EXHIBIT 2.2
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AGREEMENT AND PLAN OF ORGANIZATION
dated as of March 11, 1998
by and among
VACATION PROPERTIES INTERNATIONAL, INC.
B&B ACQUISITION CORP. and
XXXXXXXX ACQUISITION CORP.
(each a subsidiary of Vacation Properties International, Inc.)
B&B ON THE BEACH, INC.
XXXXXXXX & XXXXXXXX REALTY & DEVELOPMENT, INC.
and
the STOCKHOLDERS named herein
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TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF ORGANIZATION.............................................1
1. THE MERGER...............................................................3
1.1 Delivery and Filing of Articles of Merger............................3
1.2 Effective Time of the Merger.........................................3
1.3 Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporations..............................................3
1.4 Certain Information With Respect to the Capital Stock of the
COMPANIES, VPI and NEWCOS...........................................4
1.5 Effect of Merger.....................................................5
2. CONVERSION OF STOCK......................................................6
2.1 Manner of Conversion.................................................6
3. DELIVERY OF MERGER CONSIDERATION.........................................7
3.1 Delivery of VPI Stock and Cash.......................................7
3.2 Delivery of COMPANY Stock............................................7
3.3 Balance Sheet Test...................................................8
4. CLOSING..................................................................9
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS............10
(A) Representations and Warranties of COMPANIES and STOCKHOLDERS........10
5.1 Due Organization.................................................11
5.2 Authority........................................................11
5.3 Capital Stock of the COMPANIES...................................11
5.4 Transactions in Capital Stock....................................12
5.5 No Bonus Shares..................................................12
5.6 Subsidiaries.....................................................12
5.7 Predecessor Status; etc..........................................13
5.8 Spin-off by the COMPANIES........................................13
5.9 Financial Statements.............................................13
5.10 Liabilities and Obligations.....................................14
5.11 Accounts and Notes Receivable...................................15
5.12 Permits and Intangibles.........................................15
5.13 Environmental Matters...........................................16
5.14 Personal Property...............................................17
5.15 Significant Customers...........................................18
5.16 Material Contracts and Commitments..............................18
5.17 Real Property...................................................18
5.18 Insurance.......................................................20
5.19 Compensation; Employment Agreements; Organized Labor Matters....20
5.20 Employee Plans..................................................21
5.21 Compliance with ERISA...........................................22
5.22 Conformity with Law; Litigation.................................23
5.23 Taxes...........................................................24
5.24 No Violations...................................................26
5.25 Government Contracts............................................27
5.26 Absence of Changes..............................................27
5.27 Deposit Accounts; Powers of Attorney............................29
5.28 Validity of Obligations.........................................29
5.29 Relations with Governments......................................30
5.30 Disclosure......................................................30
5.31 Prohibited Activities...........................................31
(B) Representations and Warranties of STOCKHOLDERS......................31
5.32 Authority; Ownership............................................31
5.33 Preemptive Rights...............................................31
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5.34 No Intention to Dispose of VPI Stock............................31
6. REPRESENTATIONS OF VPI AND NEWCOS.......................................32
6.1 Due Organization....................................................32
6.2 Authorization.......................................................33
6.3 Capital Stock of VPI and NEWCOS.....................................33
6.4 Transactions in Capital Stock.......................................33
6.5 Subsidiaries........................................................34
6.6 Financial Statements................................................34
6.7 Liabilities and Obligations.........................................34
6.8 Conformity with Law; Litigation.....................................34
6.9 No Violations.......................................................35
6.10 Validity of Obligations............................................35
6.11 VPI Stock..........................................................36
6.12 No Side Agreements.................................................36
6.13 Business; Real Property; Material Agreements.......................36
6.14 Taxes..............................................................37
6.15 Completion of Due Diligence........................................39
6.16 Disclosure........................................................39
6.17 Tax Treatment......................................................39
7. COVENANTS PRIOR TO CLOSING..............................................39
7.1 Access and Cooperation; Due Diligence...............................39
7.2 Conduct of Business Pending Closing.................................41
7.3 Prohibited Activities...............................................42
7.4 No Shop.............................................................43
7.5 Notice to Bargaining Agents.........................................44
7.6 Agreements..........................................................44
7.7 Notification of Certain Matters.....................................44
7.8 Amendment of Schedules..............................................45
7.9 Cooperation in Preparation of Registration Statement................46
7.10 Final Financial Statements.........................................48
7.11 Further Assurances.................................................48
7.12 Authorized Capital.................................................48
7.13 Best Efforts to Consummate Transaction.............................48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES.......49
8.1 Representations and Warranties......................................49
8.2 Performance of Obligations..........................................49
8.3 No Litigation.......................................................50
8.4 Opinion of Counsel..................................................50
8.5 Registration Statement..............................................50
8.6 Consents and Approvals..............................................50
8.7 Good Standing Certificates..........................................50
8.8 No Material Adverse Change..........................................50
8.9 Closing of IPO......................................................51
8.10 Secretary's Certificate............................................51
8.11 Employment Agreements..............................................51
8.12 Directors and Officers Insurance...................................51
8.13 Stock Options......................................................51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS...................52
9.1 Representations and Warranties......................................52
9.2 Performance of Obligations..........................................52
9.3 No Litigation.......................................................52
9.4 Secretary's Certificate.............................................53
9.5 No Material Adverse Effect..........................................53
9.6 STOCKHOLDERS' Release...............................................53
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9.7 Termination of Related Party Agreements.............................53
9.8 Opinion of Counsel..................................................53
9.9 Consents and Approvals..............................................54
9.10 Good Standing Certificates.........................................54
9.11 Registration Statement.............................................54
9.12 Employment Agreements..............................................54
9.13 Closing of IPO.....................................................54
9.14 FIRPTA Certificate.................................................54
9.15 Insurance..........................................................54
9.16 Lockup Agreement...................................................55
9.17 Letter of Representation...........................................55
9.18 Termination of Defined Benefit Plans...............................55
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING....................55
10.1 Release From Guarantees; Repayment of Certain Obligations..........55
10.2 Preservation of Tax and Accounting Treatment.......................56
10.3 Preparation and Filing of Tax Returns..............................56
10.4 Appointment of Directors...........................................57
10.5 Preservation of Employee Benefit Plans.............................57
10.6 Maintenance of Books...............................................58
10.7 Securities Covenants...............................................58
11. INDEMNIFICATION........................................................58
11.1 General Indemnification by the STOCKHOLDERS........................58
11.2 Indemnification by VPI.............................................59
11.3 Third Person Claims................................................60
11.4 Exclusive Remedy...................................................62
11.5 Limitations on Indemnification.....................................62
12. TERMINATION OF AGREEMENT...............................................64
12.1 Termination........................................................64
12.2 Liabilities in Event of Termination................................64
13. NONCOMPETITION.........................................................65
13.1 Prohibited Activities..............................................65
13.2 Damages............................................................67
13.3 Reasonable Restraint...............................................67
13.4 Severability; Reformation..........................................67
13.5 Independent Covenant...............................................68
13.6 Materiality........................................................68
13.7 Limitation.........................................................68
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..............................69
14.1 STOCKHOLDERS.......................................................69
14.2 VPI AND NEWCOS.....................................................70
14.3 Damages............................................................71
14.4 Survival...........................................................71
14.5 Return of Data Submitted...........................................71
15. TRANSFER RESTRICTIONS..................................................71
15.1 Transfer Restrictions..............................................71
15.2 Certain Transfers..................................................72
16. SECURITIES LAW REPRESENTATIONS.........................................72
16.1 Compliance with Law................................................73
16.2 Economic Risk; Sophistication......................................73
17. REGISTRATION RIGHTS....................................................74
17.1 Piggyback Registration Rights......................................74
17.2 Demand Registration Rights.........................................75
17.3 Registration Procedures............................................76
17.4 Underwriting Agreement.............................................76
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17.5 Availability of Rule 144...........................................76
17.6 Registration Rights Indemnification................................77
18. GENERAL................................................................81
18.1 Press Releases.....................................................81
18.2 Cooperation........................................................82
18.3 Successors and Assigns; Third Party Beneficiaries..................82
18.4 Entire Agreement...................................................82
18.5 Counterparts.......................................................83
18.6 Brokers and Agents.................................................83
18.7 Expenses...........................................................83
18.8 Notices............................................................84
18.9 Governing Law......................................................85
18.10 Exercise of Rights and Remedies...................................85
18.11 Time..............................................................85
18.12 Reformation and Severability......................................85
18.13 Remedies Cumulative...............................................86
18.14 Captions..........................................................86
18.15 Amendments and Waivers............................................86
18.16 Incorporation by Reference........................................86
18.17 Defined Terms.....................................................86
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF VPI AND NEWCOS
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANIES
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF VPI
ANNEX VI-A FORM OF CORPORATE OPINION OF COUNSEL TO VPI
ANNEX VI-B FORM OF TAX OPINION OF COUNSEL TO VPI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANIES AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
March 11, 1998, by and among VACATION PROPERTIES INTERNATIONAL, INC., a Delaware
corporation ("VPI"), B&B ACQUISITION CORP., a Delaware corporation, XXXXXXXX
ACQUISITION CORP., a Delaware corporation (individually, a "NEWCO" and
collectively, the "NEWCOS"), B&B ON THE BEACH, INC., a North Carolina
corporation, and XXXXXXXX & XXXXXXXX REALTY & DEVELOPMENT, INC., a North
Carolina corporation (each, a "COMPANY" and collectively, the "COMPANIES"), and
XXXXXXX X. XXXXXXXX, an individual residing in Corolla, North Carolina, and
XXXXX XXXXXXX XXXXXXXX, an individual residing in Duck, North Carolina (the
"STOCKHOLDERS").
WHEREAS, each NEWCO is a corporation duly organized and existing under
the laws of the State of Delaware, each having been incorporated on March
4, 1998, solely for the purpose of completing the transactions set forth
herein, and each NEWCO is a wholly-owned subsidiary of VPI;
WHEREAS, the respective Boards of Directors of each NEWCO and each
COMPANY (which together are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that (i) B&B
ACQUISITION CORP. merge with and into B&B ON THE BEACH, INC. and (ii)
XXXXXXXX ACQUISITION CORP. merge with and into XXXXXXXX & XXXXXXXX REALTY &
DEVELOPMENT, INC., pursuant to this Agreement and the applicable provisions
of the laws of the State of Delaware and the State in which each of the
COMPANIES is incorporated;
WHEREAS, VPI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is
entitled "Agreement and Plan of Organization," with each of Coastal Resorts
Realty L.L.C., a Delaware limited
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liability company, Coastal Resorts Management, Inc., a Delaware
corporation, Collection of Fine Properties, Inc., a Colorado corporation,
Ten Mile Holdings, Ltd., a Colorado corporation, First Resort Software,
Inc., a Colorado corporation, Hotel Corporation of the Pacific, Inc., a
Hawaii corporation, Houston and X'Xxxxx Company, a Colorado corporation,
Jupiter Property Management at Park City, Inc., a Utah corporation, Maui
Condominium & Home Realty, Inc., a Hawaii corporation, The Maury People,
Inc., a Massachusetts corporation, Xxxxx Acquisition, Inc., a Florida
corporation, Realty Consultants, Inc., a Florida corporation, Resort
Property Management, Inc., a Utah corporation, Telluride Resort
Accommodations, Inc., a Colorado corporation, Xxxxx-Xxxxxxx Enterprises,
Inc., a Georgia corporation, THE Management Company, a Georgia corporation,
and Whistler Chalets Limited, a British Columbia corporation, and their
respective stockholders in order to acquire additional businesses (the
COMPANIES, together with each of the entities with which VPI has entered
into the Other Agreements, are collectively referred to herein as the
"Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of VPI Stock
constitute the "VPI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of VPI, each of the Other Founding Companies and each of the
subsidiaries of VPI that are parties to the Other Agreements intend to
consummate the VPI Plan of Organization as an integrated plan pursuant to
which the STOCKHOLDERS and the stockholders of the Other Founding Companies
shall transfer the capital stock of the Founding Companies to VPI or a
subsidiary of VPI, and the STOCKHOLDERS and the public will acquire the
stock of VPI as an exchange pursuant to which gain is not recognized under
Section 351(a) of the Code; and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Boards of Directors of the
COMPANIES have
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approved this Agreement as part of the VPI Plan of Organization in order to
transfer the capital stock of the COMPANIES to VPI;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGERS
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent Corporations
will cause the Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State in which each of the COMPANIES is incorporated and will deliver stamped
receipt copies of each such filing to VPI on or before the Closing Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Mergers, (i)
B&B ACQUISITION CORP. shall be merged with and into B&B ON THE BEACH, INC. and
(ii) XXXXXXXX ACQUISITION CORP. shall be merged with and into XXXXXXXX &
XXXXXXXX REALTY & DEVELOPMENT, INC., each in accordance with the Articles of
Merger, the separate existence of each NEWCO shall cease and each COMPANY shall
be the surviving party in the Mergers (each COMPANY is sometimes hereinafter
referred to as the "Surviving Corporation" and collectively the COMPANIES are
sometimes hereinafter referred to as the "Surviving Corporations"). Each Merger
will be effected in a single transaction.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATIONS. At the Effective Time of each Merger:
(i) the Certificate of Incorporation then in effect of each COMPANY
shall be the Certificate of Incorporation of the Surviving Corporation in
such Merger until changed as provided by law;
(ii) the Bylaws of each NEWCO then in effect shall become the Bylaws
of the Surviving Corporation in such Merger; and subsequent to the
Effective Time of such Merger,
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such Bylaws shall be the Bylaws of the Surviving Corporation in such Merger
until they shall thereafter be duly amended;
(iii) the Board of Directors of each Surviving Corporation shall
consist of the persons who are, immediately prior to the Effective Time of
the Merger, on the Board of Directors of the COMPANY merging into such
Surviving Corporation, provided that the Chief Executive Officer of VPI
shall be elected as a director of each Surviving Corporation effective as
of the Effective Time of each Merger; the Board of Directors of each
Surviving Corporation shall hold office subject to the provisions of the
laws of the state in which the Surviving Corporation is located and of the
Certificate of Incorporation and Bylaws of the Surviving Corporation; and
(iv) the officers of each COMPANY immediately prior to the Effective
Time of each Merger shall continue as the officers of the Surviving
Corporation into which such COMPANY is merged in the same capacity or
capacities, and effective upon the Effective Time of each Merger the person
designated by VPI to be appointed as such officer shall be appointed as a
vice president of each Surviving Corporation and the person designated by
VPI to be appointed as such officer shall be appointed as an Assistant
Secretary of each Surviving Corporation, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of
the Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANIES,
VPI AND NEWCOS. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the COMPANIES,
VPI and the NEWCOS as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANIES is as set forth on Schedule 1.4 hereto;
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(ii) immediately prior to the Closing Date, the authorized capital
stock of VPI will consist of 50,000,000 shares of VPI Stock, of which the
number of issued and outstanding shares will be as set forth in the
Registration Statement, and 10,000,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of each NEWCO consists of 1000 shares of NEWCO stock, of which ten (10)
shares are issued and outstanding.
1.5 EFFECT OF MERGERS. At the Effective Time of the Mergers, the effect of
the Mergers shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the laws of
the State in which each COMPANY is incorporated. Except as herein specifically
set forth, the identity, existence, purposes, powers, objects, franchises,
privileges, rights and immunities of each COMPANY shall continue unaffected and
unimpaired by the Mergers and the corporate franchises, existence and rights of
each NEWCO shall be merged with and into the respective COMPANIES, and the
COMPANIES, as the Surviving Corporations, shall be fully vested therewith. At
the Effective Time of the Mergers, the separate existence of each NEWCO shall
cease and, in accordance with the terms of this Agreement, the Surviving
Corporations shall possess all of the rights, privileges, immunities and
franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all Taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to each NEWCO and each COMPANY shall be taken and deemed to
be transferred to, and vested in, the respective Surviving Corporations without
further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectively
the property of the respective Surviving Corporations as they were of each NEWCO
and each COMPANY; and the title to any real estate, or interest therein, whether
by deed or otherwise, under the laws of the states of incorporation vested in
each respective NEWCO and COMPANY, shall not revert or be in any way impaired by
reason of the Mergers. Except as otherwise provided herein, each Surviving
Corporation shall thenceforth be responsible and
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liable for all of the liabilities and obligations of the respective NEWCO and
COMPANY and any claim existing, or action or proceeding pending, by or against a
NEWCO or COMPANY may be prosecuted as if the Merger involving such NEWCO or
COMPANY had not taken place, or the respective Surviving Corporation may be
substituted in their place. Neither the rights of creditors nor any liens upon
the property of a NEWCO or COMPANY shall be impaired by the Merger involving
such NEWCO or COMPANY, and all debts, liabilities and duties of such NEWCO and
COMPANY shall attach to the respective Surviving Corporation, and may be
enforced against such Surviving Corporation to the same extent as if said debts,
liabilities and duties had been incurred or contracted by such Surviving
Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of each COMPANY (collectively, "COMPANY Stock") and
(ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time
of the Mergers, respectively, into shares of (x) VPI Stock and (y) common stock
of the Surviving Corporations, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock of each COMPANY issued and
outstanding immediately prior to the Effective Time of each respective
Merger, by virtue of such Merger and without any action on the part of the
holder thereof, automatically shall be deemed to represent (l) the right to
receive the number of fully paid and nonassessable shares of VPI Stock set
forth on Annex III hereto with respect to such holder and (2) the right to
receive the amount of cash, subject to adjustment pursuant to Section 3.3
hereof, set forth on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by each COMPANY as
treasury stock shall be canceled and retired and no shares of VPI Stock or
other consideration shall be delivered or paid in exchange therefor; and
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(iii) each share of NEWCO Stock of each NEWCO issued and outstanding
immediately prior to the Effective Time of each respective Merger, shall,
by virtue of such Merger and without any action on the part of VPI,
automatically be converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation involved in such Merger which
shall constitute all of the issued and outstanding shares of common stock
of such Surviving Corporation immediately after the Effective Time of such
Merger.
All VPI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
VPI Stock by reason of the provisions of the Certificate of Incorporation of VPI
or as otherwise provided by the Delaware GCL. All voting rights of such VPI
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Mergers, VPI shall have no
class of capital stock (including preferred stock) issued and outstanding other
than the VPI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 DELIVERY OF VPI STOCK AND CASH. At the Effective Time of the Mergers
and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding
certificates representing shares of COMPANY Stock, shall, upon surrender of such
certificates, receive the respective number of shares of VPI Stock and the
amount of cash (subject to adjustment pursuant to Section 3.3) set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 DELIVERY OF COMPANY STOCK. The STOCKHOLDERS shall deliver to VPI at the
Pre-Closing (subject to Section 4) the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by blank stock
powers, and with all necessary transfer tax and other revenue stamps, acquired
at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the
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endorsement of the stock certificates or other documents of conveyance with
respect to such COMPANY Stock or with respect to the stock powers accompanying
any COMPANY Stock.
3.3 BALANCE SHEET TEST. As of the Closing Date, each COMPANY shall have (i)
positive net worth (excluding all customer deposits and similar escrow-type
accounts); (ii) positive net working capital (defined as current assets minus
current liabilities, excluding all customer deposits and similar escrow-type
accounts); and (iii) all customer deposit accounts and other similar escrow-type
accounts fully funded in cash or cash equivalents. To the extent that any
condition set forth in clauses (i) through (iii) is not met, the cash portion of
the consideration to be paid to the STOCKHOLDERS pursuant to this Section 3
shall be reduced by the amount required to cure any such failure. Indebtedness
of each COMPANY in excess of the amount set forth on Annex III that was incurred
in connection with the acquisition of such COMPANY by the STOCKHOLDERS, or the
acquisition of nonoperating assets by such COMPANY or the STOCKHOLDERS, shall
result in a corresponding dollar-for-dollar reduction in the cash portion of the
consideration paid to the STOCKHOLDERS pursuant to this Section 3. If necessary,
a post-Closing adjustment shall be made to effect the intent of this Section
3.3. Notwithstanding the foregoing balance sheet requirements, it is understood
that the COMPANY's earnings for the three months ended March 31, 1998 will
reflect, with respect to B&B On The Beach, Inc., an amount equal to 25% of the
projected earnings for B&B On The Beach, Inc. for the twelve months ended
December 31, 1998. The COMPANY's earnings so determined for the three months
ended March 31, 1998 will be distributed to the STOCKHOLDERS on the Closing Date
and all other revenues including rentals or management fees or commissions (but
not any portion thereof previously paid to property owners) related to any
periods after March 31, 1998 shall be retained by the COMPANY and acquired by
VPI in the transaction contemplated hereunder. The COMPANY's earnings after
March 31, 1998 will be retained by the COMPANY. The form of the distribution to
the STOCKHOLDERS will be mutually agreed upon by the STOCKHOLDERS and VPI. The
parties also will consider entering into a mutual indemnification agreement
regarding the tax consequences of such distribution.
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4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the Mergers (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of
Merger, which shall become effective at the Effective Time of the Mergers) and
(ii) effect the conversion and delivery of shares referred to in Section 3
hereof; provided, however, that such actions shall not include the actual
completion of the Mergers or the conversion and delivery of the shares and
certified check(s) or wire transfer(s) referred to in Section 3 hereof, each of
which actions shall only be taken upon the Closing Date as herein provided. In
the event that there is no Closing Date and this Agreement terminates, VPI and
the NEWCOS hereby covenant and agree to do all things required by Delaware law
and all things which counsel for the COMPANIES advise VPI and/or the NEWCOS are
required by applicable laws of the State in which the COMPANIES are incorporated
in order to rescind the effects, if any, of the filing of the Articles of Merger
as described in this Section and to pay all related costs of the COMPANIES
directly associated with such rescission. The taking of the actions described in
clauses (i) and (ii) above (the "Pre-Closing") shall take place on the
pre-closing date (the "Pre-Closing Date") at the offices of Akin, Gump, Strauss,
Xxxxx & Xxxx, L.L.P., 0000 Xxx Xxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000.
On the Closing Date (x) the Articles of Merger shall have been filed with the
appropriate state authorities so that they shall be or, as of 8:00 a.m. New York
City time on the Closing Date, shall become effective and the Mergers shall
thereby be effected, (y) all transactions contemplated by this Agreement,
including the conversion and delivery of shares, the delivery of a certified
check or checks or wire transfer(s) in an amount equal to the cash portion of
the consideration which the STOCKHOLDERS shall be entitled to receive pursuant
to the Mergers referred to in Section 3 hereof shall occur and (z) the closing
with respect to the IPO shall be completed. The taking of the actions described
in the preceding clauses (x), (y) and (z) shall constitute the closing of the
transactions hereunder (the "Closing"), and the date on which the actions
described in the preceding clauses (x), (y) and (z) occur shall be referred to
as the "Closing
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Date." Except as provided in Sections 8 and 9 hereof with respect to actions to
be taken on the Closing Date, during the period from the Pre-Closing Date to the
Closing Date this Agreement may only be terminated by a party if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Closing
Date has not occurred within 15 business days of the Pre-Closing Date. Time is
of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANIES AND STOCKHOLDERS.
Each of the COMPANIES and the STOCKHOLDERS jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Pre-Closing and the Closing Date. Each of
the COMPANIES and the STOCKHOLDERS agrees that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 5.23 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
5.23 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, VPI actually incurs
liability under the 1933 Act, the 1934 Act or any other federal or state
securities laws as a result of a breach of a representation or warranty by the
COMPANIES or the STOCKHOLDERS, the representations and warranties set forth
herein shall survive until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for such purposes. For purposes
of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and
all of its Subsidiaries, if any.
10
5.1 DUE ORGANIZATION. Each COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and such COMPANY is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, properties, assets, condition (financial or otherwise) or,
to the knowledge of such COMPANY or the STOCKHOLDERS, prospects of such COMPANY
taken as a whole (as used herein with respect to such COMPANY, or with respect
to any other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which each COMPANY is incorporated and contains a list of all
such jurisdictions in which each COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of each COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of each COMPANY, as
heretofore made available to VPI, are correct and complete in all material
respects. There are no minutes in the possession of each COMPANY or the
STOCKHOLDERS which have not been made available to VPI, and all of such minutes
are correct and complete in all material respects. Except as set forth on
Schedule 5.1, the most recent minutes of each COMPANY, which are dated no
earlier than ten business days prior to the date hereof, affirm and ratify all
prior acts of such COMPANY, and of its officers and directors on behalf of such
COMPANY.
5.2 AUTHORITY. Each COMPANY has the full legal right, power and authority
to enter into and perform this Agreement and the Merger.
5.3 CAPITAL STOCK OF THE COMPANIES. The authorized capital stock of each
COMPANY is as set forth on Schedule 1.4. All of the issued and outstanding
shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued
11
and outstanding shares of the capital stock of each COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by such COMPANY in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of the COMPANY.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
each COMPANY has not acquired any COMPANY Stock since January l, 1995. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates any of the COMPANIES to issue any
of its capital stock; (ii) neither COMPANY has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (iii) neither the voting stock structure of each COMPANY
nor the relative ownership of shares among any of their respective stockholders
has been altered or changed in contemplation of the Mergers and/or the VPI Plan
of Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of each COMPANY's stock and
the material terms of such outstanding options, warrants or other rights.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each
COMPANY's subsidiaries, whether a corporation, limited liability company or
other business entity (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned by the COMPANIES as
set forth on Schedule 5.6, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions,
12
encumbrances and claims of every kind. Except as set forth on Schedule 5.6, each
COMPANY does not presently own, of record or beneficially, or control, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity nor
is any COMPANY, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of each COMPANY, including the names of any
entities acquired by each COMPANY (by stock purchase, merger or otherwise) or
owned by each COMPANY or from whom the COMPANIES previously acquired material
assets. Except as disclosed on Schedule 5.7, neither COMPANY has been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 SPIN-OFF BY THE COMPANIES. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of any of the
COMPANIES since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of the
following financial statements (the "COMPANY Financial Statements") of each of
the COMPANIES: the COMPANY's (i) audited Balance Sheet, if any, as of December
31, 1997 and unaudited Balance Sheet, if any, as of December 31, 1996; (ii)
audited Statement of Operations, if any, for the period ended December 31, 1997
(December 31, 1997 being hereinafter referred to as the "Balance Sheet Date")
and unaudited Statement of Operations, if any, for the period ended December 31,
1996; (iii) audited Statement of Changes in Stockholders' Equity, if any, for
the period ended on the Balance Sheet Date; and (iv) audited Statement of Cash
Flows, if any, for the period ended on the Balance Sheet Date. Except as set
forth on Schedule 5.9, such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
5.9 and, with respect to unaudited COMPANY Financial Statements, except for the
requirement of footnote disclosures). Except as set forth on Schedule 5.9,
13
such Balance Sheets as of December 31, 1997 and 1996 present fairly the
financial position of such COMPANY as of the dates indicated thereon, and such
Statements of Operations, Statements of Changes in Stockholders' Equity and
Statements of Cash Flows present fairly the results of operations for the
periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.10) as of the Balance
Sheet Date of (i) all liabilities of such COMPANY which are not reflected in the
COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of such COMPANY (including all liabilities in excess of $10,000) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements, together with true, correct and
complete copies of such documents. Except as set forth on Schedule 5.10, since
the Balance Sheet Date neither COMPANY has incurred any material liabilities of
any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business. Each of the COMPANIES has also delivered to VPI on
Schedule 5.10, in the case of those contingent liabilities related to pending
or, to the knowledge of the COMPANIES, threatened litigation, or other
liabilities which are not fixed or are being contested, the following
information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
14
5.11 ACCOUNTS AND NOTES RECEIVABLE. Each of the COMPANIES has delivered to
VPI an accurate list (which is set forth on Schedule 5.11) of the accounts and
notes receivable of such COMPANY, as of the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Each of the COMPANIES shall also provide to VPI (x) an accurate
list of all receivables obtained subsequent to the Balance Sheet Date up to the
Pre-Closing Date and (y) an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the
extent reflected on Schedule 5.11 or as disclosed by the COMPANIES to VPI in a
writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
each COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of such COMPANY after the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. Each of the COMPANIES holds all licenses,
franchises, permits and other governmental authorizations that are necessary for
the operation of the business of such COMPANY as now conducted, and such COMPANY
has delivered to VPI an accurate list and summary description (which is set
forth on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by such COMPANY (including interests in software or
other technology systems, programs and intellectual property) (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 5.13). The licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 are valid, and such COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. Each of the
COMPANIES has
15
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12 and 5.13
and is not in violation of any of the foregoing, except for inadvertent,
immaterial noncompliance with such requirements, standards, criteria and
conditions (provided that any such noncompliance shall be deemed a breach of
this Section 5.12 for purposes of Section 11 hereof). Except as specifically
provided on Schedule 5.12, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to each COMPANY by, any such licenses,
franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i) each
of the COMPANIES has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their respective properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) each COMPANY has obtained and adhered to all permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.13, and has reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by each COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by such
COMPANY except as permitted by Environmental Laws; (iv) such COMPANY knows of no
on-site or off-site location to which such COMPANY has transported or disposed
of Hazardous Wastes and Hazardous Substances or arranged for the transportation
of Hazardous Wastes and Hazardous
16
Substances, which site is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against any of the COMPANIES, VPI or the NEWCOS for any clean-up cost, remedial
work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) such
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. Each COMPANY has delivered to VPI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included in
"depreciable plant, property and equipment" on the balance sheet of such COMPANY
as of the Balance Sheet Date or that will be included on any balance sheet of
such COMPANY prepared after the Balance Sheet Date, (y) all other personal
property (except cash and cash equivalents) owned by such COMPANY with a value
in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date and (z) all leases and agreements in respect of personal
property used in the operation of such COMPANY's business as now conducted,
including, true, complete and correct copies of all such leases and agreements.
The COMPANIES shall indicate on Schedule 5.14 those assets listed thereon that
are currently owned, or that were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or Affiliates of such COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by each COMPANY in its business is either
owned by such COMPANY or leased by such COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect
and, assuming due execution and delivery thereof by the parties thereto other
than such COMPANY, the STOCKHOLDERS and their respective Affiliates, constitute
valid and binding agreements of such COMPANY, the STOCKHOLDERS and, to the
knowledge of such COMPANY or the
17
STOCKHOLDERS, the other parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS. Each COMPANY has delivered to VPI an accurate
list (which is set forth on Schedule 5.15) of (i) all significant customers, it
being understood and agreed that a "significant customer," for purposes of this
Section 5.15, means a customer (or person or entity) representing 5% or more of
such COMPANY's annual revenues as of the Balance Sheet Date. Except to the
extent set forth on Schedule 5.15, none of any COMPANY's significant customers
(or persons or entities that are sources of a significant number of customers)
have canceled or substantially reduced or, to the knowledge of any COMPANY, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by such COMPANY.
5.16 MATERIAL CONTRACTS AND COMMITMENTS. Each COMPANY has listed on
Schedule 5.16 all material contracts, commitments and similar agreements to
which such COMPANY currently is a party or by which it or any of its properties
are bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land), other than contracts,
commitments and agreements otherwise listed on Schedules 5.10, 5.14 or 5.17, (a)
in existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to VPI. Each COMPANY has complied with all material commitments
and obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.16 and no notice of default under any such
contract or agreement has been received. Each COMPANY has also indicated on
Schedule 5.16 a summary description of all pending plans or projects involving
the opening of new operations, expansion of existing operations, and the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by such COMPANY.
5.17 REAL PROPERTY. Schedule 5.17 includes a list of all real property
owned or leased by each COMPANY (i) as of the Balance Sheet Date and (ii)
acquired or leased since the Balance Sheet
18
Date, and all other real property, if any, used by each COMPANY in the conduct
of its business. Each COMPANY has good and insurable title to the real property
owned by it, including those reflected on Schedule 5.14, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.17 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current use of the property.
Schedule 5.17 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of each COMPANY with respect to real property owned by such COMPANY.
Each COMPANY has also delivered to VPI an accurate list of real property
leased by such COMPANY as lessee (which list is set forth on Schedule 5.17),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by such COMPANY as lessee (which copies are
attached to Schedule 5.17), and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by the STOCKHOLDERS or
business or personal affiliates of such COMPANY or the STOCKHOLDERS. Except as
set forth on Schedule 5.17, all of such leases included on Schedule 5.17 are in
full force and effect and, assuming due execution and delivery thereof by the
parties thereto other than such COMPANY, the STOCKHOLDERS and their respective
affiliates, constitute valid and binding agreements of such COMPANY, the
STOCKHOLDERS and, to the knowledge of such COMPANY or the STOCKHOLDERS, the
other parties (and their successors) thereto in accordance with their respective
terms.
19
5.18 INSURANCE. Each COMPANY has delivered to VPI, as set forth on and
attached to Schedule 5.18, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by such COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that such COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Closing Date. No insurance carried by such
COMPANY has ever been canceled by the insurer and such COMPANY has never been
unable to obtain insurance coverage for its assets and operations.
5.19 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. Each
COMPANY has delivered to VPI an accurate list (which is set forth on Schedule
5.19) showing all officers, directors and key employees of such COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. Each COMPANY has provided to
VPI true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.19. Except as set forth on Schedule 5.19, since the Balance
Sheet Date, there have been no increases in the compensation payable or any
special bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.19, (i) neither COMPANY is bound by or
subject to (and none of their respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of any
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best of each COMPANY's knowledge, no campaign
to establish such representation is in progress and (iv) there is no pending or,
to the best of each COMPANY's knowledge, threatened labor dispute involving any
COMPANY and any group of its
20
employees nor has any COMPANY experienced any labor interruptions over the past
three years. Each COMPANY believes its relationship with employees to be good.
Each COMPANY (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic or foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages and
hours, except for inadvertent, immaterial noncompliance with such laws, rules,
and regulations (provided that any such noncompliance shall be deemed a breach
of this Section 5.19 for purposes of Section 11 hereof); (ii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; (iii) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other employment-related benefits; and
(iv) has provided employees with the benefits to which they are entitled
pursuant to the terms of all COMPANY benefit plans.
5.20 EMPLOYEE PLANS. Each COMPANY has delivered to VPI an accurate schedule
(Schedule 5.20) showing all employee benefit plans currently sponsored or
maintained or contributed to by, or which cover the current or former employees
or directors of such COMPANY, all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and all
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.20,
neither COMPANY sponsors, maintains or contributes to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan" (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) nor has any COMPANY any obligation to contribute to or
accrue or pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of ERISA) or any
non-qualified deferred compensation
21
arrangement). Neither COMPANY has sponsored, maintained or contributed to any
employee pension benefit plan other than the plans, agreements, arrangements and
trusts set forth on Schedule 5.20, nor is any COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of such
COMPANY's employees.
All accrued contribution obligations of each COMPANY with respect to any
plan listed on Schedule 5.20 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of such COMPANY as of the Balance Sheet
Date.
5.21 COMPLIANCE WITH ERISA. All such plans, agreements, arrangements and
trusts of each COMPANY that are currently maintained or contributed to by such
COMPANY or cover employees or former employees of such COMPANY listed on
Schedule 5.20 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.21 hereof. All employee
benefit plans, agreements, arrangements and trusts listed on Schedule 5.20 and
the administration thereof are in substantial compliance with their terms and
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes, ordinances
and regulations. Except as disclosed on Schedule 5.21, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audit reports, Forms 5500, summary plan descriptions or Tax Returns)
have been timely filed or distributed, and copies thereof for the three most
recent plan years are included as part of Schedule 5.21 hereof. No such plan
listed on Schedule 5.20, nor any COMPANY, nor any STOCKHOLDER with respect to
any such plan or any COMPANY, has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No such plan
listed on Schedule 5.20 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and each
COMPANY has not incurred any liability
22
for excise tax or penalty due to the Internal Revenue Service nor any liability
to the Pension Benefit Guaranty Corporation. The COMPANIES and STOCKHOLDERS
further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.20 subject to the provisions of
Title IV of ERISA has been terminated except in accordance with applicable
laws and regulations or as may be required pursuant to Section 9.18 hereof;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.20;
(iv) each COMPANY has not incurred liability under Section 4062 of
ERISA;
(v) each COMPANY is not now, and cannot as a result of its past
activities become, liable to the Pensions Benefit Guaranty Corporation or
to any multi-employer pension benefit plan under the provisions of Title IV
of ERISA; and
(vi) no circumstances exist pursuant to which any COMPANY has or could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to the Internal Revenue Service for any excise
tax or penalty, or being subject to any Statutory Lien to secure payment of
any liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than a COMPANY that is, or at any time
was, a member of a "controlled group" (as defined in Section 412(n)(6)(B)
of the Code) that includes such COMPANY.
5.22 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 5.22 or 5.13, neither COMPANY is in violation of any law or regulation
or of any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over such COMPANY, except for inadvertent, immaterial noncompliance
with any such law, regulation or order (provided that any such noncompliance
shall be
23
deemed a breach of this Section 5.22 for purposes of Section 11 hereof); and
except to the extent set forth on Schedules 5.10 or 5.13, there are no claims,
actions, suits or proceedings, commenced or, to the knowledge of the COMPANIES,
threatened, against or affecting any of the COMPANIES, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
such COMPANY and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. Each COMPANY has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations, and is not in
violation of any of the foregoing.
5.23 TAXES.
(a) Each COMPANY has timely filed all requisite federal, state, local
and other Tax returns, reports, declarations or Tax return filing extension
requests ("Tax Returns") for all fiscal periods ended on or before the Balance
Sheet Date. All such Tax Returns have set forth all material items required to
be set forth therein and were prepared in compliance with applicable laws and
were true, correct and complete in all material respects. No material fact or
information has become known to the COMPANIES or their respective officers or
employees responsible for maintaining the financial records of such COMPANY
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 5.23, there are no
examinations in progress (and the COMPANIES and their respective employees are
not aware of any proposed examinations) or claims against any COMPANY (including
liens against the COMPANY's assets) for federal, state, local and other Taxes
(including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for Taxes, whether
pending or threatened, has been received. Except as set forth on Schedule 5.23,
neither any COMPANY nor the STOCKHOLDERS have entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
24
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by any COMPANY, any member of an affiliated or
consolidated group which includes or included any of the COMPANIES, or with
respect to any payment made or deemed made by any COMPANY, required to be paid
by the date hereof, have been paid. All amounts required to be deposited,
withheld or collected under applicable federal, state, local or other Tax laws
and regulations by any COMPANY for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or secured and reserved against and entered on the COMPANY
Financial Statements(and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof).
(c) The amounts, if any, shown as accruals for Taxes on the COMPANY
Financial Statements (and, if applicable, any Financial Statements delivered
pursuant to Section 7.10 hereof) are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date.
(d) Except as set forth on Schedule 5.23, neither COMPANY has been
included in or joined in the filing of any consolidated or combined Tax Return
(other than as a common parent). Neither COMPANY is a party to or bound by or
obligated under any Tax sharing, Tax benefit or similar agreement with any
person or entity.
(e) Except as set forth on Schedule 5.23, neither COMPANY has (i)
assumed or is liable for any Taxes of any other person or entity, including any
predecessor corporation or partnership, as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which any COMPANY
or such person or entity was the surviving corporation or a consolidation) or
(ii) indemnified any other person or entity or otherwise agreed to pay on behalf
of any other person or entity any Taxes arising from or which may be asserted on
the basis of any Tax treatment adopted with respect to all or any aspect of such
business acquisition transaction.
25
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of each COMPANY for its last three (3) fiscal years or
such shorter period of time as such COMPANY shall have existed, (ii) any Tax
examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 5.23.
(g) Each COMPANY has a taxable year ended on the date set forth as
such on Schedule 5.23.
(h) Except as disclosed on Schedule 5.23, each COMPANY's methods of
accounting have not changed in the past five years. No adjustment to taxable
income by reason of a change of accounting method is required in respect of any
period for which the statute of limitations has not expired.
(i) Neither COMPANY is an investment company as defined in Section
351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting any COMPANY as of the date hereof are disclosed on Schedule
5.23. After the date hereof, no statutory or regulatory election with respect to
Taxes will be made without the written consent of VPI.
(k) Neither COMPANY has filed a consent with the Internal Revenue
Service pursuant to section 341(f) of the Code or agreed to have section
341(f)(2) of the Code apply to any disposition of any subsection (f) asset (as
defined in section 341(f) of the Code) owned by such COMPANY.
5.24 NO VIOLATIONS. Neither COMPANY is in violation of any Charter
Document. Neither COMPANY or, to the knowledge of either COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15, 5.16 or 5.17, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.24, (a) the
rights and benefits of each
26
COMPANY under the Material Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.24, none
of the Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.24, none of the Material Documents
prohibits the use or publication by any COMPANY, VPI or any NEWCO of the name of
any other party to such Material Document, and none of the Material Documents
prohibits or restricts either COMPANY from freely providing services to any
other customer or potential customer of such COMPANY, VPI, the NEWCOS or any
Other Founding Company.
5.25 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.25, neither
COMPANY is now a party to any governmental contract subject to price
redetermination or renegotiation.
5.26 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.26, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of any COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of any
COMPANY;
(iii) any change in the authorized capital of any COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
27
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock (except for dividends or distributions of cash
that do not cause the COMPANIES to fail to meet the financial requirements,
as of the Closing Date, set forth in the first sentence of Section 3.3) or
any direct or indirect redemption, purchase or other acquisition of any of
the capital stock of any COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by any COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of any COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of any COMPANY to any person (other
than VPI), including, without limitation, the STOCKHOLDERS and their
respective affiliates;
(viii) any cancellation of, or agreement to cancel, any indebtedness
or other obligation owing to any COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDERS or any affiliate thereof,
except for inadvertent, immaterial cancellations of or agreements to cancel
any such indebtedness or obligation (provided that any such cancellation or
agreement to cancel shall be deemed a breach of this Section 5.26 for
purposes of Section 11 hereof);
(ix) any plan, agreement or arrangement granting (other than to VPI)
any preferential rights to purchase or acquire any interest in any of the
assets, property or rights of any COMPANY or requiring consent of any party
to the transfer and assignment of any such assets, property or rights;
28
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of any COMPANY's business;
(xi) any waiver of any material rights or claims of any COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which any COMPANY is a party;
(xiii) any transaction by any COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by any COMPANY.
5.27 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Each of the COMPANIES has
delivered to VPI an accurate schedule (which is set forth on Schedule 5.27) as
of the date of the Agreement of:
(i) the name of each financial institution in which each COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.27 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from each COMPANY and a description of the terms of such power.
5.28 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of the COMPANIES and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of each
of the COMPANIES and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of each
COMPANY, enforceable against such COMPANY in accordance with its terms except as
may be limited by (i) bankruptcy, insolvency or other similar laws of general
application relating to or affecting
29
the enforcement of creditors' rights generally or (ii) the discretionary power
of a court exercising equity jurisdiction. The individual signing this Agreement
on behalf of each COMPANY has the legal power, authority and capacity to bind
such COMPANY to the terms of this Agreement.
5.29 RELATIONS WITH GOVERNMENTS. Neither COMPANY has made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office in violation of applicable law nor has it
otherwise taken any action which would cause any COMPANY to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
5.30 DISCLOSURE.
(a) This Agreement, including the schedules hereto, together with the
completed Directors and Officers Questionnaires and Registration Statement
Questionnaires attached hereto as Schedule 5.30 and all other documents and
information made available to VPI and its representatives in writing pursuant
hereto or thereto, present fairly the business and operations of each COMPANY
for the time periods with respect to which such information was requested. Each
COMPANY's rights under the documents delivered pursuant to this Agreement would
not be materially adversely affected by, and no statement made in this Agreement
would be rendered untrue in any material respect by, (i) any other document to
which any COMPANY is a party, or to which their respective properties are
subject, or (ii) any other fact or circumstance regarding any COMPANY (which
fact or circumstance was, or should reasonably, after due inquiry, have been
known to any COMPANY) that is not disclosed pursuant to this Agreement or to
such delivered documents.
(b) Each of the COMPANIES and the STOCKHOLDERS acknowledge and agree
(i) that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither VPI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to any COMPANY, the
STOCKHOLDERS or any other
30
person affiliated or associated with any COMPANY for any failure of the
Registration Statement to become effective, the IPO to occur at a particular
price or within a particular range of prices or to occur at all.
5.31 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.31, neither
COMPANY has, between the Balance Sheet Date and the date hereof, taken any of
the actions set forth in Section 7.3 (Prohibited Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Pre-Closing and on
the Closing Date, and that the representations and warranties set forth in
Sections 5.32, 5.33 and 5.34 shall survive until the second anniversary of the
Closing Date, which shall be the Expiration Date for purposes of those Sections.
5.32 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right, power
and authority to enter into this Agreement. Such STOCKHOLDER owns beneficially
and of record all of the shares of the COMPANY Stock identified on Annex IV as
being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.3, such
COMPANY Stock is owned free and clear of all liens, encumbrances and claims of
every kind.
5.33 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or VPI Stock
that such STOCKHOLDER has or may have had on the date hereof other than rights
of the STOCKHOLDER to acquire VPI Stock pursuant to any option granted by VPI.
5.34 NO INTENTION TO DISPOSE OF VPI STOCK. The STOCKHOLDERS do not have any
present plan, intention, commitment, binding agreement, or arrangement to
dispose of any shares of VPI Stock received as described in Section 3.1 in a
manner that would cause the Merger to violate the control requirement set forth
in Code section 368(c).
31
6. REPRESENTATIONS OF VPI AND NEWCOS
VPI and the NEWCOS jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and, subject to Section 7.8 hereof, shall be true at the
time of Pre-Closing and the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of two years (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 6.14 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Closing Date, which shall be deemed to be the Expiration Date for Section
6.14, (ii) the warranties and representations set forth in Section 6.17 hereof
shall survive until April 15, 2002, or until such later date as the limitations
period on the assessment of additional tax relating to the taxable year in which
the transactions contemplated herein occur may be extended from time to time, so
long as VPI has been notified of such extension and has consented to such
extension (which consent shall not be unreasonably withheld) and (iii) solely
for purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDERS or the COMPANIES actually incur
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. VPI and the NEWCOS are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and Bylaws, each as amended, of VPI and the NEWCOS
(the "VPI Charter Documents") are all attached hereto as Annex II. The VPI
32
Charter Documents provide for indemnification of officers and directors to the
full extent permitted by the General Corporation Law of Delaware.
6.2 AUTHORIZATION. (i) The respective representatives of VPI and the NEWCOS
executing this Agreement have the authority to enter into and bind VPI and the
NEWCOS to the terms of this Agreement and (ii) VPI and the NEWCOS have the full
legal right, power and authority to enter into and perform this Agreement and
the Mergers, and all required approvals of the shareholders and board of
directors of VPI and NEWCO, respectively, have been obtained.
6.3 CAPITAL STOCK OF VPI AND NEWCOS. Immediately prior to the Closing Date,
the authorized capital stock of VPI and the NEWCOS is as set forth in Sections
1.4(ii) and (iii), respectively. All of the issued and outstanding shares of the
capital stock of each NEWCO are owned by VPI and all of the issued and
outstanding shares of the capital stock of VPI are owned by the persons set
forth on Annex V hereof, and further are owned, in each case, free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. Upon consummation of the IPO, the number
of outstanding shares of VPI will be as set forth in the Registration Statement.
All of the issued and outstanding shares of the capital stock of VPI and each
NEWCO have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by VPI and the persons set
forth on Annex V, respectively, and further, such shares were offered, issued,
sold and delivered by VPI and the NEWCOS in compliance with all applicable state
and federal laws concerning the issuance of securities. Further, none of such
shares was issued in violation of the preemptive rights of any past or present
stockholder of VPI or the NEWCOS.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates VPI or the NEWCOS to
issue any of their respective authorized but unissued capital stock; and (ii)
neither VPI nor the NEWCOS has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend
33
or make any distribution in respect thereof. Schedule 6.4 also includes complete
and accurate copies of all stock option or stock purchase plans, including a
list, accurate as of the date hereof, of all outstanding options, warrants or
other rights to acquire shares of the stock of VPI.
6.5 SUBSIDIARIES. The NEWCOS have no subsidiaries. VPI has no subsidiaries
except for the NEWCOS and each of the companies identified as "NEWCO" in each of
the Other Agreements. Except as set forth in the preceding sentence, neither VPI
nor any NEWCO presently owns, of record or beneficially, or controls, directly
or indirectly, any capital stock, securities convertible into capital stock or
any other equity interest in any corporation, association or business entity nor
is VPI or any NEWCO, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of the
following financial statements (the "VPI Financial Statements") of VPI, which
reflect the results of its operations from inception: VPI's audited Balance
Sheet as of December 31, 1997 and Statements of Income, Cash Flows and Retained
Earnings for the period from inception through December 31, 1997. Such VPI
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 6.6). Except as set forth on
Schedule 6.6, such Balance Sheets as of December 31, 1997 present fairly the
financial position of VPI as of such date, and such Statements of Income, Cash
Flows and Retained Earnings present fairly the results of operations for the
period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, VPI
and the NEWCOS have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither VPI nor any NEWCO is in violation of any law or
regulation, or of any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
34
instrumentality having jurisdiction over either of them; and except to the
extent set forth on Schedule 6.8, there are no material claims, actions, suits
or proceedings, pending or, to the knowledge of VPI or the NEWCOS, threatened,
against or affecting VPI or the NEWCOS, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over either of them and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. VPI and the NEWCOS have conducted and are conducting their
respective businesses in compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and are not in violation of any of the foregoing.
6.9 NO VIOLATIONS. Neither VPI nor any NEWCO is in violation of any VPI
Charter Document. None of VPI, the NEWCOS or, to the knowledge of VPI and the
NEWCOS, any other party thereto, is in default under any lease, instrument,
agreement, license or permit to which VPI or any NEWCO is a party, or by which
VPI or any NEWCO, or any of their respective properties, are bound
(collectively, the "VPI Documents"); and (a) the rights and benefits of VPI and
the NEWCOS under the VPI Documents will not be adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the VPI Documents
or the VPI Charter Documents. Except as set forth on Schedule 6.9, none of the
VPI Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect and consummation
of the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by VPI and the NEWCOS and the performance of the transactions contemplated
herein have been duly and validly
35
authorized by the respective Boards of Directors of VPI and the NEWCOS and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of VPI and the NEWCOS, enforceable
against each of VPI and the NEWCOS in accordance with its terms except as
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights generally, and the
individuals signing this Agreement on behalf of VPI and the NEWCOS have the
legal power, authority and capacity to bind such parties.
6.11 VPI STOCK. At the time of issuance thereof, the VPI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of VPI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the VPI Stock
issued and outstanding as of the date hereof and the VPI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of VPI Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither VPI nor any NEWCO has entered or will
enter into any agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies or VPI other than the Other Agreements
and the agreements specifically contemplated by each of the Other Agreements,
including the employment agreements referred to therein, and none of VPI, the
NEWCOS, their equity owners or affiliates have received any cash compensation or
payments in connection with this transaction except for reimbursement of
out-of-pocket expenses which are necessary or appropriate to this transaction.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither VPI nor any
NEWCO has conducted any operations or business since inception other than
activities related to the VPI Plan of Organization. Neither VPI nor any NEWCO
owns or has at any time owned any real property or any material personal
property or is a party to any other agreement, except as listed on Schedule 6.13
and
36
except that VPI is a party to the Other Agreements and the agreements
contemplated thereby and to such agreements as will be filed as Exhibits to the
Registration Statement.
6.14 TAXES .
(a) VPI and the NEWCOS have timely filed all requisite federal, state,
local and other Tax Returns for all fiscal periods ended on or before the date
hereof. All such Tax Returns have set forth all material items required to be
set forth therein and were prepared in compliance with applicable laws and were
true, correct and complete in all material respects. No material fact or
information has become known to VPI or the NEWCOS or their officers or employees
responsible for maintaining the financial records of VPI and the NEWCOS
subsequent to the filing of such Tax Returns to the contrary of any information
contained therein. Except as set forth on Schedule 6.14, there are no
examinations in progress (and VPI and the NEWCOS and their employees are not
aware of any proposed examinations) or claims against VPI or the NEWCOS
(including liens against assets of VPI or the NEWCOS) for federal, state, local
and other Taxes (including penalties and interest) for any period or periods
prior to and including the date hereof and no notice of any claim for Taxes,
whether pending or threatened, has been received. Except as set forth on
Schedule 6.14, neither VPI nor the NEWCOS has entered into an agreement or
waiver or have been requested to enter into an agreement or waiver extending any
statute of limitations regarding Taxes.
(b) All Taxes, including interest and penalties (whether or not shown
on any Tax Return) owed by VPI and the NEWCOS, any member of an affiliated or
consolidated group which includes or included VPI or the NEWCOS, or with respect
to any payment made or deemed made by VPI or the NEWCOS, required to be paid by
the date hereof, have been paid. All amounts required to be deposited, withheld
or collected under applicable federal, state, local or other Tax laws and
regulations by VPI and the NEWCOS for Taxes have been so deposited, withheld or
collected, and such deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside and secured in accounts for
such purpose or
37
secured and reserved against and entered on the financial statements.
(c) The amounts, if any, shown as accruals for Taxes on the VPI
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date.
(d) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
has been included in or joined in the filing of any consolidated or combined Tax
Return (other than as a common parent). Neither VPI nor the NEWCOS is a party to
or bound by or obligated under any Tax sharing, Tax benefit or similar agreement
with any person or entity.
(e) Except as set forth on Schedule 6.14, neither VPI nor the NEWCOS
(i) has assumed or is liable for any Taxes of any other person or entity,
including any predecessor corporation or partnership, as a result of any
purchase of assets or other business acquisition transaction (other than a
merger in which VPI or the NEWCOS or such person or entity was the surviving
corporation or a consolidation) and (ii) has indemnified any other person or
entity or otherwise agreed to pay on behalf of any other person or entity any
Taxes arising from or which may be asserted on the basis of any Tax treatment
adopted with respect to all or any aspect of such business acquisition
transaction.
(f) Copies of (i) the federal, state and local income tax returns and
franchise tax returns of VPI and the NEWCOS for its last three (3) fiscal years
or such shorter period of time as VPI or the NEWCOS shall have existed, (ii) any
Tax examinations commenced or closed or outstanding during their three (3) most
recent fiscal years, and (iii) currently outstanding extensions of statutory
limitations, are attached hereto as Schedule 6.14.
(g) VPI and the NEWCOS have a taxable year ended on the date set forth
as such on Schedule 6.14.
(h) Except as disclosed on Schedule 6.14, neither VPI's nor the
NEWCOS' methods of accounting have changed in the past five years. No adjustment
to taxable income by reason of a change of accounting method is required in
respect of any period for which the statute
38
of limitations has not expired.
(i) Neither VPI nor the NEWCOS is an investment company as defined in
Section 351(e)(1) of the Code.
(j) All statutory or regulatory material elections with respect to
Taxes affecting VPI and the NEWCOS as of the date hereof are disclosed on
Schedule 6.14.
(k) Neither VPI nor the NEWCOS has filed a consent with the Internal
Revenue Service pursuant to section 341(f) of the Code or has agreed to have
section 341(f)(2) of the Code apply to any disposition of any subsection (f)
asset (as defined in section 341(f) of the Code) owned by VPI or the NEWCOS.
6.15 COMPLETION OF DUE DILIGENCE. VPI has substantially completed its due
diligence of the COMPANIES as of the date hereof, except for any additional
investigation that may be needed as a result of a notice pursuant to Section 7.7
or an amendment pursuant to Section 7.8.
6.16 DISCLOSURE. This Agreement (which includes the Schedules and Annexes
attached hereto) and the Registration Statement do not contain any untrue
statement of a material fact by VPI or NEWCO, and do not omit to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they are made, not misleading.
6.17 TAX TREATMENT. The receipt by the STOCKHOLDERS of the shares of VPI
Stock pursuant to Section 3 hereof will qualify as an exchange pursuant to which
gain is not recognized under Section 351(a) of the Code, provided that the
representations of the STOCKHOLDERS set forth in the letter of representations
(referenced in the tax opinion letter to be delivered pursuant to Section 8.4
hereof) are true and correct in all material respects.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Closing Date, each COMPANY will afford to the officers and
authorized representatives of
39
VPI and the Other Founding Companies (including the Underwriters and their
counsel) access to all of such COMPANY's sites, properties, books and records
and will furnish VPI with such additional financial and operating data and other
information as to the business and properties of such COMPANY as VPI or the
Other Founding Companies may from time to time reasonably request. Each COMPANY
will reasonably cooperate with VPI and the Other Founding Companies and their
respective representatives, including VPI's auditors and counsel, in the
preparation of any documents or other material (including the Registration
Statement) which may be required in connection with any documents or materials
required by this Agreement. VPI, the NEWCOS, the STOCKHOLDERS and the COMPANIES
shall treat all information obtained in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted with
respect to the Other Founding Companies as confidential in accordance with the
provisions of Section 14 hereof. In addition, VPI will cause each of the Other
Founding Companies to enter into a provision similar to this Section 7.1
requiring each such Other Founding Company, its stockholders, directors,
officers, representatives, employees and agents to keep confidential any
information regarding the COMPANY obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Closing Date, VPI will
afford to the officers and authorized representatives of each COMPANY access to
all of VPI's and the NEWCOS' sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish each COMPANY with such additional financial and
operating data and other information as to the business and properties of VPI
and the NEWCOS as each COMPANY may from time to time reasonably request. VPI and
the NEWCOS will cooperate with each COMPANY, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. VPI will provide complete access to its operations and key officers
and employees to each COMPANY, its representatives and advisors on a continuing
basis through the Closing Date. Each
40
COMPANY will cause all information obtained in connection with the negotiation
and performance of this Agreement to be treated as confidential in accordance
with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing Date, each COMPANY shall, except (x) as set forth on Schedule
7.2, (y) as requested by VPI or (z) as consented to by VPI (which consent shall
not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in at least as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under debt and
lease instruments and other agreements relating to or affecting its assets,
properties, equipment or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, and use
its best efforts to retain its present employees and relationships and
present agreements with suppliers, customers and others having business
relations with such COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities, except for
inadvertent, immaterial noncompliance with any such permit, law, rule,
regulation or order (provided that any such noncompliance shall be deemed a
breach of this Section 7.2 for purposes of Section 11 hereof);
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, other than in the ordinary course
of business; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for regularly
scheduled raises to non-officers consistent with past practices.
41
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between the
date hereof and the Closing Date, neither COMPANY shall, without the prior
written consent of VPI or unless requested by VPI:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding (except for dividends or
distributions of cash that do not cause the COMPANIES to fail to meet the
financial requirements, as of the Closing Date, set forth in the first
sentence of Section 3.3), or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of such COMPANY; (2)(A) liens for Taxes either not yet due or
payable or being contested in good faith and by appropriate proceedings
(and for which contested Taxes adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary course
of business (the liens set forth in clause (2) being referred to herein as
"Statutory Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.17
hereto;
42
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of such COMPANY, provided
that such COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of such COMPANY;
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder;
(xii) effect any change in the capital structure of the COMPANIES,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the COMPANIES'
capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock; or
(xiii) make expenditures outside the normal course of business.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANIES, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
43
(iii) furnish any information to any person or entity other than VPI
or its authorized agents relating to
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, any COMPANY or a merger, consolidation or business
combination of any COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Pre-Closing Date, each
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide VPI on Schedule 7.5 with proof that any required
notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and each COMPANY shall terminate, on or
prior to the Closing Date, (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants and employment agreements between such COMPANY
and any employee listed on Schedule 8.11 hereto and (ii) any existing agreement
between each COMPANY and any STOCKHOLDER not reflecting fair market terms,
except such existing agreements as are set forth on Schedule 9.7. Such
termination agreements are listed on Schedule 7.6 and copies thereof are
attached hereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and each COMPANY
shall give prompt notice to VPI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of any COMPANY or any STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the
Pre-Closing and (ii) any material failure of any STOCKHOLDER or any COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. VPI and the NEWCOS shall give prompt
notice to the COMPANIES of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of VPI or the NEWCOS contained herein to be untrue or
inaccurate in any material respect at or prior to the Pre-Closing and (ii) any
material failure of VPI or the NEWCOS to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.7 that is not
44
accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Pre-Closing Date to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising which, if existing at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided, however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15, 5,16 and
5.19 shall only have to be delivered at the Pre-Closing Date, unless such
Schedule is to be amended to reflect an event occurring other than in the
ordinary course of business. Notwithstanding the foregoing sentence, no
amendment or supplement to a Schedule prepared by any COMPANY that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless VPI and a majority of the Founding Companies other than the
COMPANIES consent to such amendment or supplement; and provided further, that no
amendment or supplement to a schedule prepared by VPI or the NEWCOS that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless a majority of the Founding Companies consent
to such amendment or supplement. For all purposes of this Agreement, including
without limitation for purposes of determining whether the conditions set forth
in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto shall be
deemed to be the schedules as amended or supplemented pursuant to this Section
7.8. In the event that one of the Other Founding Companies seeks to amend or
supplement a schedule pursuant to Section 7.8 of one of the Other Agreements,
and such amendment or supplement constitutes or reflects an event or occurrence
that would have a Material Adverse Effect on such Other Founding Company, VPI
shall give the COMPANIES notice promptly after it has knowledge thereof. If VPI
and a majority of the
45
Founding Companies consent to such amendment or supplement, but the COMPANIES do
not give their consent, the COMPANIES collectively may terminate this Agreement
pursuant to Section 12.l(iv) hereof. In the event that the COMPANIES seek to
amend or supplement a Schedule pursuant to this Section 7.8, and VPI and a
majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that VPI or any NEWCO seeks to
amend or supplement a Schedule pursuant to this Section 7.8 and a majority of
the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
7.8. No amendment of or supplement to a Schedule shall be made later than 24
hours prior to the anticipated effectiveness of the Registration Statement. For
purposes of this Section 7.8, consent to an amendment or supplement to a
schedule pursuant to Section 7.8 of this Agreement or one of the Other
Agreements shall have been deemed given by VPI or any Founding Company if no
response is received within 24 hours following receipt of notice of such
amendment or supplement (or sooner if required by the circumstances under which
such consent is requested and so requested in the notice). The provisions of
this Section 7.8 shall be contained in the Other Agreements executed in
connection with the VPI Plan of Organization.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. Each COMPANY and
the STOCKHOLDERS shall furnish or cause to be furnished to VPI and the
Underwriters all of the information concerning such COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with VPI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). Each COMPANY and the STOCKHOLDERS
agree promptly to advise VPI if, at any time during the period in which a
prospectus relating to the offering is required to be delivered
46
under the 1933 Act, any information contained in the prospectus concerning any
COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such inaccuracy. VPI
will give the COMPANIES and the STOCKHOLDERS an opportunity and a reasonable
amount of time to review and comment on a substantially final draft of the
Registration Statement prior to filing, and with respect to all amendments
thereto, VPI will give the COMPANIES and STOCKHOLDERS an opportunity to review
and comment on those portions of such amendments that relate to the COMPANIES.
Insofar as the information contained in the Registration Statement relates
solely to the COMPANIES or the STOCKHOLDERS, as of the effective date of the
Registration Statement each COMPANY represents and warrants as to such
information with respect to itself, and each STOCKHOLDER represents and
warrants, as to such information with respect to the COMPANIES and himself or
herself, that the Registration Statement will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading and that the STOCKHOLDERS and the COMPANIES
have had the opportunity to review and approve such information. If, prior to
the 25th day after the date of the final prospectus of VPI utilized in
connection with the IPO, the COMPANIES or the STOCKHOLDERS become aware of any
fact or circumstance which would change (or, if after the Closing Date, would
have changed) a representation or warranty of the COMPANIES or the STOCKHOLDERS
in this Agreement or would affect any document delivered pursuant hereto in any
material respect, the COMPANIES and the STOCKHOLDERS shall immediately give
notice of such fact or circumstance to VPI. However, subject to the provisions
of Section 7.8, such notification shall not relieve either the COMPANIES or the
STOCKHOLDERS of their respective obligations under this Agreement, and, subject
to the provisions of Section 7.8, at the sole option of VPI, the truth and
accuracy of any and all warranties and representations of the COMPANIES, or on
behalf of the COMPANIES and of STOCKHOLDERS at the date of this Agreement and on
the Pre-Closing Date and on the Closing Date, contained in this Agreement
(including the Schedules and Annexes
47
hereto) shall be a precondition to the consummation of this transaction.
7.10 FINAL FINANCIAL STATEMENTS. Each COMPANY shall provide prior to the
Closing Date, and VPI shall have had sufficient time to review the unaudited
consolidated balance sheets of the COMPANIES as of the end of all fiscal
quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANIES for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANIES or the results of its
operations from the financial statements as of the Balance Sheet Date. For the
fiscal quarter ending March 31, 1998, such financial statements shall be
delivered to VPI on or before April 21, 1998, unless the Closing Date shall have
occurred on or before April 21, 1998. Except as set forth on Schedule 7.10, such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the COMPANIES for the periods indicated thereon and shall be for
such dates and time periods as required by Regulation S-X under the 1933 Act and
the 1934 Act.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. VPI shall maintain its authorized capital stock as
set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the VPI Stock.
7.13 BEST EFFORTS TO CONSUMMATE TRANSACTION. VPI agrees to use its
commercially reasonable best efforts to effectuate the acquisition of the
businesses of the Founding Companies pursuant to the Other Agreements, and the
IPO. Between the date hereof and the Closing Date, VPI agrees that it will take
no action except such actions which are in furtherance of the business
48
of VPI as described in the Registration Statement. In connection with the
closings of the transactions under the Other Agreements, VPI agrees that it will
not waive any closing condition under any Other Agreement that would result in a
Material Adverse Effect to VPI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANIES
The obligations STOCKHOLDERS and the COMPANIES with respect to actions to
be taken on the Pre-Closing Date are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date of all of the following conditions. The
obligations of the STOCKHOLDERS and the COMPANIES with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of the conditions set forth in Sections 8.2, 8.3, 8.8 and
8.9. From and after the Pre-Closing Date or, with respect to the conditions set
forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after the Closing Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of VPI and the NEWCOS contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
VPI and the NEWCOS contained in Section 6 shall be true and correct in all
material respects as of the Pre-Closing Date as though such representations and
warranties had been made as of that time; and a certificate to the foregoing
effect dated the Pre-Closing Date and signed by the President or any Vice
President of VPI shall have been delivered to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by VPI and the NEWCOS on or
before the Pre-Closing Date and the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Pre-Closing Date and the Closing Date and signed by the
President or any Vice President of VPI shall have been delivered to the
STOCKHOLDERS.
49
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Mergers or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANIES as a result of which
the management of the COMPANIES deems it inadvisable to proceed with the
transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANIES and the Underwriters shall have
received a corporate opinion letter and a tax opinion letter from counsel for
VPI, dated the Pre-Closing Date, in the forms annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of VPI Stock to be received by the STOCKHOLDERS is not less
than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made, and all consents and
approvals of third parties listed on Schedule 6.9 shall have been obtained.
8.7 GOOD STANDING CERTIFICATES. VPI and the NEWCOS each shall have
delivered to the COMPANIES a certificate, dated as of a date no later than ten
days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of
State and in each state in which VPI or the NEWCOS are authorized to do
business, showing that each of VPI and the NEWCOS is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for VPI and the NEWCOS, respectively, for all periods prior to the
Pre-Closing Date have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to VPI or the NEWCOS which would constitute a Material
Adverse Effect, and VPI and/or the NEWCOS shall not have suffered any material
loss or damages to any of its properties or assets,
50
whether or not covered by insurance, which change, loss or damage materially
affects or impairs the ability of VPI and/or the NEWCOS to conduct their
respective businesses.
8.9 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANIES shall have received a
certificate or certificates, dated the Pre-Closing Date and signed by the
secretary of VPI and of each NEWCO, certifying the truth and correctness of
attached copies of VPI's and the NEWCOS' respective Certificates of
Incorporation (including amendments thereto), Bylaws (including amendments
thereto), and resolutions of the boards of directors and, if required, the
stockholders of VPI and the NEWCOS approving VPI's and the NEWCOS' entering into
this Agreement and the consummation of the transactions contemplated hereby.
Such certificate or certificates also shall be addressed to the Underwriters and
copies thereof shall be delivered to the Underwriters.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 DIRECTORS AND OFFICERS INSURANCE. VPI shall have obtained Directors
and Officers liability insurance in amounts that are customary and commercially
reasonable.
8.13 STOCK OPTIONS. VPI shall have established a stock option plan pursuant
to which 6% of the outstanding shares of VPI will be made available for issuance
by the Founding Companies to their employees on a pro rata basis based upon the
respective consideration amounts paid by VPI under this Agreement and the Other
Agreements. The exercise price of all options granted under such stock option
plan as of the Closing Date will be the price per share of VPI Stock in the IPO,
and all such options shall vest in four equal installments commencing on the
first anniversary of the Closing Date and on each of the three anniversaries
thereafter. The
51
terms set forth in the preceding sentence and all other terms of the options
shall be no less favorable than the options made available to the Other Founding
Companies.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF VPI AND NEWCOS
The obligations of VPI and the NEWCOS with respect to actions to be taken
on the Pre-Closing Date are subject to the satisfaction or waiver on or prior to
the Pre-Closing Date of all of the following conditions. The obligations of VPI
and the NEWCOS with respect to actions to be taken on the Closing Date are
subject to the satisfaction or waiver on or prior to the Closing Date of the
conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the
Pre-Closing Date or, with respect to the conditions set forth in Sections 9.2,
9.3, 9.5 and 9.13, from and after the Closing Date, all conditions not satisfied
shall be deemed to have been waived, except that no such waiver shall be deemed
to affect the survival of the representations and warranties of the COMPANY
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the STOCKHOLDERS and the COMPANIES contained in this Agreement shall be true and
correct in all material respects as of the Pre-Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANIES on or before the Pre-Closing Date or the Closing Date, as the case may
be, shall have been duly performed or complied with in all material respects;
and the STOCKHOLDERS shall have delivered to VPI certificates dated the
Pre-Closing Date and the Closing Date, respectively, and signed by them to such
effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO
52
and no governmental agency or body shall have taken any other action or made any
request of VPI as a result of which the management of VPI deems it inadvisable
to proceed with the transactions hereunder.
9.4 SECRETARY'S CERTIFICATES. VPI shall have received certificates, dated
the Pre-Closing Date and signed by the secretary or an assistant secretary of
each COMPANY, certifying the truth and correctness of attached copies of each
COMPANY's Charter Documents and resolutions of the board of directors and the
STOCKHOLDERS approving each COMPANY's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate also
shall be addressed to the Underwriters and a copy thereof shall be delivered to
the Underwriters.
9.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to any COMPANY which would constitute a Material Adverse
Effect, and neither COMPANY shall have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of any COMPANY
to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to VPI an
instrument dated the Pre-Closing Date releasing the COMPANIES and VPI from (i)
any and all claims of the STOCKHOLDERS against the COMPANIES and VPI and (ii)
obligations of the COMPANIES and VPI to the STOCKHOLDERS, except for (x) items
specifically identified on Schedules 5.10, 5.11 and 5.16 as being claims of or
obligations to the STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS
relating to their employment by the COMPANIES and (z) obligations arising under
this Agreement or the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between any of the COMPANIES and the
STOCKHOLDERS not reflecting fair market terms shall have been canceled effective
prior to or as of the Closing Date.
9.8 OPINION OF COUNSEL. VPI shall have received an opinion from Counsel to
the COMPANIES and the STOCKHOLDERS, dated the Pre-Closing Date, substantially in
the form
53
annexed hereto as Annex VII, and the Underwriters shall have received a copy of
the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.24 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANIES shall have delivered to VPI
certificates, dated as of a date no earlier than ten days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in each
COMPANY's state of incorporation and, unless waived by VPI, in each state in
which each COMPANY is authorized to do business, showing each COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for each COMPANY for all periods prior to the
Pre-Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the VPI Stock to the
Underwriters in the IPO and the acquisitions of at least eight of the Other
Founding Companies with aggregate earnings before taxes of at least $8 million
for the 12-month period ended December 31, 1997, pursuant to the Other
Agreements shall have occurred simultaneously with the Closing Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to VPI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 INSURANCE. VPI shall have been named as an additional insured on all
insurance policies of each COMPANY, and certificates of insurance to that effect
shall have been delivered to
54
VPI. VPI shall reimburse the COMPANIES for the incremental cost of having VPI so
named as an additional insured.
9.16 LOCKUP AGREEMENT Each of the COMPANIES and the STOCKHOLDERS shall have
signed an agreement with the Underwriters, in form and substance identical to
agreements signed by the Other Founding Companies and the Founding Stockholders
in connection with the Other Agreements, by which the STOCKHOLDERS covenant to
hold all of the VPI Stock acquired hereunder for a period of at least 180 days
after the Closing Date except for transfers to immediate family members, and
trusts for the benefit of STOCKHOLDERS and/or immediate family members, who
agree to be bound by such restrictions on transfer.
9.17 LETTER OF REPRESENTATION. Each of the STOCKHOLDERS shall have
delivered the letter of representations referenced in the tax opinion letter to
be delivered pursuant to Section 8.4 hereof.
9.18 TERMINATION OF DEFINED BENEFIT PLANS. Each COMPANY shall have
terminated any qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA) in accordance with applicable laws and regulations.
10. COVENANTS OF VPI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. VPI shall
use its best efforts to have the STOCKHOLDERS released, contemporaneously with
the Closing Date, from any and all guarantees on any indebtedness that they
personally guaranteed and from any and all pledges of assets that they pledged
to secure such indebtedness for the benefit of the COMPANIES, with all such
guarantees on indebtedness being assumed by VPI. In the event that VPI cannot
obtain such releases from the lenders of any such guaranteed indebtedness on the
Closing Date, VPI shall repay all indebtedness of the COMPANIES relating to such
personal guarantees within 60 days after the Closing Date. VPI shall indemnify
and hold harmless the STOCKHOLDERS from the payment of any guaranties on any
indebtedness or contractual obligations that the STOCKHOLDERS had
55
incurred prior to the Pre-Closing Date provided that such indebtedness or
obligations are related to the business of the COMPANIES as being conducted at
the Pre-Closing Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Closing Date, VPI
shall not and shall not permit any of its subsidiaries to undertake any act that
would jeopardize the status of the transaction contemplated hereby as an
exchange pursuant to which gain is not recognized under Section 351(a) of the
Code, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the VPI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANIES shall, if possible, file or cause to be filed all
separate Tax Returns of any Acquired Party for all taxable periods that end
on or before the Closing Date. All such Tax Returns shall have set forth
all material items required to be set forth therein and shall have been
prepared in compliance with applicable laws and shall be true, correct and
complete in all material respects. Each STOCKHOLDER shall pay or cause to
be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements and books and records) required to be shown by
such Tax Returns to be due.
(ii) VPI shall file or cause to be filed all consolidated Tax Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date. VPI shall pay or cause to be paid all Tax
liabilities (in excess of amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the VPI Financial
Statements and books and records) required to be shown by such Tax Returns
to be due.
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(iii) Each party hereto shall, and shall cause its subsidiaries and
component members of a controlled group of corporations including the
COMPANIES, as defined in Section 1563 of the Code, to, provide to each of
the other parties hereto such cooperation and information as any of them
reasonably may request in filing any Tax Return, amended Tax Return or
claim for refund, determining a liability for Taxes or a right to refund of
Taxes or in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of all
relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property, which
such party may possess. Each party shall make its employees reasonably
available on a mutually convenient basis at its cost to provide explanation
of any documents or information so provided. Subject to the preceding
sentence, each party required to file Tax Returns pursuant to this
Agreement shall bear all costs of filing such Tax Returns.
(iv) Each of the COMPANIES, the NEWCOS, VPI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the transaction
as an exchange pursuant to which gain is not recognized under Section
351(a) of the Code.
10.4 APPOINTMENT OF DIRECTORS. The STOCKHOLDERS hereby designate Xxxxxxx X.
Xxxxxxxx to serve as a director of VPI effective as of the Closing Date.
Representatives of the Founding Companies shall constitute a majority of the
directors of VPI immediately following the Closing Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Closing Date,
VPI shall not terminate any health insurance, life insurance or 401(k) plan in
effect at any COMPANY until such time as VPI is able to replace such plan with a
plan that is applicable to VPI and all of its then existing subsidiaries. VPI
shall have no obligation to provide replacement plans that have the same terms
and
57
provisions as the existing plans, except as may be required by ERISA or other
applicable law; provided, however, that any new health insurance plan shall
provide for coverage for preexisting conditions for employees of each COMPANY
who were covered by such COMPANY's health insurance plan immediately prior to
the Closing Date or as otherwise required by law.
10.6 MAINTENANCE OF BOOKS. VPI will cause each COMPANY (a) to maintain the
books and records of such COMPANY existing prior to the Pre-Closing Date for a
period of six years after the Pre-Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
10.7 SECURITIES COVENANTS. VPI shall meet the current public information
requirements of Rule 144, promulgated by the SEC, for the two-year period
following the Closing Date. In addition, unless otherwise advised by counsel,
VPI agrees that it will promptly remove the restricted stock legend from the VPI
Stock received by the STOCKHOLDERS pursuant to this Agreement when the
restrictions against transfer under applicable securities laws have lapsed.
11. INDEMNIFICATION
The STOCKHOLDERS, VPI and the NEWCOS each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless VPI, the NEWCOS and each COMPANY (as the Surviving Corporations)
at all times, from and after the date of this Agreement until the Expiration
Date, from and against all losses, claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by VPI, the NEWCOS and each COMPANY (as the Surviving
Corporations) as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or each COMPANY set forth
herein or on the Schedules or certificates delivered in connection herewith,
(ii)
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any breach of any agreement on the part of the STOCKHOLDERS or the COMPANIES
under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating solely to any COMPANY or the STOCKHOLDERS, and provided
to VPI or its counsel by the COMPANIES or the STOCKHOLDERS, contained in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating solely to
the COMPANIES or the STOCKHOLDERS required to be stated therein or necessary to
make the statements therein not misleading, or (iv) the matters described on
Schedule 11.1(iv) (relating to specifically identified matters such as ongoing
claims and/or litigation), which Schedule shall be prepared by VPI, provided,
however, (A) that in the case of any indemnity arising pursuant to clause (iii)
such indemnity shall not inure to the benefit of VPI, the NEWCOS, the COMPANIES
or the Surviving Corporations to the extent that such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in
writing, corrected information to VPI counsel and to VPI for inclusion in the
final prospectus, and such information was not so included or properly
delivered, and (B) that no STOCKHOLDER shall be liable for any indemnification
obligation pursuant to this Section 11.1 to the extent attributable to a breach
of any representation, warranty or agreement made herein individually by any
other STOCKHOLDER.
11.2 INDEMNIFICATION BY VPI. VPI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by VPI or the NEWCOS
of their representations and warranties set forth herein or on the Schedules or
certificates attached hereto, (ii)
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any breach of any agreement on the part of VPI or the NEWCOS under this
Agreement, (iii) any liabilities which the STOCKHOLDERS may incur due to VPI's
or the NEWCOS' failure to be responsible for the liabilities and obligations of
the COMPANIES as provided in Section 1 hereof (except to the extent that VPI or
the NEWCOS have claims against the STOCKHOLDERS under Section 11.1 hereof by
reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act
or other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to VPI, the NEWCOS or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to VPI or the NEWCOS or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
11.2(v) (relating to specifically identified matters including the release of
the guarantees pursuant to Section 10.1 hereof).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (subject to the consent of the Indemnified Party, as
hereinafter provided), at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to
60
defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by the Indemnifying Party, provided that if
counsel to the Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and the Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. Further,
absent a conflict, the Indemnified Party may select counsel and have such
counsel participate in such matter at the sole cost of the Indemnified Party.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested in writing by the Indemnifying Party, in
which event the Indemnified Party shall be reimbursed by the Indemnifying Party
for reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim in which no admission of wrongdoing is required of the
Indemnified Party and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. If the Indemnifying Party does not undertake to
defend such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnifying Party shall reimburse the
Indemnified
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Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld, conditioned or delayed. All
settlements hereunder shall effect a complete release of the Indemnified Party,
unless the Indemnified Party otherwise agrees in writing. The parties hereto
will make appropriate adjustments for insurance proceeds in determining the
amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party relating to this Agreement or the
preparation of the Registration Statement and the IPO, provided, however, that
nothing herein shall be construed to limit the right of a party, in a proper
case, to seek injunctive relief for a breach of this Agreement. The obligations
set forth herein are contingent upon similar obligations being incorporated in
all of the Other Agreements.
11.5 LIMITATIONS ON INDEMNIFICATION. VPI, the NEWCOS, the Surviving
Corporations and the other persons or entities indemnified pursuant to Section
11.1 shall not assert any claim for indemnification hereunder against the
STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of
all claims which such persons may have against the STOCKHOLDERS shall exceed
2.0% of the sum of (i) the cash paid to the STOCKHOLDERS and (ii) the value of
the VPI Stock delivered to the STOCKHOLDERS (the "Indemnification Threshold"),
provided, however, that VPI, the NEWCOS, the Surviving Corporations and the
other persons or entities indemnified pursuant to Section 11.1 may assert and
shall be indemnified for any claim under Section 11.l(iv) at any time,
regardless of whether the aggregate of all claims which such persons may have
against the STOCKHOLDERS exceeds the Indemnification Threshold, it being
understood that the amount of any such claim under Section 11.1(iv) shall not be
counted towards the Indemnification Threshold. The STOCKHOLDERS shall not assert
any claim for indemnification hereunder against VPI or the
62
NEWCOS until such time as, and solely to the extent that, the aggregate of all
claims which the STOCKHOLDERS may have against VPI and the NEWCOS shall exceed
$50,000, provided, however, that the STOCKHOLDERS and the other persons or
entities indemnified pursuant to Section 11.2 may assert and shall be
indemnified for any claim under Section 11.2(v) at any time, regardless of
whether the aggregate of all claims which such persons may have against any of
VPI and the NEWCOS exceeds $50,000, it being understood that the amount of any
such claim under Section 11.2(v) shall not be counted towards such $50,000
amount. No person shall be entitled to indemnification under this Section 11 if
and to the extent that: (a) such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement; or (b) such
person receives a tax benefit as a result of the claim or loss for which
indemnification is sought (i.e., the amount of such claim or loss for which
indemnification is provided hereunder shall be reduced by the amount of such tax
benefit).
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) shall not be limited. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of VPI Stock, or a combination thereof, at the STOCKHOLDER's election.
For purposes of calculating the value of the VPI Stock received or delivered by
a STOCKHOLDER (for purposes of determining the Indemnification Threshold, the
limitation on indemnity set forth in the second preceding sentence and the
amount of any indemnity paid), VPI Stock shall be valued at its initial public
offering price as set forth in the Registration Statement. Any indemnification
payment made by the STOCKHOLDERS pursuant to this Section 11 shall be deemed to
be a reduction in the consideration received by the STOCKHOLDERS pursuant to
Section 3.
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12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated by written notice from
the party asserting termination to the other parties at any time prior to the
Closing Date solely:
(i) by mutual consent of the boards of directors of VPI and the COMPANIES;
(ii) by the STOCKHOLDERS or the COMPANIES (acting through their boards of
directors), on the one hand, or by VPI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by June 30, 1998, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or the COMPANIES, on the one hand, or by VPI, on
the other hand, if a breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein (including but not limited to the
condition that the aggregate value of the cash and the number of shares of VPI
Stock to be received by the STOCKHOLDERS is not less than the Minimum Value set
forth on Annex III), which breach or default has a Material Adverse Effect, and
the curing of such default shall not have been made on or before the Closing
Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 7.8
hereof, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 12.1(i), (ii) (except as set forth
64
therein), (iv) or (v), provided, however (and notwithstanding anything in
Section 18.7 to the contrary), that VPI shall reimburse the COMPANY for the
reasonable documented fees and expenses of its attorneys and accountants
incurred in connection with the transactions contemplated by this Agreement in
the event that this Agreement is terminated by the COMPANY or the STOCKHOLDERS
pursuant to Section 12.1(iii); and further provided, however (and
notwithstanding anything in Section 18.7 to the contrary), that the COMPANY and
the STOCKHOLDERS shall reimburse VPI for the reasonable documented fees and
expenses of its attorneys and accountants incurred in connection with the
transactions contemplated by this Agreement in the event that this Agreement is
terminated by VPI pursuant to Section 12.1(iii).
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Provided that VPI shall have complied with and
performed all of its obligations hereunder in all material respects and the
STOCKHOLDERS shall have received payment in full of the consideration described
in Section 3, each of the STOCKHOLDERS shall not, during the Noncompetition
Period, for any reason whatsoever, directly or indirectly, for themselves or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or sales
business or hotel management business in direct competition with VPI or any
of its subsidiaries, within 100 miles of the locations in which VPI or the
COMPANIES, or any of their subsidiaries, conduct a noncommercial property
management, rental or sales business or hotel management business (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of VPI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the
65
purpose or with the intent of enticing such employee away from or out of
the employ of VPI (including the subsidiaries thereof), provided that each
STOCKHOLDER shall be permitted to call upon and hire any member of his or
her immediate family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to that time, a customer of VPI
(including the subsidiaries thereof), of any COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of providing
noncommercial property management, rental or sales services or hotel
management services to property owners and/or renters in direct competition
with VPI within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by VPI (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, VPI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity, unless VPI
(or any subsidiary thereof) has expressly declined to pursue such
acquisition candidate or at least one (1) year has elapsed since VPI (or
any subsidiary thereof) has taken any action with respect to pursuing such
acquisition candidate; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that such COMPANY has in
the past disclosed such information to the types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
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13.2 DAMAGES. Because of the difficulty of measuring economic losses to VPI
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to VPI for which it would have no
other adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may
be enforced by VPI in the event of breach by such STOCKHOLDER, by injunctions
and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of VPI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of VPI (including VPI's subsidiaries); but it is also the intent
of VPI and the STOCKHOLDERS that such covenants be construed and enforced in
accordance with the changing locations of VPI (including VPI's other
subsidiaries) from the date hereof through the Noncompetition Period. For
example, if, during the Noncompetition Period, VPI (including VPI's other
subsidiaries) establishes new locations for its current activities or business
in addition to the locations currently established therefor, then the
STOCKHOLDERS will be precluded from soliciting customers or employees from such
new location and from directly competing within 100 miles of such new
location(s) through the term of the Noncompetition Period.
It is further agreed by the parties hereto that, in the event that any
STOCKHOLDER shall enter into a business or pursue other activities not in
competition with VPI (including VPI's other subsidiaries), or similar
activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of Section 13.1, and in any event
such new business, activities or location are not in violation of this Section
13 or of such STOCKHOLDER's obligations under this Section 13, if any, such
STOCKHOLDER shall not be chargeable with a violation of this Section 13 if VPI
(including VPI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities, or (iii) location, as
applicable.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other
67
covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. Subject to the introductory clause of Section
13.1, all of the covenants in this Section 13 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any STOCKHOLDER against VPI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by VPI of such covenants. It is
specifically agreed that the Noncompetition Period, during which the agreements
and covenants of each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which a
court of competent jurisdiction or other arbitrator or mediator has determined
that such STOCKHOLDER is in violation of any provision of this Section 13. The
covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated.
13.6 MATERIALITY. Each of the COMPANIES and the STOCKHOLDERS hereby agree
that the covenants in this Section 13 are a material and substantial part of
this transaction.
13.7 LIMITATION. In the event that any STOCKHOLDER who is employed by VPI
or any COMPANY pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), notwithstanding the definition of
"Noncompetition Period" in Section 18.17, the provisions of this Section 13
shall not be valid or enforceable by VPI if such STOCKHOLDER waives the
STOCKHOLDER's right to receive severance compensation under such employment
agreement. In the event such employment agreement is terminated as a result of a
material breach by the COMPANY of the employment agreement, the provisions of
this Section 13 likewise shall not be valid or enforceable.
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANIES, the Other Founding Companies,
and/or VPI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANIES', the Other Founding
Companies' and/or VPI's respective businesses. The STOCKHOLDERS agree that they
shall not use, except in connection with the transactions contemplated hereby,
or disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except
disclosures (a) to authorized representatives of VPI, (b) following the Closing,
by the STOCKHOLDERS as is required in the course of performing their duties for
VPI or the Surviving Corporation and (c) to counsel and other advisors, provided
that such advisors (other than counsel) agree to the confidentiality provisions
of this Section 14.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the noncommercial property
management, rental or sales industry through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, however, that prior to disclosing any information
pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give two
days' prior written notice thereof to VPI and provide VPI with the opportunity
within such two-day period to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by any of the STOCKHOLDERS of the provisions of this
Section, VPI shall be entitled to an injunction restraining such STOCKHOLDERS
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting VPI from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by
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this Agreement are not consummated, STOCKHOLDERS shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
14.2 VPI AND NEWCOS. VPI and the NEWCOS recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the COMPANIES, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the COMPANIES` businesses. VPI and
the NEWCOS agree that, prior to the Closing, or if the transactions contemplated
by this Agreement are not consummated, they will not use, except in connection
with the transactions contemplated hereby, or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except disclosures (a) to authorized
representatives of the COMPANIES, (b) to counsel and other advisors; provided,
however, that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 14.2 and (c) to the Other Founding Companies and
their representatives pursuant to Section 7.1(a), unless (i) such information
becomes known to the public generally through no fault of VPI or any NEWCO, (ii)
disclosure is required by law or the order of any governmental authority under
color of law; provided, however, that prior to disclosing any information
pursuant to this clause (ii), VPI and the NEWCOS shall, unless otherwise
required by law or such order, give two days' prior written notice thereof to
the COMPANIES and the STOCKHOLDERS and provide the COMPANIES and the
STOCKHOLDERS with the opportunity within such two-day period to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. VPI will disclose confidential information relating to the
COMPANIES to the Other Founding Companies only if such companies have agreed, in
advance, to treat such information as confidential. In the event of a breach or
threatened breach by VPI or the NEWCOS of the provisions of this Section, the
COMPANIES and the STOCKHOLDERS shall be entitled to an injunction restraining
VPI and the NEWCOS from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as
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prohibiting the COMPANIES and the STOCKHOLDERS from pursuing any other available
remedy for as such breach or threatened breach, including the recovery of
damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of three years from (a)
the Closing Date if the transactions contemplated hereby are consummated or (b)
the date hereof if the transactions contemplated hereby are not consummated.
14.5 RETURN OF DATA SUBMITTED. Upon termination of this Agreement for any
reason, VPI will cause the return to the COMPANIES of all data, and all copies
thereof, submitted to VPI or its agents pursuant to this Agreement.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year after the Closing Date, except
pursuant to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of VPI Stock
received by the STOCKHOLDERS pursuant to Section 3.1. The certificates
evidencing the VPI Stock delivered to the STOCKHOLDERS pursuant to Section 3 of
this Agreement shall bear a legend substantially in the form set forth below and
containing such other information as VPI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
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ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, APPOINTMENT OR
OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE.
15.2 CERTAIN TRANSFERS. Except for transfers to family members who agree to
be bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Closing Date, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of, in any
transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of VPI Stock received by the STOCKHOLDERS pursuant to
Section 3.1 except in accordance with this Section 15.2. If any STOCKHOLDER
desires to make a Future Sale, the STOCKHOLDER shall first provide written
notice thereof to VPI. VPI shall have three (3) days after receipt of such
notice by VPI in which to arrange for a private sale of such shares through one
or more of the Underwriters, and such STOCKHOLDER may not make the Future Sale
except pursuant to such arrangements; provided, however, that the terms of such
sale (including commissions) are at least as favorable as the terms the
STOCKHOLDER would have received in the absence of this Section 15.2. If VPI has
not successfully arranged for a private sale of such shares through one or more
the Underwriters within such three (3) day period, the restrictions of this
Section 15.2 shall not apply to such Future Sale. Any subsequent Future Sales by
such STOCKHOLDER must be made in accordance with this Section 15.2. The terms of
this Section 15.2 shall not apply to pledges of shares of VPI Stock.
16. SECURITIES LAW REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of VPI Stock to be delivered
to the STOCKHOLDERS pursuant to this Agreement have not been registered under
the 1933 Act and therefore may not be resold without compliance with the 1933
Act. The VPI Stock to be acquired by
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such STOCKHOLDERS pursuant to this Agreement is being acquired solely for their
own respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of VPI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act, the rules and regulations of the SEC and applicable state
securities laws. All of the VPI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND OTHER APPLICABLE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each of the STOCKHOLDERS is able to
bear the economic risk of an investment in the VPI Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the proposed investment in the
VPI Stock. The STOCKHOLDERS have had an adequate opportunity to ask questions
and receive answers from the officers of VPI concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
VPI, the plans for the operations of the business of VPI, the business,
operations and financial condition of the Founding Companies other than the
COMPANIES, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
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17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing Date,
whenever VPI proposes to register any VPI Stock for its own or others' account
under the 1933 Act, other than (i) any shelf registration of shares to be used
as consideration for acquisitions of additional businesses by VPI and (ii)
registrations relating to employee benefit plans, VPI shall give each of the
STOCKHOLDERS prompt written notice of its intent to do so. Upon the written
request of any of the STOCKHOLDERS given within 30 days after receipt of such
notice, VPI shall cause to be included in such registration all of the VPI Stock
issued to such STOCKHOLDER pursuant to this Agreement which any such STOCKHOLDER
requests, provided that VPI shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the reasonable opinion of tax counsel to VPI or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as an exchange pursuant to which gain is not recognized
under Section 351(a) of the Code. In addition, if VPI is advised in writing in
good faith by any managing underwriter of an underwritten offering of the
securities being offered pursuant to any registration statement under this
Section 17.1 that the number of shares to be sold by persons other than VPI is
greater than the number of such shares which can be offered without adversely
affecting the offering, VPI may reduce pro rata the number of shares offered for
the accounts of such persons (based upon the number of shares desired to be sold
by such person) to a number deemed satisfactory by such managing underwriter,
provided, however, that for each such offering made by VPI after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than VPI, the STOCKHOLDERS and the stockholders of the Other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements (collectively, the STOCKHOLDERS and the stockholders of the other
Founding Companies who receive shares of VPI Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the
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Founding Stockholders on a pro rata basis based on the number of shares proposed
to be registered by each of the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date two years after
the Closing Date, the holders of a majority of the shares of VPI Stock issued to
the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing (the "Demand Registration Request")
that VPI file a registration statement under the 1933 Act covering the
registration of up to all of the shares of VPI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
the Demand Registration Request, VPI shall give written notice of such request
to all other Founding Stockholders and shall, as soon as practicable but in no
event later than 45 days after the Demand Registration Request, file and use its
best efforts to cause to become effective a registration statement covering all
shares requested to be registered pursuant to this Section 17.2. VPI shall be
obligated to effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following the Demand Registration
Request a majority of VPI's disinterested directors (i.e., directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for a 60-day period if such deferral is
deemed by such directors to be in the best interests of VPI.
If immediately prior to the Demand Registration Request VPI has fixed plans
to file within 60 days after receipt of the Demand Registration Request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' VPI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless VPI is no longer proceeding
diligently to effect such registration (in which case the delay contemplated by
this sentence would not be applicable); provided that VPI shall provide the
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Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by VPI. In connection with
registrations under Sections 17.1 and 17.2, VPI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the VPI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 45 days (or such shorter period during which the Founding Stockholders
shall have sold all VPI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the VPI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution for the VPI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered public offering,
VPI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of VPI's size
and investment stature.
17.5 AVAILABILITY OF RULE 144. VPI shall not be obligated to register
shares of VPI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER with respect to such
STOCKHOLDER's VPI Stock.
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17.6 REGISTRATION RIGHTS INDEMNIFICATION.
(a) Indemnification by VPI. In the event any shares of VPI Stock received
by the STOCKHOLDERS pursuant to this Agreement (the "Registrable Securities")
are included in a registration statement under this Section 17, to the extent
permitted by law, VPI will, and hereby does, indemnify and hold harmless each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, agents, attorneys, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which such seller or any such director or officer or underwriter or
controlling Person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the 1933 Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
VPI will reimburse such seller and each such director, officer, underwriter and
controlling Person for any expenses (including but not limited to reasonable
attorneys' fees) reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
VPI shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to VPI by such seller expressly for use in the preparation thereof, and provided
further that VPI shall not be liable to any Person
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who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the 1933 Act, in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by Sellers. If any Registrable Securities are included
in any registration statement filed pursuant to this Section 17, each
prospective seller of such securities shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 17.6) each underwriter, each Person who controls such underwriter within
the meaning of the 1933 Act, VPI, each director of VPI, each officer of VPI,
VPI's agents and attorneys and each other Person, if any, who controls VPI
within the meaning of the 1933 Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
strict conformity with written information furnished to VPI by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the 1933 Act, in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or
78
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any underwriter, VPI or
any such director, officer or controlling Person and shall survive the transfer
of such securities by such seller. In no event shall the liability of any
selling holder of Registrable Securities under this Section 17.6(b) be greater
in amount than the dollar amount of the proceeds received by such holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 17.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 17.6, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall,
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without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 17.6 (with appropriate modifications)
shall be given by VPI and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the 1933
Act.
(e) Indemnification Payments. The indemnification required by this Section
17.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Section 17.6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to
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above shall be deemed to include, subject to the limitations set forth in
Section 17.6(c) hereof, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 17.6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 17.6(f), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason on such untrue or
alleged untrue statement or omission or alleged omission, and no selling holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such selling holder were
offered to the public exceeds the amount of any damages which such selling
holder has otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 17.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 17.6(a) through Section 17.6(e) hereof without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 17.6(f).
18. GENERAL
18.1 PRESS RELEASES. The parties hereto acknowledge that public disclosure
of this Agreement and/or any information regarding the transactions contemplated
hereby or the Other Agreements may adversely affect the ability of the parties
hereto and to the Other Agreements to
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consummate the transactions contemplated hereby and by the Other Agreements.
VPI, each COMPANY, and the STOCKHOLDERS hereby agree that they shall not issue
any press release or otherwise make any public announcement (including
communications with trade publications and other media), or disclose information
to any third party (except those agents or representatives of a party directly
involved in the transactions contemplated hereby and except as required by law)
concerning VPI, the Founding Companies or the transactions contemplated hereby
or by the Other Agreements without the prior approval of VPI, the COMPANIES and
the STOCKHOLDERS.
18.2 COOPERATION. The COMPANIES, the STOCKHOLDERS, VPI and the NEWCOS shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of each COMPANY cooperate
with VPI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement and
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, the successors of VPI, and the heirs and legal representatives of the
STOCKHOLDERS. Nothing in this Agreement shall be deemed to create any right with
respect to any person or entity not a party to or property not subject to this
Agreement.
18.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANIES, the NEWCOS and VPI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement, including but
not limited to any letter of intent entered into by any of the parties hereto.
This Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable
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in accordance with its terms and may be modified or amended only by a written
instrument executed by the STOCKHOLDERS, the COMPANIES, the NEWCOS and VPI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.6 BROKERS AND AGENTS. Except as disclosed on Schedule 18.6, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.7 EXPENSES. Whether or not the transactions herein contemplated shall be
consummated, VPI will pay the fees, expenses and disbursements of VPI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by VPI under this Agreement, including the fees and expenses of
Xxxxxx Xxxxxxxx, LLP (including such fees and expenses in connection with the
audit of the COMPANIES' financial statements), Akin, Gump, Strauss, Xxxxx &
Xxxx, L.L.P., and any other person or entity retained by VPI, and the costs of
preparing the Registration Statement. The STOCKHOLDERS shall pay the fees,
expenses and disbursements of the STOCKHOLDERS, the COMPANIES and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance and compliance with
all conditions to be performed by the COMPANIES and the STOCKHOLDERS under this
Agreement, including the fees and expenses of accountants and legal counsel to
the COMPANIES and the STOCKHOLDERS. Notwithstanding the foregoing, if the
transactions contemplated by this Agreement are consummated, VPI shall reimburse
the STOCKHOLDERS for such reasonable fees, expenses and disbursements upon the
closing of the
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IPO up to $50,000. In addition, each STOCKHOLDER shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
Mergers, other than Transfer Taxes, if any, imposed by the State of Delaware.
Each STOCKHOLDER shall file all necessary documentation and Tax Returns with
respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that
he or she, and not the COMPANIES or VPI, shall pay all taxes due upon receipt of
the consideration payable pursuant to Section 3 hereof, and shall assume all tax
risks and liabilities of such STOCKHOLDER in connection with the transactions
contemplated hereby; provided, however, that the foregoing shall not in any way
prejudice the ability of the STOCKHOLDERS and the COMPANIES to rely upon the
opinions contained in the tax opinion letter referenced in Annex VI.
18.8 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given (i) by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (ii) by delivering the same in person
to an officer or agent of such party or (iii) by facsimile transmission when
confirmation of receipt is received from the party being notified by the party
sending such notice.
(a) If to VPI, or the NEWCOS, addressed to them at:
Vacation Properties International, Inc.
c/o Capstone Partners, LLC
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile no.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with copies to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile no.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxxx
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(b) If to the STOCKHOLDERS, addressed to them at their respective addresses
set forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANIES, addressed to it at:
B&B On The Beach, Inc.
Xxxxxxxx & Xxxxxxxx Realty & Development, Inc.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile no.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx and Xxxxx Xxxxxxx Xxxxxxxx
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.8 from time to time.
18.9 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be held by any court of competent jurisdiction to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner as
to be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
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18.13 REMEDIES CUMULATIVE. Except to the extent specifically set forth
herein, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but each shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of VPI, the NEWCOS, the COMPANIES and STOCKHOLDERS (as defined in the
introductory paragraph of this Agreement) who will hold or who hold at least 50%
of the VPI Stock issued or to be issued to the STOCKHOLDERS upon consummation of
the respective Mergers. Any amendment or waiver effected in accordance with this
Section 18.15 shall be binding upon each of the parties hereto, any other person
receiving VPI Stock in connection with the Mergers and each future holder of
such VPI Stock.
18.16 INCORPORATION BY REFERENCE. To the extent that an item is disclosed
in a particular Schedule or a subsection of a particular Schedule and such item
is readily apparent on its face as being applicable to another Schedule or
another subsection of the same Schedule, such item shall be deemed incorporated
by reference in such Schedule or such other subsection under the same Schedule.
18.17 DEFINED TERMS. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any Schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means any COMPANY, any Subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean the NEWCOS and each of the other
Delaware companies wholly-owned by VPI prior to the Closing Date.
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"Affiliates" shall mean, with respect to a corporation, any other person or
entity that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such corporation,
and shall mean, with respect to an individual, any parent, spouse or child of
such individual.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" or "COMPANIES" has the meaning set forth in the first paragraph
of this Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Effective Time of the Mergers" shall mean the time as of which the Mergers
become effective, which is contemplated to occur on the Closing Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.20.
"Expiration Date" has the meaning set forth in Section 5(A).
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"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of VPI Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.24.
"Mergers" means the mergers of (i) B&B ACQUISITION CORP. with and into B&B
ON THE BEACH, INC. and (ii) XXXXXXXX ACQUISITION CORP. with and into XXXXXXXX &
XXXXXXXX REALTY & DEVELOPMENT, INC., pursuant to this Agreement and the
applicable provisions of the laws of the State of Delaware and other applicable
state laws.
"NEWCO" or "NEWCOS" has the meaning set forth in the first paragraph of
this Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of each
respective NEWCO.
"Noncompetition Period" means the longest of the following periods: (i)
three (3) years following the Closing Date; or (ii) (A) two (2) years following
the date of termination of any employment agreement entered into between VPI
and/or any COMPANY and the STOCKHOLDER subject to the Noncompetition Period or
(B) in the case of a termination without cause under such employment agreement
of the STOCKHOLDER subject to the Noncompetition Period, one (1) year following
the termination of such employment agreement.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the COMPANIES.
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"Person" means any natural person, corporation, business trust,
association, company, partnership, limited liability company, joint venture or
any other entity, government, agency or political subdivision.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by VPI and the Underwriters of
the public offering price of the shares of VPI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Pre-Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.21.
"Registrable Securities" has the meaning set forth in Section 17.6.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of VPI Stock to be issued in the IPO.
"Relevant Group" means the COMPANIES and any affiliated, combined,
consolidated, unitary or similar group of which any COMPANY is or was a member.
"Restricted Common Stock" means the common stock of VPI, par value $0.01
per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of VPI on the Closing Date.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"stock" and "capital stock" and "shares" mean, when used with respect to a
limited liability company unless the context otherwise requires, the membership
interests of such limited liability company, and otherwise have their respective
ordinary meanings.
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"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"stockholders" means, when used with respect to a corporation, the owners
of the capital stock of such corporation and means, when used with respect to a
limited liability company unless the context otherwise requires, the owners of
the membership interests of such limited liability company.
"Subsidiary" has the meaning set forth in Section 5.6.
"Surviving Corporations" shall mean each of the COMPANIES as the surviving
parties in the Mergers.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" has the meaning set forth in Section 5.23.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.7.
"VPI" has the meaning set forth in the first paragraph of this Agreement.
"VPI Charter Documents" has the meaning set forth in Section 6.1.
"VPI Financial Statements" has the meaning set forth in Section 6.6.
"VPI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"VPI Stock" means the common stock, par value $.01 per share, of VPI.
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"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VACATION PROPERTIES INTERNATIONAL, INC.
B&B ACQUISITION CORP.
XXXXXXXX ACQUISITION CORP.
By:/s/ Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx
Vice President
B&B ON THE BEACH, INC.
XXXXXXXX & XXXXXXXX REALTY & DEVELOPMENT, INC.
By:/s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
---------------------------
Title: President
--------------------------
STOCKHOLDERS:
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxx Xxxxxxx Xxxxxxxx
----------------------------------
Xxxxx Xxxxxxx Xxxxxxxx
