. Each issued and outstanding share of capital stock of
each Affiliated Entity has been duly authorized and validly issued, is fully
paid and nonassessable, and has not been issued in violation of, and is not
subject to, any preemptive or subscription rights.
(c) Seller has good and valid title to all of the Company Shares, free and
clear of all Liens.
(d) Seller (or the Affiliated Entity listed in Section 6.2(b) of the Seller
Disclosure Schedule) has good and valid title to all of the Seller Affiliate
Shares (other than the Company Affiliate Shares) owned by such Person, free and
clear of all Liens.
28
(e) The Company has good and valid title to all of the Company Affiliate
Shares, free and clear of all Liens.
(f) The Trust has good and valid title to all of the Trust Shares, free and
clear of all Liens.
(g) Each Nominee Shareholder has good and valid title to all Nominee Shares
owned by such Nominee Shareholder, free and clear of all Liens, other than the
rights of the Company or the appropriate Affiliated Entity in and to such
shares.
(h) Except as set forth in Section 6.4(f) of the Seller Disclosure
Schedule, (i) there is no option, warrant or other right, agreement,
arrangement, or commit- ment of any kind whatsoever relating to the issued or
unissued capital stock or other equity interests of the Company or any
Affiliated Entity or obligating the Company or any Affiliat- ed Entity to grant,
issue or sell any share of the capital stock or other equity interests of the
Company or such Affiliated Entity by sale, lease, license or otherwise; (ii)
there is no obliga- tion, contingent or otherwise, of the Company or any
Affiliated Entity to (A) repurchase, redeem or otherwise acquire any share of
the capital stock or other equity interests of the Company or any Affiliated
Entity, or (B) provide funds to, or make any investment in (in the form of a
loan, capital contribution or otherwise), or provide any guarantee with respect
to the obligations of, the Company or any Affiliated Entity or any other Person;
(iii) other than as set forth in Section 6.2(b) of the Seller Disclosure
Schedule, neither the Company nor any Affiliated Entity, directly or indirectly,
owns, or has agreed to purchase or otherwise ac- quire, the capital stock or
other equity interests of, or any interest convertible into or ex- changeable or
exercisable for such capital stock or such equity interests of, any corporation,
partnership, joint venture or other entity (other than ownership of shares of
another Affiliated Entity as reflected on Schedule I hereto); (iv) there is no
agreement, arrangement, contract or other commitment of any kind whatsoever
(contingent or otherwise) pursuant to which any Person is or may become entitled
to receive any payment based on the revenues or earnings, or calculated in
accordance therewith, of the Company or any Affiliated Entity; and (v) there is
no voting trust, proxy or other agreement, arrangement, contract or other
commitment of any kind whatsoever to which the Company or any Affiliated Entity
is a party, or by which the Company or any Affiliated Entity, or any of their
respective properties or assets, is bound with respect to the voting of any
share of capital stock or other equity interest of the Company or any Affiliated
Entity.
(i) Set forth on Section 6.4(i) of the Seller Disclosure Schedule are (i)
the names of all persons or entities (other than Seller, the Company, any
Affiliated Entity or the Trust) who hold an equity interest in any of the
Affiliated Entities (the"Nominee Shareholders"), (ii) the shares of any
Affiliated Entity owned by each Nominee Shareholder ("Nominee Shares") and (iii)
the respective relationships or affiliations of each Nominee Shareholder with
Seller, the Company or any of the Affiliated Entities.
29
(j) Upon delivery to Acquiror at the Closing of the Company Shares, the
Seller Affiliate Shares and the Trust Shares pursuant to Sections 2.1 and 2.2
hereof, and payment by Acquiror of the consideration therefor pursuant to
Section 2.4 hereof, Acquiror shall acquire and receive all right, title and
interest in and to 100% of the issued and outstanding shares of the Company and
each Affiliated Entity, free and clear of all Liens, other than the Nominee
Shares.
Section 6.5 No Violation; Consents and Approvals.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not, (i) except as set forth in Section
6.5(c) of the Seller Disclosure Schedule, conflict with or violate the articles
of incorporation or by-laws, in each case as currently in effect, of the Company
or any Affiliated Entity, (ii) conflict with or violate any Laws applicable to
the Company or any Affiliated Entity or by or to which any of their respective
properties or assets is bound or subject, or (iii) result in any breach of, or
constitute a default (or an event that with notice or lapse of time or both
would consti- tute a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of a Lien on any of the properties or assets of the Company or
any Affiliated Entity under, any note, bond, ▇▇▇▇- ▇▇▇▇, indenture, contract,
agreement, arrangement, commitment, lease, license, permit, ▇▇▇▇- chise or other
instrument or obligation to which the Company or any Affiliated Entity is a
party or by or to which the Company or any Affiliated Entity or any of their
respective prop- erties or assets is bound or subject, except where the
conflict, violation, breach, default, termination, amendment, acceleration,
cancellation, requirement or creation would not have a Material Adverse Effect
on the Company and the Affiliated Entities considered as a whole, would not
prevent Seller's or the Company's ability to consummate the transactions con-
templated hereby, or would not impair in any material respect Acquiror's ability
to operate the Company and the Affiliated Entities, considered as a whole, as
currently operated.
(b) The execution and delivery of this Agreement by Seller do not, and the
performance of this Agreement by Seller and the consummation of the transactions
con- templated hereby will not, (i) except as set forth in Section 6.5(c) of the
Seller Disclosure Schedule, conflict with or violate any Laws applicable to
Seller or by or to which any of her properties or assets is bound or subject, or
(ii) result in any breach of, or constitute a default (or an event that with
notice or lapse of time or both would constitute a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of a Lien on any of the
properties or assets of Seller under, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Seller is a party or by or to which any of her properties or
assets is bound or subject, except where the conflict, violation, breach,
default, termination, amendment, acceleration, cancellation, requirement or
creation would not have a Material Adverse Effect on the Company and the
Affiliated Entities considered as a whole, would not prevent Seller's or the
Company's ability to
30
consummate the transactions contemplated hereby, or would not impair in any
material re- spect Acquiror's ability to operate the Company and the Affiliated
Entities, considered as a whole, as currently operated.
(c) The execution and delivery of this Agreement by Seller and the Company
do not, and the performance by Seller and the Company of this Agreement and the
consummation of the transactions contemplated hereby will not require Seller,
the Company or any Affiliated Entity to obtain any consent, approval, waiver,
authorization or permit of, or to make any filing or registration with or
notification to ("Consents"), any court, agency or commission, or other
governmental entity, authority or instrumentality, whether domestic or foreign
("Governmental Authority"), or any third party, except for (i) applicable
require- ments, if any, of the HSR Act and the Competition Laws and (ii) the
Consents set forth in Section 6.5(c) of the Seller Disclosure Schedule.
(d) Except as set forth in Section 6.5(d) of the Seller Disclosure
Schedule, none of the Permits will lapse, terminate or expire as a result of the
performance of this Agreement by Seller and the Company or the consummation of
the transactions con- templated hereby.
Section 6.6 Absence of Litigation.
(a) Except as set forth in Section 6.6(a) of the Seller Disclosure Sche-
dule, (i) there is no claim, action, suit, proceeding or investigation of any
kind whatsoever, at law or in equity (including actions or proceedings seeking
injunctive relief), by or before any Governmental Authority ("Litigation")
pending or, to the knowledge of each of Seller and the Company, threatened
against Seller, the Company or any Affiliated Entity or af- fecting any of their
respective properties or assets, and none of Seller, the Company or any
Affiliated Entity is a party or subject to, or in default under, any judgment,
order or decree of any Governmental Authority.
(b) To the knowledge of each of Seller and the Company, none of the
Litigation set forth in Section 6.6(a) of the Seller Disclosure Schedule, if
adversely deter- mined, or the judgments, orders or decrees, in each case as set
forth in Section 6.6(a) of the Seller Disclosure Schedule, (i) has had or could
reasonably be expected to have a Material Adverse Effect on the Company, (ii)
could impair Seller's or the Company's ability to perform their respective
obligations hereunder or to consummate the transactions contem- plated hereby or
(iii) could impair the ability of the Company or any Affiliated Entity to con-
duct their respective businesses after the Closing Date in substantially the
manner as they are now being conducted.
Section 6.7 Related Party Agreements. Except as set forth in Section 6.7 of
the Seller Disclosure Schedule, no current or former director, executive officer
or stock- holder of the Company or any Affiliated Entity is a party to any
agreement, arrangement, contract or other commitment (the "Related Party
Agreements") to which the Company or
31
any Material Affiliate is a party or by or to which any of their respective
properties or assets is bound or subject, or to the knowledge of each of Seller
and the Company, has a material interest in any agreement, arrangement, contract
or other commitment, property or asset (real or personal), tangible or
intangible, owned by, used in or pertaining to the business of the Company or
any Affiliated Entity.
Section 6.8 Permits; Compliance with Laws. The Company and each Affiliated
Entity possesses all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted (other than those required under
Environmental Laws, which are governed by Section 6.13 hereof), other than those
that are not material to the operation of the business of the Company and the
Affiliated Entities considered as a whole (collectively, the "Permits"), and
there is no claim, action, suit, proceeding or investigation pending or, to the
knowledge of each of Seller and the Company, threatened regarding suspension or
cancellation of any such Permits. Section 6.8 of the Seller Disclosure Schedule
sets forth a true, correct and com- plete list of all such Permits. Except as
set forth in Section 6.8 of the Seller Disclosure Schedule, each of the Company
and the Affiliated Entities is, and has been since January 1, 1993, in
compliance in all material respects with such Permits and with all Laws
applicable to it or by or to which any of its properties or assets is bound or
subject (other than (i) Envi- ronmental Laws, which are governed by Section 6.13
hereof, (ii) ERISA and other Laws re- ▇▇▇▇▇▇▇ employee benefit matters, which
are governed by Section 6.11 hereof, (iii) Labor Laws, which are governed by
Section 6.16 hereof, and (iv) Tax Laws, which are governed by Section 6.20
hereof).
Section 6.9 Financial Statements/Undisclosed Liabilities/Receivables.
(a) The Company has delivered to Acquiror true and complete copies of: (i)
the audited combined balance sheets of the Company and the Combined Entities as
of December 31, 1995, December 31, 1994 and December 31, 1993, and the audited
combined statements of operations and retained earnings and cash flows of the
Company and the Combined Entities for each of the fiscal years then ended, all
certified by the Company's independent auditors, Ernst & Young LLP, whose
reports thereon are included therewith; and (ii) the unaudited combined balance
sheets of the Company and the Combined Entities as of June 30, 1996 and August
31, 1996, respectively, and the unaudited combined statements of operations and
retained earnings of the Company and the Combined Entities for the six- month
period ended June 30, 1996 and the eight-month period ended August 31, 1996
(col- lectively, such audited and unaudited financial statements are referred to
herein as the "Financial Statements"). Each of the Financial Statements
(including any related notes there- to) has been prepared in accordance with
GAAP consistently applied throughout the periods involved (except as may be
indicated therein or in the notes thereto and, as to the Financial Statements
referred to in clause (ii) above, except as set forth in Section 6.9(a) of the
Seller Disclosure Schedule) and fairly presents the combined financial position,
results of operations and cash flows of the Company and the Combined Entities as
of the dates or for the periods
32
indicated therein, subject, in the case of the unaudited financial
statements, to normal and recurring year-end audit adjustments (which are not,
individually or in the aggregate, materi- al to the Company and the Combined
Entities) and the absence of footnote disclosure. The unaudited combined balance
sheet of the Company and the Combined Entities as of August 31, 1996 included in
the Financial Statements is herein referred to as the "Balance Sheet". Since
December 31, 1994, neither the Company nor any of the Combined Entities has made
any material change in the accounting practices or policies applied in the
preparation of its financial statements.
(b) The Company has delivered to Acquiror true and complete copies of: (i)
the unaudited combined balance sheets of the Related Entities as of December 31,
1995, December 31, 1994 and December 31, 1993, and the unaudited combined
statements of operations and retained earnings of the Related Entities for each
of the fiscal years then ended, certified by the Chief Financial Officer of the
Company; and (ii) the unaudited combined balance sheets of the Related Entities
as of June 30, 1996 and August 31, 1996, respectively, and the unaudited
combined statements of operations and retained earnings of the Related Entities
for the six-month period ended June 30, 1996 and the eight-month period ended
August 31, 1996 (collectively, such unaudited financial statements are referred
to here- in as the "Related Entity Financial Statements"). Each of the Related
Entity Financial State- ments has been prepared in accordance with GAAP
consistently applied throughout the peri- ods involved (except as set forth in
Section 6.9 of the Seller Disclosure Schedule) and fairly presents the combined
financial position and results of operations of the Related Entities as of the
dates or for the periods indicated therein, subject to normal and recurring
year-end audit adjustments (which are not, individually or in the aggregate,
material to the Related Entities) and the absence of footnote disclosure. Since
December 31, 1995, none of the Related Entities has made any material change in
the accounting practices or policies applied in the preparation of its financial
statements.
(c) Since December 31, 1995, neither the Company nor any Affiliated Entity
has incurred any liability or obligation (whether direct or indirect, fixed,
contingent or otherwise) other than (i) such as have been reflected on the
Balance Sheet in accordance with GAAP consistently applied and (ii) such as have
been incurred in the ordinary course of business consistent with past practice
since August 31, 1996 and none of which represent contingent liabilities in
excess of $100,000 individually or $500,000 in the aggregate. Except as set
forth in Section 6.9(c) of the Seller Disclosure Schedule, the reserves for such
liabilities and obligations reflected on the Balance Sheet are adequate.
(d) Except as set forth in Section 6.9(d) of the Seller Disclosure
Schedule, all accounts receivable and notes receivable of the Company and the
Affiliated Entities have arisen from bona fide transactions in the ordinary
course of business consistent with past practice and are current and collectible
net of any reserves reflected on the Balance Sheet (which reserves were
determined in accordance with GAAP consistent with past prac- ▇▇▇▇).
33
(e) Section 6.9(e) of the Seller Disclosure Schedule sets forth a true and
complete list of all derivative securities and similar financial instruments
owned by the Company or any of the Affiliated Entities.
Section 6.10 Absence of Certain Changes or Events. Except as set forth in
Section 6.10 of the Seller Disclosure Schedule, since December 31, 1995, (a) the
Company and each of the Material Affiliates has conducted its business only in
the ordinary course of business consistent with past practice and has made
efforts consistent with past practice to preserve each of its relationships with
timeshare exchange members and subscribers and resort and condominium developers
and owners, (b) there has not occurred, nor has there been any condition, event,
circumstance, change or effect that has had or would reasonably be expected to
have, a Material Adverse Effect on the Company and the Affiliated Entities
considered as a whole, and (c) none of the Company or any of the Affiliated
Entities has taken any of the following actions:
(i) declared, set aside or paid any dividend or other distribution (whether
in cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock; except (A) in the ordinary course of
business among the Company and the Affiliated Entities pursuant to their normal
cash management practices and (B) cash dividends by the Company to Seller during
1996 as set forth in Section 6.10 of the Seller Disclosure Schedule;
(ii) adjusted, split, combined, subdivided or reclassified any shares of
its capital stock, as the case may be, or any option, warrant or right relating
thereto;
(iii) (A) sold, leased, transferred or otherwise disposed of any of its
properties, assets or rights, other than transfers of properties, assets or
rights for fair value in the ordinary course of business consistent with past
practice in an amount not to exceed $250,000 individually or $500,000 in the
aggregate, (B) permitted, allowed or suffered any of its properties or assets to
be subjected to any Lien, restriction or charge other than Permitted Liens,
except for such Liens set forth in Section 6.14 or 6.15 of the Seller Disclosure
Schedule, or (C) acquired or leased any properties, assets or rights in an
amount not to exceed $250,000 individually or $500,000 in the aggregate, in each
case, other than purchases and sales of Liquid Securities and Long-Term
Securities in the ordinary course of business consistent with past practice;
(iv) created, incurred, assumed or guaranteed (A) any Indebted- ness or (B)
any other liability or obligation other than in the ordinary course of business
consistent with past practice;
(v) paid, discharged or satisfied any claim, encumbrance, liability or
obligation (whether absolute, accrued, contingent or otherwise, and whether due
or to become due), other than the payment, discharge or satisfaction in the
ordinary course
34
of business consistent with past practice of liabilities and obligations
that were actually due and payable and are reflected on the Balance Sheet or
incurred in the ordinary course of business consistent with past practice since
the date thereof;
(vi) changed any of the accounting or tax principles, practices or methods
used by the Company or any of the Affiliated Entities, failed to maintain the
ac- counts, books and records of the Company or any of the Affiliated Entities
in the usual, regular and ordinary manner on a basis consistently applied or
caused or permitted to terminate the status as an S Corporation of the Company
or any Affiliated Entity that is an S Corporation.
(vii) made any material change in its working capital practices from those
in effect from the beginning of fiscal 1995 through the date of the Balance
Sheet, including the payment of payables and the collection of receivables; and
(viii) made or authorized any capital expenditures or commit- ment for
capital expenditures, except for (A) capital expenditures on items other than
the BPR Project in the ordinary course of business consistent with past practice
not in excess of $250,000 individually or $1,000,000 in the aggregate, and (B)
capital expenditures set forth on Schedule V hereto relating to the BPR Computer
Project.
Section 6.11 Employee Benefit Plans; ERISA.
(a) Section 6.11 of the Seller Disclosure Schedule sets forth a true and
complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program, agreement or arrangement,
and each other employee benefit plan, program, agree- ment or arrangement,
sponsored, maintained or contributed to or required to be contributed to by the
Company or any Affiliated Entity or by any ERISA Affiliate, for the benefit of
any employee or former employee of the Company or any Affiliated Entity or any
ERISA Affili- ate, whether formal or informal other than any such plan, program,
agreement or arrange- ment sponsored, maintained or mandated by any governmental
authority outside the United States of America (collectively, the "Plans").
Section 6.11(a) of the Seller Disclosure Sche- dule identifies each of the Plans
that is an "employee benefit plan", as that term is defined in Section 3(3) of
ERISA (such plans being hereinafter referred to collectively as the "ERISA
Plans"). Except as set forth in Section 6.11(a) of the Seller Disclosure
Schedule, neither the Company nor any Affiliated Entity nor any ERISA Affiliate
has any formal plan or commit- ment to create any additional Plan or modify or
change any existing Plan in a way that would affect any employee or terminated
employee of the Company or any Affiliated Entity or any ERISA Affiliate.
35
(b) With respect to each of the Plans, the Company has delivered (or prior
to Closing will deliver) to Acquiror true, correct and complete copies of each
of the following documents:
(i) the Plan (including all amendments thereto);
(ii) the annual report, if required under ERISA, for each of the last three
years;
(iii) the actuarial report, if required under ERISA, for each of the last
three years;
(iv) the most recent Summary Plan Description, together with each Summary
of Material Modifications, required under ERISA, and all material employee
communications relating to such Plan;
(v) if the Plan is funded through a trust or any third-party funding
agreement, a copy of the current trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof;
(vi) all current contracts relating to the Plan with respect to which the
Company or any Affiliated Entity or any ERISA Affiliate may have any liability,
including insurance contracts, investment management agreements, subscription
and partic- ipation agreements and record-keeping agreements; and
(vii) the most recent determination letter received from the IRS with
respect to each Plan that is intended to be qualified under Section 401 of the
Code.
(c) No liability under Title IV of ERISA has been incurred by the Company
or any Affiliated Entity or any ERISA Affiliate since the effective date of
ERISA that has not been satisfied in full, and no condition exists that presents
a risk to the Company or any Affiliated Entity or any ERISA Affiliate of
incurring a liability under Title IV of ERISA, other than liability for premiums
due the Pension Benefit Guaranty Corporation ("PBGC") (which premiums have been
paid when due). To the extent this representation applies to Section 4064, 4069
or 4204 of Title IV of ERISA, it is made not only with respect to the ERISA
Plans, but also with respect to any Plan subject to Title IV of ERISA to which
the Company or any Affiliated Entity or any ERISA Affiliate made, or was
required to make, contributions during the six-year period ending on the Closing
Date.
(d) The PBGC has not instituted any proceeding to terminate any ERISA Plan,
and no condition exists which presents a risk that any such proceeding will be
instituted.
36
(e) Except as set forth in Section 6.11(e) of the Seller Disclosure
Schedule, no ERISA Plan is subject to Title IV of ERISA.
(f) Neither the Company nor any Affiliated Entity nor any ERISA Affiliate
nor any ERISA Plan, nor any trust created thereunder nor any trustee or
administra- tor thereof, has engaged in a transaction in connection with which
the Company, any Affiliated Entity, any ERISA Affiliate or any ERISA Plan, or
any such trust or any trustee or administrator thereof, or any party dealing
with any ERISA Plan or any such trust, could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code.
(g) Full payment has been made of all amounts that the Company or any
Affiliated Entity or any ERISA Affiliate is required to pay under the terms of
each ERISA Plan and Section 412 of the Code as of the last day of the most
recent Plan year thereof ended prior to the date of this Agreement, and all such
amounts properly accrued through the Closing Date with respect to the current
Plan year thereof will be paid by the Company or the applicable Affiliated
Entity on or prior to the Closing Date or will be prop- erly recorded in the
Company's combined financial statements in accordance with GAAP; and no ERISA
Plan or any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
ERISA Plan ended prior to the date of this Agreement; and all contributions
required to be made with respect thereto (whether pursuant to the terms of any
ERISA Plan or otherwise) on or prior to the Closing Date have been timely made.
(h) With respect to each of the ERISA Plans that is subject to Title IV of
ERISA, the present value of accrued benefits under such Plan, based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Plan's actuary with respect to such Plan, did not, as of
its latest validation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits.
(i) No ERISA Plan is a "multiemployer plan," as such term is defined in
Section 3(37) of ERISA, nor is any ERISA Plan a plan described in Section
4063(a) of ERISA.
(j) Each Plan has been created, operated and administered in all material
respects in accordance with its terms and in compliance with applicable laws,
including, but not limited to, ERISA and the Code.
(k) (i) Each ERISA Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code; and (ii)
each Plan that is intended to satisfy the requirements of Section 501(c)(9) of
the Code has so satisfied such requirements.
37
(l) Except as set forth in Section 6.11(l) of the Seller Disclosure Sche-
dule, no Plan provides benefits, including death or medical benefits (whether or
not insured), with respect to current or former employees of the Company or any
Affiliated Entity or any ERISA Affiliate beyond their retirement or other
termination of service (other than coverage mandated by applicable Laws), and
neither the Company nor any Affiliated Entity nor any ERISA Affiliate has ever
represented, promised or contracted (whether in oral or written form) that any
employee or group of employees would be provided with any such benefits upon
their retirement or termination of employment.
(m) Except as set forth in Section 6.11(m) of the Seller Disclosure
Schedule, neither the execution and delivery of this Agreement by Seller and the
Company nor the performance by Seller and the Company of this Agreement nor the
consummation of the transactions contemplated hereby will (i) entitle any
current or former director, officer or employee of the Company or any Affiliated
Entity or any ERISA Affiliate to severance pay, unemployment compensation or any
other payment from the Company or any Affiliated Entity, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due any such
director, officer or employee, or (iii) result in any prohibited transaction de-
scribed in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
(n) Each Plan that is not subject to Title I of ERISA pursuant to Section
4(b)(4) of ERISA (the "Foreign Plans") is in compliance in all material respects
with all laws, regulations and rules applicable thereto and the respective
requirements of the governing documents for such Plan. With respect to each
Foreign Plan that is required to be funded through a trust or other funding
vehicle, the aggregate liabilities of the accrued benefits do not exceed the
fair market value of the assets held in the trust of other funding vehicle for
such Plan. The aggregate unfunded liabilities with respect to each Foreign Plan,
after giving effect to any reserves for such liabilities, will not result in a
material liability to the Company or the Affiliated Entities considered as a
whole.
Section 6.12 Contracts.
(a) The number of fully paid Members as of December 31, 1995 set forth in
the Combined Statement of Key Operating Statistics, as audited by the Company's
independent public accountants, was 2,048,804. To the knowledge of each of
Seller and the Company, there has not been a material reduction in the number of
Members since Decem- ber 31, 1995.
(b) Section 6.12(b) of the Seller Disclosure Schedule sets forth a true and
complete list of all agreements, arrangements, contracts and commitments (other
than such agreements, arrangements, contracts and other commitments among or
between one or more of the Company and any Affiliated Entity, on the one hand,
and the resort and condominium developers and owners, on the other hand,
(collectively, the "Developer Con- tracts")) to which the Company or any
Material Affiliate is a party or by or to which any of
38
their respective properties or assets is bound or subject (the "Other
Contracts" and, together with the Developer Contracts, the "Contracts"), other
than such Other Contracts as (i) (A) may be terminated at any time without
penalty by the Company or each Material Affiliate party thereto upon notice of
90 days or less or (B) involve aggregate obligations of the Company or any
Material Affiliate in any future twelve-month period of $50,000 or less; (ii)
are Plans listed in Section 6.11(a) of the Seller Disclosure Schedule; (iii) are
Related Party Agreements listed in Section 6.7 of the Seller Disclosure
Schedule; or (iv) are Leases listed in Section 6.15(b) of the Seller Disclosure
Schedule. Each Contract is in full force and ef- fect and is the valid and
binding obligation of the Company or the Material Affiliate party thereto.
Except as set forth in Section 6.12(b) of the Seller Disclosure Schedule, none
of the Company or any Material Affiliate or, to the knowledge of each of Seller
and the Company, any other party thereto is in breach of or in default in any
material respect under any of the Contracts, and no event has occurred that,
with the passage of time or the giving of notice, or both, would constitute such
a breach or default. Except as set forth in Schedule 6.12(b) of the Seller
Disclosure Schedule, neither the Company nor any Material Affiliate is a party
to, nor are any of their respective properties or assets bound by or subject to,
any agreement, arrangement, contract or other commitment, including, without
limitation, any covenant not to compete or other restrictive covenant, which
purports to limit in any respect the manner, or the localities, in which the
Company or any Material Affiliate is entitled to conduct all or
any portion of its business.
Section 6.13 Environmental Matters.
(a) Except as set forth in Section 6.13(a) of the Seller Disclosure
Schedule, the Company and each of the Affiliated Entities are in compliance in
all material respects with all applicable Environmental Laws (which compliance
includes, but is not limited to, the possession by the Company and each of the
Affiliated Entities of all permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof).
(b) Except as set forth in Section 6.13(b) of the Seller Disclosure
Schedule, there is no Environmental Claim pending or, to the knowledge of each
of Seller and the Company, threatened that would have a Material Adverse Effect
on the Company or any of the Affiliated Entities. To the knowledge of each of
Seller and the Company after due inquiry, there have been no Releases of
Hazardous Materials on, beneath or adjacent to any property currently or
formerly owned, operated, or leased by the Company or any of the Affiliated
Entities in quantities sufficient to form the basis for an Environmental Claim.
(c) Seller and the Company have delivered or otherwise made available for
inspection to Acquiror true, complete and correct copies and results of any
reports, studies, analyses, tests or monitoring possessed or initiated by the
Company or any of the Affiliated Entities pertaining to Hazardous Materials in,
on, beneath or adjacent to any property currently or formerly owned, operated or
leased by the Company or any of the
39
Affiliated Entities, or regarding the Company's or such Affiliated Entity's
compliance with applicable Environmental Laws.
(d) No Lien imposed by any governmental agency in connection with the
presence of any Hazardous Materials is currently outstanding on any property,
facility, machinery or equipment owned, operated or leased by the Company or any
of the Affiliated Entities.
Section 6.14 Personal Property.
(a) Except as set forth in Section 6.14 of the Seller Disclosure Sche-
dule, the Company or one of the Affiliated Entities has good and valid title to,
or a valid and enforceable right to use, all personal property (whether tangible
or intangible) reflected on the Balance Sheet or acquired by the Company or any
Affiliated Entity since August 31, 1996 (except such personal property as has
been disposed of in the ordinary course of busi- ness), free and clear of any
and all Liens except Permitted Liens.
(b) As of December 31, 1995, Resort Capital Corporation held approximately
$2.2 million of timeshare receivables and other net assets of less than
$500,000.
Section 6.15 Real Property.
(a) Section 6.15 of the Seller Disclosure Schedule sets forth a true and
complete list of all real property to which the Company or any Affiliated Entity
has legal or equitable title (the "Owned Realty") or in which the Company or any
Affiliated Entity has a valid and subsisting leasehold or other interest (the
"Leased Realty"), and sets forth for each such Owned Realty and Leased Realty
the title or interest held by the Company or any Affiliated Entity. All title
insurance policies issued to the Company or any Affiliated Entity are listed in
Section 6.15(a) of the Seller Disclosure Schedule and true, correct and complete
copies of such policies have been furnished to Acquiror.
(b) The Company or the Affiliated Entity, as the case may be, set forth on
Section 6.15(a) as the owner of a particular piece of the Owned Realty has good
and marketable fee title to such Owned Realty, free and clear of any and all
Liens (except Per- mitted Liens and the leases, subleases, rights of parties in
possession, easements and en- croachments set forth in Section 6.15(b) of the
Seller Disclosure Schedule).
(c) The Company and each Material Affiliate set forth on Section 6.15(a) as
the lessee of a particular piece of Leased Realty possesses a valid and
subsisting leasehold or other interest in such Leased Realty pursuant to the
leases or other instruments set forth in Section 6.15(c) of the Seller
Disclosure Schedule (the "Leases"), free and clear of any and all Liens (except
Permitted Liens and the subleases, rights of parties in posses- sion, easements
and encroachments set forth in Section 6.15(c) of the Seller ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇-
▇▇
dule). Each Lease of the Company and each Material Affiliate is in full
force and effect, and is the valid and binding obligation of each party thereto
in accordance with its terms, and there is not under any Lease any existing
default by the Company or any Material Affiliate or, to the knowledge of each of
Seller and the Company, any other party thereto, or, to the knowledge of each of
Seller and the Company, any condition or event which, with notice or lapse of
time or both, would constitute such a default.
(d) To the knowledge of each of Seller and the Company, (i) all structures
and equipment material to the operations of the Company and the Affiliated
Entities considered as a whole owned, leased or used by the Company or any
Material Affiliate in the conduct of their respective businesses are
structurally sound and are in good and normal operating condition and repair
(ordinary wear and tear excepted) and are ▇▇▇- ▇▇▇▇▇ for the uses to which they
are being put and (ii) none of such structures or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost.
Section 6.16 Labor Matters. Except as set forth in Section 6.16 of the
Seller Disclosure Schedule, (a) neither the Company nor any Affiliated Entity is
a party to (i) any collective bargaining agreement or similar agreement with any
labor organization or employee association, (ii) any other written contract
concerning employment or (iii) to the knowledge of each of Seller and the
Company, any binding oral contract concerning employ- ment; (b) no grievance or
arbitration proceeding arising out of or under any collective bar- gaining
agreement is pending, and, to the knowledge of each of Seller and the Company
after due inquiry, no such grievance or proceeding is threatened and no claim
therefor exists; (c) since January 1, 1993, there has not been, nor is there
pending or, to the knowledge of each of Seller or the Company, threatened, (i)
any labor dispute between the Company or any Affiliated Entity and any labor
organization, or any strike, slowdown, jurisdictional dispute, work stoppage or
other similar organized labor activity involving any employee of the Company or
any Affiliated Entity or affecting the Company or any Affiliated Entity or (ii)
any union organizing or election activity involving any employee of the Company
or any Affiliated Entity; (d) each of the Company and the Affiliated Entities is
and has been since January 1, 1993 in compliance in all material respects with
all federal, state, local and for- eign laws regarding labor, employment and
employment practices, conditions of employ- ment, occupational safety and
health, and wages and hours, including any bargaining or other obligations under
the National Labor Relations Act (collectively, "Labor Laws"); (e) neither the
Company nor any Affiliated Entity is engaged in any unfair labor practice, and
there is no unfair labor practice charge pending or, to the knowledge of each of
Seller or the Company, threatened against the Company or any Affiliated Entity
before the National Labor Relations Board or other Governmental Authority; (f)
to the knowledge of each of Seller and the Company, no union claims to represent
any of the employees of the Company or any Affiliated Entity; (g) to the
knowledge of each of Seller and the Company, neither the Company nor any
Affiliated Entity has received notice of the intent of any Governmental
Authority responsible for the enforcement of any Labor Law to conduct an
investigation with respect to or relating to the Company or any Affiliated
Entity, and no such investigation is in
progress; (h) there exists no pending or, to the knowledge of each of
Seller and the Compa- ny, threatened lawsuit, administrative proceeding or
investigation between the Company or any Affiliated Entity and any current or
former director, officer or employee of the Company or any Affiliated Entity,
including any claim for wrongful termination, breach of express or implied
contract of employment or for violation of equal employment opportunity laws;
and (i) since the enactment of the Worker Adjustment and Retraining Notification
Act of 1988 (the "WARN Act"), neither the Company nor any Affiliated Entity has
effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility of the Company or any Affiliated Entity or (ii) a
"mass layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any Affiliated Entity without complying with the WARN
Act; nor has the Company or any Affiliated Entity been affected by any
transaction or engaged in any layoff or employment termination of employees of
the Compa- ny or any Affiliated Entity sufficient in number to trigger
application of any similar foreign, state or local law without complying with
any such law.
Section 6.17 Insurance Policies. Section 6.17 of the Seller Disclosure
Schedule sets forth a true and complete list of policies of fire, medical, life,
liability, libel and other forms of insurance with respect to the properties,
assets, directors, officers, em- ployees, business and operations of the Company
and each Material Affiliate. Such policies insure against such risks, casualties
and contingencies and of such types and amounts as are appropriate for the size
and scope of the respective businesses of the Company and each Material
Affiliate as they are now being conducted. Each such policy is in full force and
effect, and is the valid and binding obligation of the Company or the Material
Affiliate party thereto; all premiums due and payable for such policies have
been timely paid; and all such policies (or extensions, renewals or replacements
thereof on comparable terms) in such amounts will be outstanding and in full
force and effect without interruption until the Closing.
Section 6.18 Intellectual Property. Either the Company or one of the
Affiliated Entities owns or has a valid and enforceable right to use all
copyrights, trade names, trademarks, service marks, service names, trade
secrets, designs, licenses, patents and other intellectual property rights,
including, without limitation, know-how (whether related to any of the foregoing
or otherwise) (including pending applications for any of the foregoing)
(collectively, "Intellectual Property"), used in or necessary to the conduct by
the Company and each Affiliated Entity of their respective businesses as they
are now being con- ducted. Section 6.18 of the Seller Disclosure Schedule sets
forth a true and complete list of the Intellectual Property material to the
Company and the Affiliated Entities considered as a whole, identifies the owner
thereof, the right to use or other interest therein of the Company or any
Affiliated Entity, and, with respect to each registration, grant and
application, the jurisdiction and record owner thereof. Except as set forth in
Section 6.18 of the Seller Di- sclosure Schedule, neither the Company nor any
Affiliated Entity is a licensor or licensee in respect of any Intellectual
Property. Except as set forth in Section 6.18 of the Seller Disclosure Schedule,
there is no claim, action, suit, proceeding or investigation presently
42
pending, nor, since January 1, 1993, has there been any claim, action,
suit, proceeding or investigation made or, to the knowledge of each of Seller
and the Company, threatened, nor, to the knowledge of each of Seller and the
Company, is there any basis for any valid claim, action, suit, proceeding or
investigation that (a) the operations of the Company or any Affiliated Entity
infringe upon or conflict with the rights of any other person in respect of any
Intellectual Property or (b) any Intellectual Property is invalid or
unenforceable.
Section 6.19 Bank Accounts; Powers of Attorney. Section 6.19 of the Seller
Disclosure Schedule sets forth (a) the names and locations of all banks, trust
companies, sav- ings and loan associations and other financial institutions at
which the Company and each Material Affiliate has accounts or safe-deposit boxes
and the names of all persons authorized to draw thereon or to have access
thereto and (b) the names of all persons having powers of attorney from the
Company and each Material Affiliate and, in each case, a summary of the terms
thereof.
Section 6.20 Taxes.
(a) The Company and the Affiliated Entities listed in Section 6.20(a) of
the Seller Disclosure Schedule are small business corporations and have had in
effect since the dates shown in Section 6.20(a) of the Seller Disclosure
Schedule valid elections to be treated as "S" corporations for federal income
tax purposes under the Code and in the States listed in Section 6.20(a) of the
Seller Disclosure Schedule, and neither the Company nor Seller nor any of the
Affiliated Entities has taken or caused or permitted to be taken any action that
would have caused a termination of such S elections for any period. Each of
Resort Condominiums International De Mexico, S. De ▇.▇. De C.V. and RCI Brazilia
Ltda. is a Mexican entity and a Brazilian entity, respectively, that is
characterized as a partnership for U.S. federal income tax purposes.
(b) Except as set forth in Section 6.20(b) of the Seller Disclosure
Schedule:
(i) Each of the Company and the Affiliated Entities has (x) duly and timely
filed or caused to be filed or there have been filed on its behalf with the
appropri- ate Governmental Authorities all Tax Returns required to be filed by
it, and all such Tax Re- turns are true, correct and complete and (y) timely
paid or there have been paid on its behalf all Taxes due or claimed to be due
from it by any taxing authority;
(ii) None of the Company or any of the Affiliated Entities has violated or
is in violation of any applicable Law relating to the payment and withholding of
Taxes (including, without limitation, withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any foreign Law and
withholding of Taxes in respect of employee wages). Each of the Company and the
Affiliated Entities has, within the time and within the manner prescribed by
Law, withheld and paid over to the proper
43
Governmental Authorities all amounts required to be withheld and paid over
under all applicable Laws;
(iii) There are no Liens for Taxes upon the Company Shares or the assets or
properties of the Company or any of the Affiliated Entities except for statutory
liens for Taxes not yet due;
(iv) There are no outstanding waivers or comparable Consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns of the Company or any of the Affiliated Entities;
(v) Neither the Company nor any of the Affiliated Entities has requested an
extension of time within which to file any Tax Return in respect of any fiscal
year which has not since been filed;
(vi) No federal, state, local or foreign audits or other adminis- trative
proceedings have been formally commenced or are presently pending with regard to
any Taxes or Tax Returns of Seller (insofar as such Tax Returns relate to the
Company or any of the Affiliated Entities), the Company or any of the Affiliated
Entities, and no noti- fication has been received by the Seller, the Company or
any of the Affiliated Entities that such an audit or other proceeding is pending
or threatened with respect to any Taxes due from or with respect to or
attributable to the Company or any of the Affiliated Entities or any Tax Return
filed by or with respect to the Company or any of the Affiliated Entities;
(vii) Since January 1,1990, none of the Company, the Seller or any of the
Affiliated Entities has made a change in accounting methods, received a ruling
from any taxing authority or signed an agreement with any taxing authority which
could have an adverse effect on the Company or any of the Affiliated Entities;
(viii) None of the Company, the Seller or any of the Affiliated Entities is
required to include in income any adjustment pursuant to Section 481(a) of the
Code or any similar provision of foreign, state or local Law, by reason of the
voluntary change in accounting method (nor has any taxing authority proposed in
writing any such adjustment or change of accounting method);
(ix) Except as set forth in Section 6.20(b) of the Seller Disclo- sure
Schedule, neither the Company nor any of the Affiliated Entities is a party to,
is bound by, or has any obligation under, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement. None of the
Company, the Seller or any of the Affiliated Entities is aware of any potential
liability or obligation to any Person as a result of, or pursuant to, any such
agreement, contract or arrangement;
(x) No power of attorney has been granted by or with respect to the Company
or any of the Affiliated Entities with respect to any matter relating to Taxes;
44
(xi) Neither the Company nor any of the Affiliated Entities is a party to
any agreement, plan, contract or arrangement that could result, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code;
(xii) Since January 1, 1990, no closing agreement pursuant to Section 7121
of the Code (or any predecessor provision) or any similar provision of any
state, local or foreign Law has been entered into by or with respect to the
Company or any of the Affiliated Entities;
(xiii) Neither the Company nor any of the Affiliated Entities has filed a
consent pursuant to Section 341(f) of the Code (or any predecessor provision) or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
"subsection (f) asset" (as such term is defined in Section 341(f)(4) of the
Code) owned by the Company or any of the Affiliated Entities;
(xiv) Except as set forth in Section 6.20(b)(xiv) of the Seller Disclosure
Schedule, neither the Company nor any of the Affiliated Entities has any
liability for Taxes of another Person by contract or otherwise;
(xv) Neither the Company nor any of the Affiliated Entities has or could
have any liability for Taxes under or as a result of Section 482 of the Code or
any similar provision of state, local or foreign Law; and
(xvi) The Company and each of the Affiliated Entities have filed all Tax
Returns in accordance with all written franchise, license and other agreements
entered into by any of them.
(xvii) Neither the Company nor any of the Affiliated Entities is a passive
foreign investment company, personal holding company or foreign personal holding
company or is subject to the accumulated earnings tax.
(c) All material elections with respect to Taxes of the Company and each of
the Affiliated Entities made since January 1, 1990 are set forth in Section
6.20(b) of the Seller Disclosure Schedule.
(d) The Company and each of the Affiliated Entities have previously
delivered or made available to Acquiror complete and accurate copies of each of:
(i) all audit reports, letter rulings, technical advice memoranda relating to
United States federal, state, local and foreign Taxes due from or with respect
to the Company or any of the Affiliated Entities, (ii) United States federal Tax
Returns, and those state, local or foreign Tax Returns filed by the Company or
any of the Affiliated Entities, and (iii) any closing agreements en- tered into
by the Company or any of the Affiliated Entities with any taxing authority in
each case existing on the date hereof. The Company and each of the Affiliated
Entities will
45
deliver to Acquiror all materials with respect to the foregoing for all
matters arising after the date hereof.
Section 6.21 Developers/Suppliers.
(a) To the knowledge of each of Seller and the Company, no Material
Developer has (i) given notice to Seller, the Company or any Affiliated Entity
that it intends to terminate its relationship with the Company or any Affiliated
Entity, as the case may be, or (ii) threatened in writing to terminate its
relationship with the Company or any Affiliated Entity, as the case may be. To
the knowledge of each of Seller and the Company, no Material Developer is likely
to pursue a course of action having either the purpose or effect of terminating
its relationship with the Company or any Affiliated Entity if the transactions
contemplated by this Agreement are consummated.
(b) Section 6.21(b) of the Seller Disclosure Schedule sets forth a list of
all suppliers of the Company and each Affiliated Entity to whom the Company or
such Affiliated Entities have made net payments in excess of $1,000,000 during
the fiscal year ended December 31, 1995 and the dollar amount of payments made
to each such supplier in such fiscal year. To the knowledge of each of Seller
and the Company, no supplier required to be listed in Section 6.21(b) of the
Seller Disclosure Schedule has (i) given notice to Seller, the Company or any
Affiliated Entity that it intends to terminate its relationship with the Company
or any Affiliated Entity, as the case may be, or (ii) threatened in writing to
termi- nate its relationship with the Company or any Affiliated Entity, as the
case may be. To the knowledge of each of Seller and the Company, no supplier
required to be listed in Section 6.21(b) of the Seller Disclosure Schedule is
likely to pursue a course of action having either the purpose or effect of
terminating its relationship with the Company or any Affiliated Entity if the
transactions contemplated by this Agreement are consummated.
Section 6.22 Acquisition of the Acquiror Common Stock for Investment;
Securities Act. Seller is not acquiring the shares of Acquiror Common Stock
constituting the Common Stock Consideration with any present intention of
distributing or selling such shares in violation of federal, state or other
securities laws. Seller agrees that it will not sell, transfer, offer for sale,
pledge, hypothecate or otherwise dispose of the shares of Acquiror Common Stock
constituting the Common Stock Consideration in violation of any federal, state
or other securities laws. Seller acknowledges that the Acquiror Common Stock is
subject to market and other conditions beyond the control of Acquiror and agrees
that neither Acquiror nor any of its agents, representatives, employees or
affiliates has or shall have any liability or responsibility whatsoever to
Seller on any basis (including, without limitation, in contract or tort, under
federal or state securities laws, or otherwise), except as and to the extent
expressly set forth herein and subject to the limitations and restrictions
contained herein.
Section 6.23 Timeshare Exchange Business. The Company and the Affiliated
Entities are the only entities under the control, directly or indirectly, of
Seller that carry on
46
or are involved in the worldwide condominium and resort timeshare exchange
business, subscription business, travel business and other related businesses.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR
Acquiror hereby represents and warrants to Seller and the Company as fol-
lows:
Section 7.1 Authority; Binding Effect.
(a) Acquiror has all requisite corporate power and corporate authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consum- mate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquiror. No other corporate action on the part of Acquiror or its stockholders
is required to authorize the execution, delivery and performance hereof, and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Acquiror and constitutes the valid and binding
obliga- tion of Acquiror, enforceable against Acquiror in accordance with its
terms, except that such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in effect
relating to or limiting creditors' rights generally and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the Court before which any
proceedings therefor may be brought.
Section 7.2 Organization. Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate all of its
properties and assets and to conduct its business as it is now being conducted.
Section 7.3 SEC Documents and Other Reports. Acquiror has filed all docu-
ments required to be filed by it with the SEC since January 1995 (the "Acquiror
SEC Documents"). As of their respective dates, the Acquiror SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and none of the Acquiror SEC Documents
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Acquiror included in the
Acquiror SEC Documents complied as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have
47
been prepared in accordance with GAAP (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) consistently applied
throughout the periods involved (except as may be indicated therein or in the
notes thereto) and fairly present the consolidated financial position, results
of operations and cash flows of Acquiror and its consolidated subsidiaries as of
the dates or for the periods indicated therein, subject, in the case of the
unaudited statements, to normal year-end audit adjustments (which are not,
individually or in the aggregate, material to Acquiror) and the absence of
footnote disclosure. Since December 31, 1994, Acquiror has not made any change
in the accounting practices or policies applied in the preparation of its
financial statements.
Section 7.4 Capitalization.
(a) Acquiror's authorized capitalization is as set forth in the Acquiror
SEC Documents. All of Acquiror's issued and outstanding capital stock has been
duly autho- rized, validly issued and is fully paid and nonassessable.
(b) The shares of Acquiror Common Stock to be issued to Seller have been
duly and validly authorized for issuance by Acquiror and Acquiror has the
corporate power and authority to issue, sell and deliver the Acquiror Common
Stock to be issued by it hereunder; and, when the Acquiror Common Stock is
issued and delivered to Seller against payment therefor as provided by this
Agreement, the shares of Acquiror Common Stock issued to Seller hereunder will
have been validly issued, fully paid and nonassessable, and the issuance of such
shares will not be subject to any preemptive or similar rights.
(c) The shares of Acquiror Common Stock to be issued to Seller at the
Closing will be duly approved for listing on the NYSE, subject to official
notice of issuance.
Section 7.5 No Violation; Consents and Approvals.
(a) The execution and delivery of this Agreement by Acquiror do not, and
the performance of this Agreement by Acquiror and the consummation of the
transac- tions contemplated hereby will not, (i) conflict with or violate the
certificate of incorporation or by-laws, in each case as currently in effect, of
Acquiror, (ii) conflict with or violate any Laws applicable to Acquiror or by or
to which any of its properties or assets is bound or subject, or (iii) result in
any breach of, or constitute a default (or an event that with notice or lapse of
time or both would constitute a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a Lien on any of the properties or assets of
Acquiror under, any material note, bond, mortgage, indenture, contract,
agreement, arrangement, commitment, lease, li- cense, permit, franchise or other
instrument or obligation to which Acquiror is a party or by or to which Acquiror
or any of its properties or assets is bound or subject, except where the
conflict, violation, breach, default, termination, amendment, acceleration,
cancellation, requirement or creation would not prevent or delay Acquiror's
ability to consummate the transactions contemplated hereby.
48
(b) The execution and delivery of this Agreement by Acquiror do not, and
the performance by Acquiror of this Agreement and the consummation of the
transac- tions contemplated hereby, will not, require Acquiror to obtain any
Consents from any Governmental Authority, or any third party, except for (i)
applicable requirements, if any, of the HSR Act or the Competition Laws, (ii)
required filings under the Exchange Act, (iii) the filing and approval of a
listing application with the NYSE relating to the shares of Acquiror Common
Stock constituting the Common Stock Consideration and (vi) the giving of notice
to Acquiror's lenders under Acquiror's existing credit facility.
Section 7.6 Acquisition of Shares for Investment. Acquiror is not acquiring
the Company Shares or the Affiliate Shares with any present intention of
distributing or selling such shares in violation of federal, state or other
securities laws. Acquiror agrees that it will not sell, transfer, offer for
sale, pledge, hypothecate or otherwise dispose of the Company Shares or the
Affiliate Shares in violation of any federal, state or other securities laws.
ARTICLE VIII
COVENANTS
Section 8.1 Access to Information; Confidentiality.
(a) Prior to the execution of this Agreement, Acquiror, its accountants,
counsel and advisers have reviewed and investigated financial, tax and operating
data and other information with respect to the Company and the Affiliated
Entities, and their offices, facilities, assets, properties, employees, books
and records, for the purpose of confirming the accuracy of the representations
and warranties of Seller and the Company contained in this Agreement. Neither
that review and investigation by Acquiror, nor any review and investi- gation
made hereafter pursuant to Section 8.1(c), shall affect any representation or
warranty made by Seller or the Company hereunder.
(b) Notwithstanding any other information or documents made available to
Acquiror, its accountants, counsel or advisers, Seller and the Company shall not
be deemed to have made to Acquiror any representation or warranty other than
those expressly made in Article VI; and neither Seller nor the Company shall be
deemed to have made any representation or warranty to Acquiror with respect to
any projections, estimates or budgets delivered to or made available to Acquiror
relating to future revenues, future expenses, future results of operations,
future developer affiliations or future Members, or, except as set forth in
Article VI, any other forward-looking data.
(c) During the period from the date of this Agreement through the Closing
Date, Seller and the Company shall permit, and shall cause the Affiliated
Entities to permit, Acquiror and its advisors, accountants, attorneys and
representatives to have access,
49
during regular business hours and upon reasonable notice, to the offices,
facilities, assets, properties, employees, books and records of the Company and
the Affiliated Entities, and shall furnish, or cause to be furnished, to
Acquiror, such financial, tax and operating data and other information with
respect to such entities and their respective offices, facilities, assets,
properties, employees, businesses and operations as Acquiror shall from time to
time reasonably request. Acquiror shall hold, and shall cause its Affiliates,
advisors, accountants, attorneys and representatives to hold, any non-public
information so provided to Acquiror by or on behalf of Seller or the Company in
connection with the transactions contemplated by this Agreement in confidence in
accordance with the provisions of the Confidentiality Agree- ment.
Section 8.2 Conduct of Business. Except as expressly permitted by this
Agreement or with the prior written consent of Acquiror, during the period from
the date of this Agreement to the Closing Date, the Company shall, and the
Company and Seller shall cause each Affiliated Entity to, conduct its business
only in the ordinary course consistent with past practice and the Company shall
use its reasonable best efforts, and Seller and the Company shall cause each
Affiliated Entity to use its reasonable best efforts, to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its current relationships with resort and
condominium owners and developers, timeshare subscribers and Members, licensors,
licensees, customers, suppliers, employees and any others having business
dealings with them. Without limiting the general- ity of the foregoing, and
except as otherwise expressly set forth in Section 8.2 of the Seller Disclosure
Schedule, during the period from the date of this Agreement through the Closing
Date, the Company shall not, and Seller and the Company shall cause each of the
Affiliated Entities not to, and for purposes of Section 8.2(a) hereof, Seller
shall not, without the prior written consent of Acquiror:
(a) except as set forth in Section 8.16, amend the certificate of
incorporation or by-laws or comparable organizational documents of the Company
or any Affiliated Entity;
(b) issue, reissue, sell, deliver, transfer, repurchase, redeem, acquire or
pledge or authorize or propose the issuance, reissuance, sale, delivery,
transfer, repur- chase, redemption, acquisition or pledge of shares of capital
stock of any class or series, or any securities convertible into capital stock
of any class or series, or grant or enter into any rights, warrants, options,
agreements or commitments with respect to the issuance of such capital stock or
convertible securities or amend any terms of any such right, warrant, option,
agreement or commitment;
(c) declare, set aside or pay any dividend or other distribution (wheth- er
in cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock; except in the ordinary course of business
among the Company and the Affiliated Entities pursuant to their normal cash
management practices;
50
(d) adjust, split, combine, subdivide or reclassify any shares of its
capital stock, as the case may be, or any option, warrant or right relating
thereto;
(e) (i) sell, lease, transfer or otherwise dispose of any of its
properties, assets or rights, other than (x) transfers of properties, assets or
rights for fair value in the ordinary course of business consistent with past
practice in an amount not to exceed $250,000 individually or $500,000 in the
aggregate and (y) the transfer of the real property on which the Woodview Trace
building is situated to Seller pursuant to Section 5.4 hereof; (ii) permit,
allow or suffer any of its properties or assets to be subjected to any Lien,
restriction or charge other than Permitted Liens, except for such Liens set
forth in Section 6.14 or 6.15 of the Seller Disclosure Schedule; or (iii)
acquire or lease any properties, assets or rights in an amount not to exceed
$250,000 individually or $500,000 in the aggregate;
(f) create, incur, assume or guarantee (i) any Indebtedness or (ii) any
other liability or obligation, not in the ordinary course of business consistent
with past practice;
(g) pay, discharge or satisfy any claim, encumbrance, liability or
obligation (whether absolute, accrued, contingent or otherwise, and whether due
or to become due), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice of liabilities and
obligations that are actually due and payable and are reflected on the Balance
Sheet or incurred in the ordinary course of business consistent with past
practice since the date thereof;
(h) change any of the accounting or tax principles, practices or methods
used by the Company or any of the Affiliated Entities, fail to maintain the
accounts, books and records of the Company or any of the Affiliated Entities in
the usual, regular and ordinary manner on a basis consistently applied or cause
or permit to terminate the status as an S Corporation of the Company or any
Affiliated Entity that is listed on Section 6.20(a) of the Seller Disclosure
Schedule as an S Corporation;
(i) make any material change in its working capital practices from those in
effect from the beginning of fiscal 1995 through the date of the Balance Sheet,
including the payment of payables and the collection of receivables;
(j) except as set forth on Section 8.2(j) of the Seller Disclosure
Schedule, run any promotions not consistent with past practice, provide any
special financial arrangements to developers or owners associations or make any
change to past practice that reduce assets other than Cash and Equivalents or
increase liabilities at Closing;
(k) enter into, amend or supplement any employment, severance, termination
or other agreement or employee benefit plan, including any of the Plans, or make
any change in the compensation, severance or termination benefits payable or to
become payable to any of its officers, directors, employees, agents or
consultants (other than planned
51
annual increases in the rates of compensation to employees who are not
officers or directors or Affiliates of the Company or any of the Affiliated
Entities in the ordinary course of business consistent with past practice,
provided such increases are disclosed to Acquiror in advance);
(l) enter into, adopt, amend or terminate any collective bargaining
agreement;
(m) make any payments (other than regular compensation payable to officers
and employees of the Company or the Affiliated Entities in the ordinary course
of business consistent with past practice), loans, advances or other
distributions to, or enter into any transaction, agreement or arrangement with,
any of its Affiliates, officers, directors, partners, employees, agents,
consultants, stockholders or their Affiliates, associates or family members;
(n) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets or securities of, or by any other manner, any
corporation, partnership, joint venture or other entity;
(o) make or authorize any capital expenditures or commitment for capital
expenditures, except for (i) capital expenditures on items other than the BPR
Project in the ordinary course of business consistent with past practice not in
excess of $250,000 individually or $1,000,000 in the aggregate, and (ii) capital
expenditures set forth on Schedule V hereto relating to the BPR Computer
Project;
(p) settle or compromise any Tax liability or agree to any adjustment of
any Tax attribute or make any election with respect to its Taxes;
(q) fail to duly and timely file any Tax Return with the appropriate
Governmental Authorities required to be filed by it in a true, complete and
correct form or to timely pay all Taxes shown to be due thereon;
(r) (i) except in the ordinary course of business consistent with past
practice and involving liabilities or obligations not in excess of $250,000
individually or $500,000 in the aggregate, enter into, or amend, terminate or
waive any right under, any contract, any agreement or arrangement or (ii) take
any action or fail to take any action that, with or without either notice or
lapse of time or both, would constitute a default under any contract, agreement
or arrangement;
(s) fail to maintain or renew (at levels consistent with presently existing
levels) any policy of insurance listed on Section 6.17 of the Seller Disclosure
Schedule or terminate or amend or fail to perform any of its obligations or
permit any default to exist or cause any material breach under, any such policy
of insurance, or enter into
52
(except for renewals in the ordinary course of business consistent with
past practice), any policy of insurance;
(t) dispose of or permit to lapse any rights to any Intellectual Property;
or
(u) enter into any agreement, commitment or transaction with respect to
taking any of the foregoing actions or any action that would make any
representation or warranty contained in this Agreement untrue or incorrect or
which could reasonably be expected to prevent the satisfaction of any condition
to Closing set forth in Article IX hereof or to otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement.
Section 8.3 Reasonable Best Efforts. Upon the terms and subject to the
conditions of this Agreement, each of Acquiror, Seller and the Company agrees
to, and Seller and the Company agree to cause each of the Affiliated Entities
to, use its reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effec- tive the transactions contemplated
by this Agreement as promptly as practicable (including satisfaction, but not
waiver, of the conditions to Closing set forth in Article IX hereof).
Section 8.4 Consents.
(a) Without limiting the generality of Section 8.3 hereof, each of the
parties hereto shall use its reasonable best efforts to obtain all Consents of
all third parties and Governmental Authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement prior to the
Closing, including, without limitation, all Consents required under all
Subscription Agreements between Seller, on the one hand, and the Company or one
of the Affiliated Entities, on the other hand. Notwith- standing the foregoing,
neither Acquiror nor Seller shall have any obligation to pay any fee to any
third party (which does not include filing or other fees payable to Governmental
Authorities) for the purpose of obtaining any Consent or any costs and expenses
of any third party resulting from the process of obtaining such Consents. Each
of the parties hereto shall make or cause to be made all filings and submissions
under laws and regulations applicable to it as may be required for the
consummation of the transactions contemplated by this Agreement.
(b) Each of the parties shall consult, coordinate and cooperate with other
parties hereto in exchanging such information and assistance as any of the
parties hereto may reasonably request in connection with the foregoing. Each
party shall promptly provide any necessary information with respect to, and
provide the other copies of, all filings made by such party with any
Governmental Authority or any other information supplied by such party to a
Governmental Authority in connection with this Agreement and the transac-
53
tions contemplated by this Agreement. Each party hereto shall promptly
inform the other of any communication from any Governmental Authority regarding
any of the transactions contemplated by this Agreement. If any party or
Affiliate thereof receives a request for additional information or documentary
material from any such Governmental Authority with respect to the transactions
contemplated by this Agreement, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after consul-
tation with the other party, an appropriate response in compliance with such
request. In addition, no party hereto shall take any action after the date
hereof that could reasonably be expected to materially delay the obtaining of,
or result in not obtaining, any permission, approval or consent from any
Governmental Authority necessary to be obtained prior to Closing.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require any party hereto to enter into any agreement with any
Governmental Authority or to consent to any order, decree or judgment requiring
such party to hold, separate or divest, or to restrict the dominion or control
of such party or any of its Affiliates over, any of the assets, properties or
businesses of such party or its Affiliates in existence on the date hereof.
Section 8.5 Antitrust Notification. Each of the parties shall use its
respective reasonable best efforts to obtain all authorizations or waivers
required under the HSR Act and the Competition Laws to consummate the
transactions contemplated hereby, including, without limitation, making all
filings required in connection therewith.
Section 8.6 No Solicitation. During the period from the date hereof until
the earlier of the Closing Date or termination of this Agreement, each of Seller
and the Compa- ny shall not, and shall cause the Affiliated Entities and each of
their respective officers, directors, Affiliates, representatives, agents and
employees not to, directly or indirectly, en- courage, solicit, participate in
or initiate discussions or negotiations with, or furnish or cause to be
furnished any information concerning the business, properties or assets of the
Company or the Affiliated Entities to, any person or group of persons (other
than Acquiror or its direc- tors, officers, employees, agents or
representatives) concerning any merger, business combination, joint venture,
sale of material assets, sale of shares of stock or other equity securities or
any similar transaction or proposal therefor involving the Company, any of the
Affiliated Entities or the Timeshare Exchange Business. Seller and the Company
shall imme- diately notify Acquiror of any such discussion, negotiation or
request for information with respect to any of the foregoing proposed
transactions, shall provide Acquiror with a true, correct and complete copy of
any written request or other proposal, and all related docu- ments, and shall
keep Acquiror fully informed of the status and details of any such request or
other proposal. Each of Seller and Acquiror represents and warrants that no such
discussions are ongoing.
Section 8.7 Further Assurances. From and after the Closing Date, Seller and
the Company shall take all such action as may be necessary or appropriate in
order to carry
54
out the purposes of this Agreement or to vest the Company with full title
to all property and rights of the Company and the Affiliated Entities.
Section 8.8 Notification of Certain Matters. Seller and the Company shall
give prompt notice to Acquiror and Acquiror shall give prompt notice to Seller
and the Company of the occurrence, or non-occurrence, of any event the
occurrence or non-occurrence of which would be reasonably likely to cause (i)
any representation or warranty of Seller, the Company or Acquiror, as the case
may be, contained in this Agree- ment to be untrue or inaccurate in any material
respect at or prior to the Closing or (ii) Seller, the Company or Acquiror, as
the case may be, to fail to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 8.8 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 8.9 Certain Tax Matters
(a) S Corporation Status. Seller, the Company and the Affiliated Entities
shall maintain the status of the Company and each Affiliated Entity that is
listed on Section 6.20(a) of the Seller Disclosure Schedule as an S corporation
as an S corporation for federal income Tax purposes through the Closing Date.
(b) Section 338(h)(10) Elections.
(i) With respect to the Company and each Affiliated Entity that is an S
Corporation for federal and state income tax purposes, each of Seller and
Acquiror shall jointly make the election provided for by Section 338(h)(10) of
the Code and Section 1.338(h)(10)-1 of the Treasury Regulations and any
comparable election under state or local tax law (collectively, the
"Elections"). As soon as practicable after the Closing, with respect to each
Election, Seller and Acquiror shall mutually prepare a Form 8023-A, with all
attach- ments, and Seller shall sign such Form 8023-A. Also, Acquiror and Seller
shall cooperate with each other to take all actions necessary and appropriate
(including filing such additional forms, returns, elections, schedules and other
documents as may be required to effect and preserve timely Elections in
accordance with the provisions of Section 1.338(h)(10)-1 of the Treasury
Regulations (or any comparable provisions of state or local tax law) or any suc-
cessor provisions).
(ii) Acquiror shall not make or permit to be made an election pursuant to
Section 338(g) of the Code with respect to the stock of RCI Europe, any of its
subsidiaries or any other Affiliated Entity which was a "controlled foreign
corporation" within the meaning of Section 957 of the Code prior to the Closing
Date.
55
(c) Preparation and Filing of Tax Returns; Payment of Taxes.
(i) Seller, the Company and the Affiliated Entities shall prepare and file
or cause to be prepared and filed (at Seller's cost and expense and, to the
extent permissible under applicable Law, in a manner consistent with past
practice) on a timely basis all U.S. federal and state income Tax Returns of the
Company and each of the Affiliat- ed Entities that is an S Corporation or a
partnership for income tax purposes for all Pre-Clos- ing Periods ("Seller Tax
Returns"); provided, however, that Seller shall cooperate with Acquiror with
respect to reporting any items giving rise to Acquiror Taxes (as defined in
subparagraph (e)(iii)(C) of this Section 8.9) on such Seller Tax Returns and,
provided further, that no later than ten days before the due date (including
extensions) of any Seller Tax Return, Seller shall provide or cause to be
provided to Acquiror, for Acquiror's review, a copy of such Seller Tax Return.
If any such Seller Tax Return includes an item which could give rise to a
liability for Acquiror Taxes or any other Taxes for which Acquiror is or could
be liable pursuant to this Agreement, Seller shall not file any such Seller Tax
Return without the prior written approval of Acquiror with respect to such item,
which approval shall not unreasonably be withheld. If Acquiror does not approve
any such Seller Tax Return, the manner of reporting any disputed item shall be
resolved by an independent accounting firm mutually chosen by Seller and
Acquiror, and the Seller Tax Returns shall be filed or, if necessary, amended,
in accordance with the decision of such independent accounting firm. Seller
shall pay all Taxes due and payable as a result of the income on the Seller Tax
Returns; provided, however, that Acquiror shall deliver to Seller the funds
necessary for Seller to pay any Acquiror Taxes no later than the later of five
days after Seller delivers to Acquiror copies of Tax Returns showing the amount
of Acquiror Taxes owed or five days before such payments are due.
(ii) Acquiror shall cause the Company and each of the Affiliated Entities
to prepare and file on a timely basis all Tax Returns of the Company and each
Affiliated Entity other than those Tax Returns provided for in Section 8.9(c)(i)
hereof. Subject to Section 8.9(e) hereof, Acquiror shall pay or cause the
Company and each of the Affiliated Entities to pay all Taxes shown to be due and
payable thereon.
(iii) Seller and Acquiror shall cooperate, and shall cause their respective
officers, employees, agents, auditors and representatives to cooperate, in
preparing and filing the Tax Returns of the Company and each of the Affiliated
Entities, including maintaining and making available to each other all records
necessary in connection with Taxes payable with respect to such Tax Returns.
Seller shall have the right to review all Tax Returns prepared by Acquiror with
respect to Pre-Closing Periods and Straddle Periods, and Acquiror shall not file
such Tax Returns without the prior written consent of Seller, which consent
shall not unreasonably be withheld.
(d) Transfer and Similar Taxes. Notwithstanding any other provision of this
Agreement to the contrary, Seller shall assume and promptly pay all sales, use,
privi- lege, transfer, documentary, gains, stamp, duties, recording and similar
Taxes and fees
56
(including any penalties, interest and additions to such fees) imposed upon
any party incurred in connection with any of the transactions contemplated by
this Agreement (collectively, the "Transfer Taxes"), and Seller shall procure
any stock transfer stamps required by, and accu- rately file all necessary Tax
Returns and other documentation with respect to, any Transfer Tax. Acquiror
shall reimburse Seller for fifty percent (50%) of the amount of the Transfer
Taxes.
(e) Tax Indemnification.
(i) To the extent that any of the following Damages exceed $1,000,000 plus
the amount of any unused Indemnity Credit (the "Tax Basket"), Seller shall
indemnify, defend and hold harmless the Acquiror Group from and against any and
all Damages asserted against, resulting to, imposed on or suffered by the
Acquiror Group, or any member of the Acquiror Group, directly or indirectly, by
reason of or resulting from (A) except as provided in subparagraph (iii)(C)
below, any and all Taxes other than U.K. Taxes imposed upon any of the Company
or the Affiliated Entities (x) with respect to any taxable period ending on or
before the Closing Date (such Taxes (excluding Acquiror Taxes and UK Taxes) are
hereinafter referred to as "Pre-Closing Taxes" and such periods as "Pre-Closing
Periods") and (y) with respect to any taxable period beginning before the
Closing Date and ending after the Closing Date (such Taxes are hereinafter
referred to as "Straddle Taxes" and such periods as "Straddle Periods") but only
with respect to the portion of such Straddle Period ending on the close of the
Closing Date and in the manner provided in Section 8.9(e)(iv) hereof; (B) the
breach of any representation made pursuant to Section 6.20 hereof; and (C) any
and all Taxes imposed upon the Company or any Affiliated Entity pursuant to
Treasury Regulation 1.1502-6 or comparable provision under state or local law.
For purposes of the foregoing, if a Tax imposed upon an Affiliated Entity for a
Pre-Closing Period or for the pre-closing portion of any Straddle Period results
in a Tax Benefit for another Affiliated Entity for a Pre-Closing Period or for
the pre-closing portion of any Straddle Period, any obligation of Seller to
indemnify the Acquiror Group pursuant to this Section 8.9 shall be reduced by
the amount of such Tax Benefit to the extent that such Tax Benefit is Actually
Realized.
(ii) Without limiting the generality of Section 8.9(e)(i) above, Seller
shall indemnify, defend, and hold harmless the Acquiror Group from and against
any and all Damages asserted against, resulting to, imposed on, suffered by the
Acquiror Group, or any one of them, directly or indirectly, by reason of or
resulting from (A) the failure of any of the Company or any of the Affiliated
Entities referred to in Section 6.20(a) hereof to be S corporations or the
termination of the status of the Company or any of the Affiliated Entities
referred to in Section 6.20(a) hereof as S corporations, (B) except for Acquiror
Taxes, the imposition of any Taxes on the Company for any taxable period in
which the Company's election of subchapter S status was in effect (including,
but not limited to, those taxes described in Section 1375 of the Code), or (C)
the imposition of any Taxes on the Company or any of the Affiliated Entities as
a result of the Election other than Acquiror Taxes.
57
(iii) Acquiror shall indemnify, defend and hold harmless the Seller Group
from and against any and all Damages, asserted against, resulting to, imposed on
or suffered by the Seller Group, or any one of them, directly or indirectly, by
reason of or resulting from any and all Taxes imposed upon the Company or any of
the Affiliated Entities with respect to (A) any taxable period beginning after
the Closing Date (such Taxes are hereinafter referred to as "Post-Closing Taxes"
and such periods as "Post-Closing Peri- ods"), (B) any Straddle Taxes for any
Straddle Period, but only with respect to the portion of such Straddle Period
beginning the day after the Closing Date and in the manner provided for in
Section 8.9(e)(iv) and (C) federal, state and local income Taxes incurred by the
Company under Section 1374(a) of the Code and attributable to assets held by the
Company for the first taxable year for which an S election was in effect for the
Company and which are held by the Company at the Closing ("Acquiror Taxes").
(iv) For purposes of determining the amount of Taxes for or which relate to
a Straddle Period, the Closing Date shall be treated as the last day of a tax-
able period, and the portion of any such Tax that is allocable to the taxable
period that is so deemed to end on and include the Closing Date: (A) in the case
of Taxes that are either (x) based upon or related to income or receipts or (y)
imposed in connection with any sale, transfer, assignment or distribution of
property (real or personal, tangible or intangible), shall be deemed equal to
the amount which would be payable if the period for which such Tax is assessed
ended on and included the Closing Date, determined, to the extent permissi- ble
under applicable laws, in a manner which is consistent with Seller's accounting
practices and business operations as in effect prior to the Closing Date, and
(B) in the cases of Taxes other than Taxes described in clause (A) hereof, shall
be computed on a per diem basis determined, to the extent permissible under
applicable laws, in a manner which is consistent with Seller's accounting
practices and business operations as in effect prior to the Closing Date.
(v) If a notice of deficiency, proposed adjustment, adjustment, assessment,
audit, examination, suit, dispute or other claim (a "Tax Claim") shall be deliv-
ered, sent, commenced, or initiated to or against the Company or any of the
Affiliated Entities by any taxing authority with respect to Taxes for which one
party to this Agreement is entitled to indemnification from another party, the
Company or Affiliated Entity shall promptly notify Seller in writing of the Tax
Claim. If a Tax Claim with respect to Taxes for which one party to this
Agreement is entitled to indemnification from another party shall be delivered,
sent, commenced or initiated to or against Seller by any taxing authority,
Seller shall promptly notify Acquiror in writing of such Tax Claim.
(vi) Seller may, upon timely notice to Acquiror, assume and control the
defense of a Tax Claim involving only Pre-Closing Taxes at Seller's own cost and
expense and with Seller's own counsel and Acquiror and its Affiliates agree to
cooperate with Seller in pursuing such contest. If Seller elects to assume the
defense of any such Tax Claim, notwithstanding anything to the contrary
contained herein, (A) Seller shall consult with Acquiror and shall not enter
into any settlement with respect to any such Tax Claim without Acquiror's prior
58
written consent if the effect of such settlement would be to increase the
liability for Taxes of the Company or any of the Affiliated Entities for any
Post-Closing Period, which consent shall not unreasonably be withheld; (B)
Seller shall keep Acquiror in- formed of all material developments and events
relating to such Tax Claim; and (C) at its own cost and expense, Acquiror shall
have the right to participate in (but not to control) the defense of such Tax
Claim.
(vii) In connection with the contest of any Tax Claim that re- lates to (A)
any Post-Closing Period, (B) any Straddle Period, (C) any Acquiror Taxes and (D)
any Tax Claim that Seller has the ability to control but does not timely elect
to control pursuant to Section 8.9(e)(vi), such contest shall be controlled by
Acquiror, and Seller agrees to cooperate with Acquiror and its Affiliates in
pursuing such contest. In connection with any such contest that relates to (B),
(C) or (D) above, Acquiror shall keep Seller informed of all material
developments and events relating to such Tax Claim and Seller, at Seller's own
cost and expense, shall have the right to participate in (but not control) the
defense of such Tax claim. Acquiror shall not enter into any settlement with
respect to any such Tax Claim without Seller's prior written consent if the
effect of such settlement would be to increase the liability for Taxes of the
Company or any of the Affiliated Entities for which Seller would be liable or
responsible pursuant to any provision of this Section 8.9, which consent shall
not unreasonably be withheld. Nothing contained herein shall be construed as
limiting Acquiror's right to indemnification under this Section 8.9.
(viii) In the event that (A) after the Closing Date, there is an increase
in the earnings and profits for the 1996 taxable year of any Affiliated Entity
which was a "controlled foreign corporation" within the meaning of Section 957
of the Code on or prior to the Closing Date, (B) such increase in earnings and
profits is allocated to Seller, (C) such allocation results in a portion of the
payments received by Seller pursuant to this Agreement being recharacterized as
ordinary income (as opposed to capital gain), and (D) such increase in earnings
and profits results from a change made by Acquiror in the accounting practices
or business operations of the Affiliated Entity before January 1, 1997, or any
other extraordinary transaction outside the ordinary course of business before
January 1, 1997, or from any purchase of preferred shares in the Acquiror Group
or any sale of UK Securities, then Acquiror shall reimburse Seller for the
incremental tax costs to Seller arising from such recharacterization.
(f) Timing Adjustment.
(i) If an amendment, audit or other examination of any income Tax Return of
Seller or any Affiliated Entity (A) results in an adjustment that leads to the
payment of an amount by Seller pursuant to this Section 8.9 and (B) will permit
the Acquiror Group to increase deductions, losses or tax credits or decrease
income, gains, or recapture of tax credits which would otherwise (but for such
adjustment) have been taken or reported with respect to the Acquiror Group for
one or more taxable periods beginning on or after the Closing Date, Seller will
notify Acquiror and provide it with adequate information so that it can reflect
59
on the income Tax Returns of the Acquiror Group such increases in
deductions, losses or tax credits or decreases in income, gains, or recapture of
tax credits. With respect to such increases or decreases on income Tax Returns,
Acquiror shall and shall cause the Acquiror Group to, pay Seller the amount of
any Tax Benefit which results therefrom, within ten days of the date such Tax
Benefit is Actually Realized. Principles similar to those set forth in this
subsection (f)(i) shall also apply to adjustments resulting from examinations of
income Tax Returns of the Acquiror Group that make available Tax Benefits to the
Seller or the Affiliated Entities for Pre-Closing Periods and the pre-closing
portion of any Straddle Period.
(ii) For purposes of this Agreement, the term "Tax Benefit" means the net
amount by which the tax liability of a person to the appropriate taxing
authority is reduced, plus any interest (on an after-tax basis) from such
government or jurisdiction relating to such tax liability. For purposes of this
Agreement, a Tax Benefit shall be deemed to have been Actually Realized at the
time any refund of Taxes is received or applied against other Taxes due, or at
the time of filing of a Tax Return on which a loss, deductions or credit is
applied in reduction of Taxes which would otherwise be payable; provided,
however, that, where a party has other losses, deductions, credits or similar
items available to it, deductions, credits or items for which the other party
would be entitled to a payment under this Agreement shall be treated as the last
items utilized to produce a Tax Benefit.
(g) Any Tax Claim shall be brought under this Section 8.9 and shall not be
subject to the terms of Article X.
(h) Acquiror may not alter, change, re-file or otherwise amend any Tax
Returns of the Company or any Affiliated Entity with respect to a Pre-Closing or
a Straddle Period without the prior written consent of Seller, which consent
shall not unreason- ably be withheld.
Section 8.10 Intercompany Obligations; Affiliate Agreements.
(a) Except for the items set forth in Section 8.10(a) of the Seller
Disclosure Schedule, immediately prior to the Closing, Seller shall and Seller
and the Company shall cause all of Seller's Affiliates (other than the Company
and the Affiliated Entities) to (i) repay in full any Indebtedness or other
amounts owing to the Company or the Affiliated Entities and (ii) cancel without
payment any Indebtedness or other amounts owing to Seller or such Persons from
the Company or the Affiliated Entities.
(b) Except for those agreements set forth in Section 8.10(b) of the Seller
Disclosure Schedule, prior to the Closing, Seller and the Company shall cause
all agreements between Seller or Seller's Affiliates (other than the Company and
the Affiliated Entities), on the one hand, and the Company or any of the
Affiliated Entities, on the other hand (the "Affiliate Agreements"), to be
terminated in all respects such that there is no liability thereunder on the
60
part of the Company or any Affiliated Entity. Seller and the Company shall
cause Seller's appropriate Affiliates to effectuate the foregoing without, and
Seller shall indemnify Acquiror and its Affiliates (including the Company and
the Affiliated Entities), from, any cost or expense to the Company or any
Affiliated Entity or to Acquiror.
Section 8.11 Supplements to Disclosure Schedule. Seller and the Company
shall promptly supplement or amend the Seller Disclosure Schedule with respect
to any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or otherwise
disclosed in the Seller Disclosure Schedule (the "Updated Information"). No such
supplement or amendment of the Seller Disclosure Schedule to include the Updated
Information shall (i) affect the ability of Acquiror to rely on the conditions
to Closing set forth in Article IX hereof, or (ii) be deemed to have been set
forth or otherwise disclosed as of the date of this Agreement unless Acquiror
specifically agrees thereto in writing. In the event Acquiror elects to proceed
with the Closing after delivery to Acquiror of the supplemented or amended
Seller Disclosure Schedule, Acquiror may not bring any Claim for indemnification
under Section 10.1(a) hereof based on the Updated Information.
Section 8.12 Resignations. At or prior to the Closing Date, each officer
and director of the Company and any Affiliated Entity designated in writing by
Acquiror at least five (5) days prior to Closing shall execute and deliver to
Acquiror a letter of resignation (effective on or prior to the Closing Date)
from his or her position as a director and/or officer (but not terminating
employment).
Section 8.13 Non-Competition.
(a) Seller agrees that for a period commencing on the Closing Date and
ending on the fifth anniversary of the Closing Date, Seller and Seller's
Affiliates shall not (i) engage anywhere in the world, in the timeshare exchange
or subscription business or in marketing any products or services that compete
with the Timeshare Exchange Business as conducted or as proposed to be conducted
by the Company, or (ii) directly or indirectly invest in, manage, operate, join
or control as a partner, stockholder, consultant or otherwise, any Person that
engages in the timeshare exchange or subscription business or markets any
products or services that compete with the Timeshare Exchange Business as
conducted by the Company; provided, however, that it shall not be deemed to be a
violation of this Section 8.13 for (i) Seller to provide services to the Company
or any of the Affiliated Entities after the Closing, (ii) Seller or any of
Seller's Affiliates to invest in securities having less than three percent (3%)
of the outstanding economic interest or voting power of any Person, the
securities of which are publicly traded or listed on any securities exchange or
automated quotation system, or (iii) Seller to hold Long-Term Securities of
developers which provide limited exchange privileges as to such developers' own
properties.
(b) Seller and Acquiror acknowledge that this Section 8.13 constitutes an
independent covenant and shall not be affected by performance or nonperformance
of any other provision of this Agreement. Each of Seller and Acquiror has
61
independently consulted with its counsel and after such consultation agrees that
the covenants set forth in this Section 8.13 are reasonable and proper. It is
the desire and intent of the parties that the provisions of this Section 8.13
shall be enforced to the fullest extent permissible under applicable Law. If all
or part of this Section 8.13 is held invalid, illegal or incapable of being
enforced by any Law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect. If any part of
this Section 8.13 is finally determined in a proceeding by a Governmental
Authority to be excessively broad as to duration, scope, activity or subject,
such part will be construed by limiting and reducing it so as to be en-
forceable to the maximum extent compatible with applicable Law.
Section 8.14 Access to Books and Records Following the Closing. Following
the Closing, Acquiror shall permit Seller and her authorized representatives,
during normal business hours and upon reasonable notice, to have reasonable
access to, and examine and make copies of, all books and records which relate to
transactions or events occurring prior to the Closing or transactions or events
occurring subsequent to the Closing which are related to or arise out of
transactions or events occurring prior to the Closing.
Section 8.15 Nominee Shareholders. Prior to the Closing, Seller shall cause
each of the Affiliated Entities whose capital stock is owned in part by a
Nominee Shareholder to enter into an agreement with each Nominee Shareholder, in
form and substance reasonably satisfactory to Acquiror, providing for (i) the
transfer of the shares held by such Nominee Shareholder to Acquiror (or a
designee of Acquiror) when and as Acquiror deems such transfer to be necessary
or appropriate and (ii) the ability of such Affiliated Entity to engage in
Acquiror's normal cash management practices.
Section 8.16 Amendments to Organizational Documents. Prior to the Closing,
Seller shall cause the Company and each Affiliated Entity to amend as necessary
its articles of incorporation, by-laws or other similar organizational documents
to eliminate any requirements that (i) Seller serve the Company or such
Affiliated Entity in any capacity, (ii) Seller be a signatory to any contracts
of the Company or any Affiliated Entity, (iii) are inconsistent with the terms
of this Agreement and (iv) are similar in nature.
ARTICLE IX
CONDITIONS TO CLOSING
Section 9.1 Mutual Conditions to the Obligations of the Parties. The
respec- tive obligations of each party hereto to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver at or
prior to the Closing of each of the following conditions:
(a) No Injunctions. No temporary restraining order, preliminary or
permanent injunction or other judgment, order or decree issued by a court of
competent
62
jurisdiction which prevents the consummation of the transactions
contemplated hereby shall have been issued and remain in effect, and no statute,
rule or regulation shall have been enacted, promulgated or enforced by any
Governmental Authority which makes the consum- mation of the transactions
contemplated hereby illegal; provided, that the parties shall use their
reasonable best efforts to have any temporary or preliminary order or injunction
lifted.
(b) Registration Rights Agreement. The Registration Rights Agree- ment
shall have been duly executed and delivered by each of Acquiror and Seller.
(c) NYSE Listing. The shares of Acquiror Common Stock to be issued to
Seller as the Common Stock Consideration shall have been approved for listing on
the NYSE (subject to official notice of issuance).
(d) Seller Lease. The Seller Lease shall have been duly executed and
delivered by each of the Company and Seller.
Section 9.2 Conditions to the Obligations of Acquiror. The obligation of
Acquiror to consummate the transactions contemplated by this Agreement is
subject to the satisfaction at or prior to the Closing of the following
conditions (unless waived, to the extent permitted by applicable Law, by
Acquiror):
(a) Representations and Warranties. The representations and warran- ties of
Seller and the Company contained herein which are qualified as to materiality
shall be true, correct and complete in all respects, and such representations
and warranties as are not so qualified shall be true, correct and complete in
all material respects, as of the date when made and at and as of the Closing
Date, as though such representations and warranties were made at and as of such
date.
(b) Performance. Seller and the Company shall have performed and complied
with, in all material respects, all agreements, conditions, covenants and
obligations required by this Agreement to be performed or complied with by
Seller on or prior to the Closing Date.
(c) No Material Adverse Effect. From the date of this Agreement to the
Closing Date, there shall not have occurred any condition, event or
circumstance, change or effect that, individually or in the aggregate, has
resulted or would reasonably be expected to result in a Material Adverse Effect
on the Company or any of the Affiliated Entities considered as a whole.
(d) Officer's Certificate. Seller and the Company shall have delivered to
Acquiror a certificate, dated as of the Closing Date, executed by Seller and a
duly autho- rized officer of the Company, certifying the satisfaction of the
conditions set forth in subparagraphs (a), (b) and (c) of this Section 9.2.
63
(e) Opinion of Counsel. Seller and the Company shall have delivered to
Acquiror an opinion or opinions of legal counsel to the Company and the
Affiliated Entities, addressed to Acquiror and dated as of the Closing Date, in
substantially the form of Exhibit C attached hereto.
(f) Consents. All Consents of any Governmental Authority or third party
required to be obtained, declarations or filings required to be made, and all
waiting periods or terminations required to have occurred prior to the Closing
shall have been obtained, made or occurred (including under the HSR Act and the
Competition Laws), other than those Consents the failure of which to have
obtained, made or occurred by the Closing Date would not, individually or in the
aggregate, subject Acquiror, the Company or any of the Affiliated Entities after
the Closing to (i) criminal liability, (ii) significant financial penalty for
which Seller is unwilling to provide an indemnity, or (iii) other material
adverse consequences as a result of consummating the transactions contemplated
hereby without such Consents, including, without limitation, the inability of
Acquiror, the Company or the Affiliated Entities to conduct the business of the
Company and the Affiliated Entities after the Closing in substantially the same
manner and in all material respects as conducted prior to the Closing.
(g) Seller and the Company shall have each delivered an affidavit in the
form required by Section 1.1445 of the Treasury Regulations that Seller and the
Compa- ny are not foreign Persons within the meaning of such Section; provided,
however, that if Seller and/or the Company fail to produce such certificate, the
transactions contemplated by this Agreement shall close and Acquiror shall
withhold the appropriate amount of the consideration to be paid hereunder.
Section 9.3 Conditions to the Obligations of Seller and the Company. The
obligation of Seller and the Company to consummate the transactions contemplated
by this Agreement is subject to the satisfaction at or prior to the Closing of
the following conditions (unless waived, to the extent permitted by applicable
Law, by Seller and the Company):
(a) Representations and Warranties. The representations and warran- ties of
Acquiror contained herein which are qualified as to materiality shall be true,
correct and complete in all respects, and such representations and warranties as
are not so qualified shall be true, correct and complete in all material
respects, as of the date when made and at and as of the Closing Date, as though
such representations and warranties were made at and as of such date.
(b) Performance. Acquiror shall have performed and complied with, in all
material respects, all agreements, conditions, covenants and obligations
required by this Agreement to be performed or complied with by Acquiror on or
prior to the Closing Date.
(c) Officer's Certificate. Acquiror shall have delivered to Seller and the
Company a certificate, dated as of the Closing Date, executed by a duly
authorized
64
officer of Acquiror, certifying to the satisfaction of the conditions set
forth in subsections 9.3(a) and (b) hereof.
(d) Opinion of Counsel. Acquiror shall have delivered to Seller and the
Company an opinion of legal counsel to Acquiror, addressed to Seller and the
Company and dated as of the Closing Date, in substantially the form of Exhibit D
hereto.
(e) Consents. All Consents of any Governmental Authority or third party
required to be obtained, declarations or filings required to be made, and all
waiting periods or terminations required to have occurred prior to the Closing
shall have been obtained, made or occurred, (including under the HSR Act and the
Competition Laws) other than those Consents the failure of which to have
obtained, made or occurred by the Closing Date would not, individually or in the
aggregate, subject Seller after the Closing to (i) criminal liability or (ii)
significant financial penalty for which Acquiror is unwilling to provide an
indemnity.
ARTICLE X
INDEMNIFICATION OBLIGATIONS; SURVIVAL
Section 10.1 The Seller's Agreement to Indemnify. Subject to the terms and
conditions of this Article X and in addition to the obligations of Seller under
Section 8.9 hereof with respect to Tax Claims, from and after the Closing,
Seller shall indemnify, defend and hold harmless Acquiror, the Company, each
Affiliated Entity and each of their respective successors and permitted assigns,
directors, officers, employees, representatives, agents, Affiliates and
associates (collectively, the "Acquiror Group") from and against any and all
losses, liabilities, expenses (including reasonable attorneys' fees), claims and
damages (collectively, "Damages") asserted against, resulting to, imposed upon
or suffered by the Acquiror Group, or any one of them, arising out of or related
to (a) any breach of any reprsentation or warranty of Seller or the Company
contained in or made pursuant to this Agree- ment and (b) any breach of any
covenant or agreement of Seller or the Company contained in or made pursuant to
this Agreement (collectively, "Seller Claims"). For purposes of this Article X
only, as to any representation or warranty that is qualified as to materiality
(including as to any Material Adverse Effect), notwithstanding such
qualification, such representation or warranty shall be deemed breached in the
event that the Damages for such breach equal or exceed $400,000. This Section
10.1 shall not apply to any breach of the representations and warranties
contained in Section 6.20 hereof, which will be subject to Section 8.9 hereof.
Section 10.2 Seller's Limitation of Liability.
(a) Anything in this Agreement to the contrary notwithstanding, the
liability of Seller to indemnify the Acquiror Group pursuant to Section 10.1(a)
hereof against
65
any Damages sustained by reason of any Seller Claim thereunder for a breach
of any representation or warranty of Seller or the Company shall be limited to
Seller Claims as to which any member of the Acquiror Group has given Seller
written notice on or prior to March 31, 1998, whether or not any Damages have
then actually been sustained; provided, however, that, notwithstanding the
foregoing, the liability of Seller to indemnify the Acquiror Group against any
Damages sustained by reason of any Seller Claim for a breach of any of the
representations and warranties set forth in Sections 6.4, 6.14 and 6.15 hereof
shall not be so limited.
(b) Other than with respect to the representations and warranties set forth
in Sections 6.4, 6.14 and 6.15 hereof, (i) the amount of any single Seller Claim
under Section 10.1(a) hereof for which Seller is liable for a breach of any
representation or warranty of Seller or the Company shall be reduced by a
$100,000 deductible (as to each single Seller Claim, a "Deductible"), (ii) the
provisions in Section 10.1(a) hereof for indem- nity by Seller of the Acquiror
Group against Damages sustained by reason of any Seller Claim thereunder for a
breach of any representation or warranty of Seller or the Company shall be
effective only after the aggregate amount of all such Seller Claims for which
Seller is liable (after giving effect to all Deductibles) exceeds $5,000,000
plus the amount of any unused Indemnity Credit, and then only to the extent of
such excess, and (ii) in no event shall Seller's indemnity obligations with
respect to breach of any representations or warranties of Seller or the Company
exceed the Aggregate Purchase Price.
Section 10.3 Acquiror's Agreement to Indemnify. Subject to the terms and
conditions of this Article X, from and after the Closing, Acquiror shall
indemnify, defend and hold harmless Seller and her heirs, legatees,
beneficiaries and permitted assigns (collec- tively, the "Seller Group"), from
and against all Damages asserted against, resulting to, imposed upon or suffered
by the Seller Group, or any one of them, arising out of or related to: (a) any
breach of any representation or warranty of Acquiror contained in or made
pursuant to this Agreement (which, for purposes of this Article X, shall be
determined without regard to any materiality threshold or qualification
contained in any such representa- tion or warranty) and (b) any breach of any
covenant or agreement of Acquiror contained in or made pursuant to this
Agreement ("Acquiror Claims" and, collectively with Seller Claims, "Claims").
Section 10.4 Acquiror's Limitation of Liability.
(a) Anything in this Agreement to the contrary notwithstanding, the
liability of Acquiror to indemnify the Seller Group pursuant to Section 10.3(a)
hereof against any Damages sustained by reason of any Acquiror Claim thereunder
for a breach of any representation and warranty of Acquiror shall be limited to
Acquiror Claims as to which any member of the Seller Group has given Acquiror
written notice on or prior to March 31, 1998, whether or not any Damages have
then actually been sustained; provided, however, that notwithstanding the
foregoing, the liability of Acquiror to indemnify the Seller Group against any
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Damages sustained by reason of any Acquiror Claim for a breach of any of
the representations and warranties set forth in Section 7.4(b) hereof shall not
be so limited.
(b) Other than with respect to the representations and warranties set forth
in Section 7.4(b) hereof, (i) the provisions in Section 10.3(a) hereof for
indemnity by Acquiror of the Seller Group against Damages sustained by reason of
any Acquiror Claim thereunder for a breach of any representation or warranty of
Acquiror shall be effective only after the aggregate amount of all such Acquiror
Claims for which Seller is liable exceeds $5,000,000, and then only to the
extent of such excess, and (ii) in no event shall Acquiror's indemnity
obligations with respect to breach of any representation or warranty of Acquiror
exceed the Aggregate Purchase Price.
Section 10.5 Conditions of Indemnification. The obligations and liabilities
of the Seller Group and Acquiror Group with respect to Claims made by third
parties shall be subject to the following terms and conditions:
(a) The indemnified party shall give the indemnifying party prompt notice
of any such Claim, and the indemnifying party shall have the right to undertake
the defense thereof by representatives chosen by it;
(b) If the indemnifying party undertakes the defense of any such Claim, the
indemnified party shall, to the best of its ability, assist the indemnifying
party, at the expense of the indemnifying party, in the defense of such Claim,
and shall promptly send to the indemnifying party, at the expense of the
indemnifying party, copies of any documents received by the indemnified party
which relate to such Claim;
(c) If the indemnifying party, within a reasonable time after notice of any
such Claim, fails to defend the indemnified party against which such Claim has
been asserted, the indemnified party shall (upon further notice to the
indemnifying party) have the right to undertake the defense, compromise or
settlement of such Claim on behalf of and for the account and risk of the
indemnifying party, subject to the right of the indemnifying party to assume the
defense of such Claim at any time prior to settlement, compromise or final
determination thereof; and
(d) Anything in this Article X to the contrary notwithstanding, (i) if
there is a reasonable probability that a Claim may materially and adversely
affect the indemnified party other than as a result of money damages or other
money payments, the indemnified party shall have the right, at its own cost and
expense, to defend, compromise or settle such Claim; and (ii) the indemnifying
party shall not, without the written consent of the indemnified party, settle or
compromise any Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the indemnified party a release from all liability with respect to
such Claim.
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Section 10.6 Survival of Representations. The representations and
warranties in this Agreement and in any certificate delivered pursuant hereto
shall survive the Closing solely for purposes of this Article X and shall
terminate upon expiration of the period for which indemnification for breach of
such representation and warranty may be sought under this Article X; provided,
however, that (i) representations and warranties under Section 6.20 hereof shall
terminate sixty days after the related statute of limitations (giving effect to
any extensions thereto) has expired with respect to the relevant Tax; (ii)
representations and warranties under Sections 6.4, 6.15 and 7.4(b) hereof shall
survive until sixty days after any applicable statute of limitations (or
indefinitely, if no statute of limitations is applicable).
Section 10.7 Exclusive Remedy. Except as set forth in Section 12.13 hereof,
the indemnities provided in this Article X shall be the exclusive remedy for
breach of this Agreement by any party hereto.
ARTICLE XI
TERMINATION
Section 11.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual written agreement of Acquiror and Seller;
(b) at any time after January 10, 1997 by either Acquiror or Seller, by
giving written notice of such termination to the other party, if the Closing
shall not have occurred on or prior to such date (unless the failure to
consummate the Closing by such date shall be due to or have resulted from (i)
failure to receive any regulatory or third-party consent or approval for which a
request is pending; or (ii) any breach of the representations or warranties made
by, or the failure to perform or comply with any of the agreements or covenants
hereof to be performed or complied with prior to the Closing by, the party
seeking to terminate this Agreement); or
(c) by either Acquiror or Seller by written notice of such termination to
the other party if any event, fact or condition shall occur or exist that makes
it impossible to satisfy a condition to such party's obligations to consummate
the transactions contemplated by this Agreement, unless the occurrence or
existence of such event, fact or condition shall be due to the failure of such
party to perform or comply with any of the agreements or covenants hereof to be
performed or complied with by such party prior to the Closing.
Section 11.2 Effect of Termination. In the event of the termination of this
Agreement in accordance with Section 11.1 hereof, this Agreement shall
thereafter become void and have no effect and the transactions contemplated
hereby shall be abandoned, and no party hereto shall have any liability to the
other party hereto or their respective Affiliates, directors, officers or
employees, except for the obligations of the parties hereto contained in
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this Section 11.2 and in Sections 12.1, 12.6, 12.7 and 12.8 hereof, and
except that nothing herein will relieve any party from liability for a breach of
any provision of this Agreement or limit or restrict the rights or remedies of
any party hereto against the other party for any breach of this Agreement. If
this Agreement is terminated pursuant to Section 11.1 hereof:
(a) all confidential information received by the parties shall be treated
in accordance with Section 8.1 hereof and the Confidentiality Agreements
referred to in such Section; and
(b) all filings, applications and other submissions made pursuant to
Sections 8.3, 8.4 and 8.5 hereof shall, to the extent practicable, be withdrawn
from the agency or other person to which made.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices. All notices or other communications hereunder shall
be deemed to have been duly given and made if in writing and if served by
personal delivery upon the party for whom it is intended, if delivered by
registered or certified mail, return receipt requested, or by a national courier
service, or if sent by telecopier, provided that the telecopy is promptly
confirmed by telephone confirmation thereof, to the person at the address set
forth below, or such other address as may be designated in writing hereafter, in
the same manner, by such person:
To Seller:
▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Ice ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
for express deliveries:
Suite ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
for regular mail:
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Berkley W. Duck, III, Esq.
To Acquiror:
HFS Incorporated
Six ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Chuff, Esq.
Section 12.2 Amendment; Waiver. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Acquiror, the Company and Seller, or in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
Section 12.3 Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that Acquiror may without such consent assign its
rights, duties and obligations hereunder, in whole or in part, to any direct or
indirect wholly owned subsidiary of Acquiror designated by Acquiror in a writing
delivered to Seller at or prior to the Closing; provided, however, that no
assignment by Acquiror shall relieve Acquiror of any of its obligations
hereunder.
Section 12.4 Entire Agreement. This Agreement (including the Seller Disclo-
sure Schedule and all Schedules and Exhibits hereto) contains the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect to such matters, except for the Confidenti- ality Agreement which will
remain in full force and effect for the term provided for therein.
Section 12.5 Fulfillment of Obligations. Any obligation of any party to any
other party under this Agreement, which obligation is performed, satisfied or
fulfilled by an
70
Affiliate of such party, shall be deemed to have been performed, satisfied
or fulfilled by such party.
Section 12.6 Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than Acquiror, Seller, the Company, the Affiliated
Entities or their successors or permitted assigns, any rights or remedies under
or by reason of this Agreement.
Section 12.7 Expenses. Except as otherwise expressly provided in this
Agree- ment, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contem- plated hereby shall be borne by the party incurring
such expenses; provided, however, that all reasonably incurred costs and
expenses of Seller's counsel and accountants may be borne by the Company up to a
maximum amount of $1,000,000. All other costs and expenses of Seller (including
those described in Section 12.8 hereof) shall be borne by Seller.
Section 12.8 Brokers. The fees of any broker, finder or investment banker
hired by Seller, the Company or any Affiliated Entity hereto shall be borne
solely by the Seller. The fees of any broker, finder or investment banker hired
by Acquiror or Acquisition shall be borne solely by Acquiror.
Section 12.9 Governing Law; Jurisdiction. This Agreement shall be governed
by the laws of the State of New York, its rules of conflict of laws
notwithstanding. Each of Seller, the Company and Acquiror hereby agrees and
consents to be subject to the jurisdic- tion of the United States District Court
for the District of New York and the jurisdiction of the courts of the State of
New York in any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby. Each party hereby irrevocably consents to
the service of any and all process in any such suit, action or proceeding by the
delivery of such process to such party at the address and in the manner provided
in Section 12.1.
Section 12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same agreement.
Section 12.11 Headings. The heading references herein and in the table of
contents hereto are for convenience purposes only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section 12.12 Further Assurances. From time to time after the Closing Date,
at the request of the other party hereto and at the expense of the party so
requesting, Seller, the Company and Acquiror shall execute and deliver to such
requesting party such documents and take such other action
71
and take such other action as such requesting party may reasonably request
in order to consummate the transactions contemplated hereby.
Section 12.13 Specific Performance. Each party hereto acknowledges that
money damages would be both incalculable and an insufficient remedy for any
breach of this Agreement by such party and that any such breach would cause the
other party hereto irreparable harm. Accordingly, each party hereto also agrees
that, in the event of any breach or threatened breach of the provisions of this
Agreement by such party, the other party hereto shall be entitled to equitable
relief without the requirement of posting a bond or other security, including in
the form of injunctions and orders for specific performance.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed or caused this Agreement to
be executed as of the date first written above.
HFS INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
SELLER
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
RESORT CONDOMINIUMS INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
73