AGREEMENT AND PLAN OF MERGER
among
FAIRFIELD COMMUNITIES, INC.,
FA, INC.,
XXXX XXXXXXXXX,
C. XXXXXXX XXXXXXXXX, XX.
and
APEX MARKETING, INC.
Dated as of October 22, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER.........................................................1
1.1 The Merger...................................................1
1.2 Closing......................................................2
1.3 Effective Time...............................................2
1.4 Effect of the Merger.........................................2
1.5 Articles of Incorporation....................................2
1.6 Bylaws.......................................................2
1.7 Directors....................................................2
1.8 Officers.....................................................2
ARTICLE II
EFFECTS OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES.................3
2.1 Effect on Capital Stock......................................3
2.2 Surrender and Payment for Shares.............................4
2.3 Transfer of Shares After the Effective Time..................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES.....................................4
3.1 Representations and Warranties of Fairfield and Merger Sub...4
3.2 Representations and Warranties of Shareholders and Apex......7
3.3 Additional Representations of Shareholders..................15
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS.........................15
4.1 No Solicitation.............................................15
4.2 Conduct of Business Prior to Effective Time.................16
4.3 Cooperation Between the Parties.............................17
4.4 Covenants of Fairfield......................................17
4.5 Adverse Changes in Condition................................18
ARTICLE V
ADDITIONAL AGREEMENTS.............................................18
5.1 Confidentiality.............................................18
5.2 Indemnification of Shareholders.............................18
5.3 Indemnification of Fairfield................................18
5.4 Exclusivity Of Indemnification For Contractual Breaches.....21
5.5 Arbitration.................................................21
5.6 Reasonable Efforts..........................................21
5.7 Expenses and Fees...........................................22
5.8 Consents....................................................22
5.9 Pooling of Interests.........................................22
5.10 Transfer Restrictions........................................22
5.11 Tax Treatment................................................24
5.12 Non-Competition and Non-Solicitation Covenants...............24
5.13 Payment of Bonus.............................................25
5.14 Registration Rights..........................................25
ARTICLE VI
CONDITIONS PRECEDENT...............................................27
6.1 Conditions to Each Party's Obligation to Effect the Merger...27
6.2 Conditions to Obligations of Apex and Shareholders...........28
6.3 Conditions to Obligations of Fairfield and Merger Sub........28
6.4 Frustration of Closing Conditions............................29
6.5 Closing Documents and Procedures.............................29
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER..................................31
7.1 Termination..................................................31
7.2 Effect of Termination........................................32
7.3 Amendment....................................................32
7.4 Extension; Waiver............................................32
ARTICLE VIII
GENERAL PROVISIONS.................................................32
8.1 Survival of Representations and Warranties...................32
8.2 Notices......................................................33
8.3 Definitions..................................................34
8.4 Interpretation...............................................35
8.5 Counterparts.................................................35
8.6 Entire Agreement; No Third-party Beneficiaries...............35
8.7 Governing Law................................................35
8.8 Assignment...................................................35
8.9 Enforcement..................................................36
AGREEMENT AND PLAN OF MERGER dated as of October 22, 1997 (this
"Agreement"), among FAIRFIELD COMMUNITIES, INC., a Delaware corporation
("Fairfield"), FA, Inc., an Arkansas corporation and a wholly owned subsidiary
of Fairfield ("Merger Sub"), XXXX XXXXXXXXX, C. XXXXXXX XXXXXXXXX, XX. and APEX
MARKETING, INC., an Arkansas corporation ("Apex").
WHEREAS, the respective Boards of Directors of Fairfield, Merger Sub
and Apex each have determined that it is in the best interests of their
respective stockholders for Merger Sub to merge with and into Apex (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, Xxxx Xxxxxxxxx and C. Xxxxxxx Xxxxxxxxx, Xx. (collectively, the
"Shareholders" and each a "Shareholder") hold all of the outstanding capital
stock of Apex;
WHEREAS, the respective Boards of Directors of Fairfield, Merger Sub
and Apex have each determined that the Merger and the other transactions
contemplated under this Agreement are consistent with, and in furtherance of,
their respective business strategies and goals;
WHEREAS, Fairfield, Merger Sub, Shareholders and Apex desire to make
certain representations, warranties, covenants and agreements in connection with
the transactions contemplated by this Agreement and also to prescribe various
conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Code; and
WHEREAS, for financial accounting purposes, it is intended that the
Merger will be accounted for as a pooling of interests transaction.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
I.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Arkansas Business Corporation Act
of 1987 (the "ABCA"), Merger Sub shall be merged with and into Apex at the
Effective Time (as hereinafter defined). Following the Merger, the separate
corporate existence of Merger Sub will cease and Apex will continue as the
surviving corporation (the "Surviving Corporation") and will succeed to and
assume all the rights and obligations of Merger Sub in accordance with the ABCA.
I.2 Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the date that is two business days after the expiration of the
Inspection Period (the "Closing Date"), at the offices of Fairfield, 00000
Xxxxxxxxx Xxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000, unless another date, time
or place is agreed to in writing by all of the parties hereto.
I.3 Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on or after the Closing Date the parties shall deliver
Articles of Merger (the "Articles of Merger") executed in accordance with the
relevant provisions of the ABCA to the Arkansas Secretary of State for filing as
required under the ABCA and shall make all other filings or recordings required
under the ABCA. The Merger shall become effective at such time (the "Effective
Time") as the Articles of Merger have been accepted for filing by the Arkansas
Secretary of State (or such later time as stated in the Articles of Merger and
permitted by the Arkansas Secretary of State), which will be the Closing Date or
as soon as practicable thereafter.
I.4 Effect of the Merger. The Merger shall have the effects set forth
in Section 4-27-1106 of the ABCA.
I.5 Articles of Incorporation. Articles of incorporation of Apex shall
be amended to read in their entirety as set forth in Exhibit A attached hereto
and shall be the articles of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
I.6 Bylaws. The bylaws of Apex shall be amended to read in their
entirety as set forth in Exhibit B and shall be the bylaws of the Surviving
Corporation following the Merger until thereafter changed or amended as provided
therein or by applicable law.
I.7 Directors. The directors of Merger Sub at the Effective Time shall
be the directors of the Surviving Corporation following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
I.8 Officers. The officers of Merger Sub at the Effective Time shall be
the officers of the Surviving Corporation following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECTS OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
II.1 Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of the
capital stock of the constituent corporations:
(a)Exchanged Shares. All of the shares of Common Stock, par value
$.01 per share, of Apex (the "Apex Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Apex Common Stock,
if any, to be canceled under Section 2.1(c)), shall be converted into the right
to receive the number (the "Exchanged Shares") of validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of Fairfield
(the "Fairfield Common Stock") as determined pursuant to the following sentence.
If on the second business day immediately preceding the Closing Date the closing
sale price per share of Fairfield Common Stock ("Closing Price Per Share") as
reported in the New York Stock Exchange Composite Transaction Tape is:
(i) less than $24 per share, the total number of shares of
Fairfield Common Stock included in the Exchanged Shares shall be equal
to $5,400,000 divided by the Closing Price Per Share;
(ii) at least $24 per share but not more than $30 per share,
the total number of shares of Fairfield Common Stock included in the
Exchanged Shares shall be 225,000 shares of Fairfield Common Stock; or
(iii) more than $30 per share, the total number of shares of
Fairfield Common Stock included in the Exchanged Shares shall be equal
to $6,750,000 divided by the Closing Price Per Share.
In each case, the number of Exchanged Shares shall be rounded to the nearest
whole share. If, subsequent to the date hereof and prior to the Effective Time,
Fairfield should split, reclassify or combine the shares of Fairfield Common
Stock, or pay a stock dividend or other stock distribution in Fairfield Common
Stock, or otherwise change or convert the Fairfield Common Stock into any other
securities, or make any other dividend or distribution on the Fairfield Common
Stock (other than normal cash dividends), or if a record date with respect to
any of the foregoing shall have been set, then the Exchanged Shares will be
appropriately adjusted to reflect such split, reclassification, combination,
dividend or other distribution or change.
(b)Certificates. All shares of Apex Common Stock to be converted
into the right to receive shares of Fairfield Common Stock pursuant to this
Section 2.1 shall cease to be outstanding, shall be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares of Apex Common Stock shall thereafter cease to have any rights with
respect to such shares of Apex Common Stock, except the right to receive for
each of the shares of Apex Common Stock, upon the surrender of such certificate
in accordance with Section 2.2, the amount of Exchanged Shares specified in
Section 2.2.
(c)Treasury Shares. Shares of Apex Common Stock, if any, held by
Apex as treasury stock immediately prior to the Effective Time shall cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor, and shall cease to exist.
(d)Stock of Merger Sub. Each share of common stock, par value of
$.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
II.2 Surrender and Payment for Shares. Upon surrender to Fairfield of a
certificate or certificates representing the Shareholder's shares of Apex Common
Stock outstanding immediately prior to the Effective Time, each Shareholder will
be entitled to receive the number of Exchanged Shares equal to the product,
rounded to the nearest whole number, of (a) the Exchanged Shares multiplied by
(b) a fraction, the numerator of which is the aggregate number of shares of Apex
Common Stock represented by the certificate or certificates so surrendered and
the denominator of which is the aggregate number of shares of Apex Common Stock
issued and outstanding (the "Apex Stock Percentage"). Fairfield shall deliver to
such holder a certificate representing 90% of the number of shares the
Shareholder is entitled to receive under this Section 2.2, with the remaining
shares of Fairfield Common Stock due to that Shareholder (the "Holdback Shares")
to be held in escrow and delivered in accordance with Section 5.3 and the escrow
agreement to be entered into upon terms mutually agreeable to the parties and
the escrow agent (the "Escrow Agreement").
II.3 Transfer of Shares After the Effective Time. No transfers of
shares of Apex Common Stock shall be made on the stock transfer books of Apex
after the close of business on the day prior to the date of the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
III.1 Representations and Warranties of Fairfield and Merger Sub.
Fairfield and Merger Sub represent and warrant to Apex and Shareholders as
follows:
(a)Organization. Each of Fairfield and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Fairfield and
Merger Sub is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed or
to be in good standing (individually or in the aggregate) could not have a
material adverse effect on Fairfield.
(b)Binding Agreement. This Agreement has been duly executed and
delivered by Fairfield and Merger Sub and constitutes the valid and binding
agreement of Fairfield and Merger Sub enforceable in accordance with its terms.
(c)No Breach. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will result in the breach
of any term or provision of, or constitute a default under, any charter
provision, bylaw, agreement, indenture, instrument, order, law or regulation to
which Fairfield and/or Merger Sub is a party or which is otherwise applicable to
both or either of them which would have a material adverse effect on Fairfield
and its Subsidiaries (as the term "subsidiary" is defined in Rule 12b-2
promulgated under the Exchange Act) (including Merger Sub) taken as a whole
other than the credit agreements described in Section 6.1(b).
(d)Merger Sub. Merger Sub is a newly formed direct wholly owned
subsidiary of Fairfield formed solely for the purpose of engaging in this
transaction. As of the Effective Date, Merger Sub will not have conducted any
business nor will it own any significant assets or owe any significant
liabilities.
(e)Capitalization. The authorized capital stock of Fairfield
consists of 25,000,000 shares of Fairfield Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share ("Fairfield Preferred Stock"). At the
close of business on September 18, 1997, (i) 16,689,192 shares of Fairfield
Common Stock were issued and outstanding, (ii) 2,305,640 shares of Fairfield
Common Stock were held by Fairfield in its treasury, (iii) no shares of
Fairfield Preferred Stock were issued and outstanding, (iv) no shares of
Fairfield Preferred stock were held by Fairfield in its treasury and (v) not
more than 5,093,155 shares of Fairfield Common Stock were reserved for issuance
(A) upon exercise of outstanding employee and director stock options and
warrants to purchase shares of Fairfield Common Stock, (B) under Fairfield's
plan of reorganization and related agreements and settlements, and (C) under its
employee stock purchase plan. Except as set forth above, as of the date of this
Agreement, no shares of capital stock or other voting securities of Fairfield
were issued, reserved for issuance or outstanding. As of the date of this
Agreement, all outstanding shares of capital stock of Fairfield are, and all
shares which may be issued pursuant to this Agreement will be, when issued in
accordance with the terms hereof, duly authorized, validly issued, fully paid
and nonassessable, and not subject to preemptive rights.
(f)Compliance With Laws. Fairfield has obtained all, and is not
in default under any, permits, licenses, certificates, approvals, orders,
franchises, registrations and other authorizations required for the operation of
its business, except where the failure to obtain a permit, or a default under
such permits, would not, individually or in the aggregate, adversely affect the
business or prospects of Fairfield.
(g)SEC Documents; Undisclosed Liabilities. Fairfield has filed
all required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1996 (the "Fairfield SEC Documents"). As of their
respective dates, the Fairfield SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Fairfield SEC Documents, and none of the Fairfield SEC Documents when
filed contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any Fairfield
SEC Document has been revised or superseded by a later Fairfield SEC Document,
none of the Fairfield SEC Documents contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
Fairfield included in the Fairfield SEC Documents comply as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of
Fairfield and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments). Except (i) as reflected in such financial
statements or in the notes thereto, (ii) as contemplated hereunder, (iii) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, (iv) for liabilities and obligations incurred since
December 31, 1996 in the ordinary course of business consistent with past
practice, and (v) as set forth in Schedule 3.1(g), neither Fairfield nor any of
its Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), including liabilities
arising under any environmental laws or laws relating to the protection of
health or safety required by generally accepted accounting principles to be
reflected in a consolidated balance sheet of Fairfield and its consolidated
Subsidiaries and which, individually or in the aggregate, could reasonable be
expected to have a material adverse effect on Fairfield.
(h)Absence of Certain Changes or Events. Except (i) as disclosed
in the Fairfield SEC Documents, (ii) for the transactions provided for herein,
(iii) as set forth in Schedule 3.1(g), and (iv) for liabilities incurred in
connection with or as a result of this Agreement, since the date of the most
recent financial statements included in the Fairfield SEC Documents, Fairfield
has conducted its business only in the ordinary course, and there has not been
(1) any material adverse change in Fairfield, (2) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of Fairfield's capital stock other than the stock
dividend effected on July 15, 1997, (3) any split, combination or
reclassification of any of Fairfield's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of Fairfield's capital stock other than the
adjustment of share purchase rights in connection with the stock dividend
effected on July 15, 1997, or (4) except insofar as may have been disclosed in
the Fairfield SEC Documents or required by a change in generally accepted
accounting principles, any change in accounting methods, principles or practices
by Fairfield materially affecting its assets, liabilities or business.
(i)Proceedings. Except as set forth in the Fairfield SEC
Documents, there are currently no pending, and Fairfield is not aware of any
threatened, lawsuits or administrative or other proceedings against Fairfield or
its assets that would adversely affect the business or prospects of Fairfield.
(j)Tax Matters. Fairfield has not taken any action that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
III.2 Representations and Warranties of Shareholders and Apex.
Shareholders and Apex hereby represent and warrant to Fairfield and Merger Sub
as follows:
(a)Organization. Apex is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arkansas. Apex has
full power to own its properties and to carry on the business currently being
conducted by it, and does not conduct business in any state other than Arkansas,
Missouri and Texas. Apex does not now own and has never owned any capital stock
any or equity interest in any corporation, limited liability company,
partnership or other entity and has no Subsidiary.
(b)Binding Agreement. The execution, delivery, and consummation
of this Agreement has been duly authorized by Shareholders and Apex and approved
by all necessary action. This Agreement has been duly executed and delivered by
Apex and each Shareholder and constitutes the valid and binding agreement of
each of them enforceable in accordance with its terms.
(c)No Breach. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will result in the breach
of any term or provision of, or constitute a default under, or be in violation
of any charter provision, bylaw, agreement, instrument, order, law or regulation
to which any Shareholder and/or Apex is a party or which is otherwise
applicable.
(d)Financial Statements. Shareholders and Apex have furnished to
Fairfield unaudited balance sheets of Apex as of April 30, 1997 and the related
unaudited statements of operations for the fiscal year then ended and the
unaudited balance sheet of Apex as of August 31, 1997 and the related unaudited
consolidated statements of operations for the four months then ended (the
"Unaudited Financial Statements"). Those financial statements fairly present the
financial position of Apex at, and the results of operations for the periods
ending on, such dates, in a consistent manner throughout the periods indicated
and were prepared based on the books and records maintained for Apex's business.
Except as disclosed in the Unaudited Financial Statements (which includes the
notes thereto), Apex has no liabilities (contingent, accrued, actual or
otherwise) that were not provided or reserved for in the August 31, 1997 balance
sheet, other than liabilities incurred since the date of the August 31, 1997
balance sheet in the ordinary course of business; and all reserves established
by Apex and reflected in the August 31, 1997 balance sheet were at the times
they were established, adequate for the purposes indicated therein. Except as
disclosed in those financial statements (which includes the notes thereto),
since August 31, 1997, Apex has not: (i) declared or set aside or paid any
dividend or made any payment or distribution in respect of shares of its capital
stock; (ii) made any loans or advances to any person; (iii) entered into any
transaction with any affiliate of Apex or either Shareholder; (iv) incurred any
indebtedness for money borrowed; or (v) made or entered into any agreement or
understanding to do any of the foregoing.
(e)Accounts Receivable. The accounts receivable reflected on the
balance sheet included in the Unaudited Financial Statements, and the accounts
receivable created after the date thereof, are valid and genuine and arose from
bona fide performance of services or other transactions in the ordinary course
of the business of Apex. The accounts receivable have been collected in full
since those dates, or are collectible at their full amounts as of the Closing
Date.
(f)Assets.
(i) Schedule 3.2(f) is a complete and accurate list of all
owned or leased real property (the "Real Property"), and a list of
personal property (individual items with a depreciated book value in
excess of $3,000) (the "Personal Property"), which is owned or leased
by Apex. Except as set forth on Schedule 3.2(f), Apex is not a party to
any leases, subleases, rental agreements, contracts of sale, tenancies
or licenses (collectively, "Leases") of any portion of the Real
Property or the Personal Property. Subject to the stated book value
threshold, the Real Property and the Personal Property include all
property (whether real, personal or mixed) which Apex purports to own,
including, without limitation, all the properties and assets reflected
in the Unaudited Financial Statements (except for such properties or
assets disposed of since the date of the Unaudited Financial Statements
in the ordinary course of business), and all the properties and assets
purchased by Apex since the date of the Unaudited Financial Statements
and all such properties are all the assets necessary for the conduct by
Apex of its business as now conducted.
(ii) Except as set forth on Schedule 3.2(f), Apex has good,
valid and marketable fee simple title to all Real Property owned by
Apex, free and clear of all liens, mortgages, pledges, deeds of trust,
security interest, conditional sales agreements, charges, encumbrances
and other adverse claims or interests of any kind (together, "Liens"),
other than Liens for property taxes not yet due and payable and other
interests which do not materially affect the usefulness of the Real
Property to the present conduct of business of Apex. Apex has not
granted any leases, subleases, tenancies or licenses of or entered into
any rental agreement or contract of sale with respect to any portion of
the Real Property. Except as set forth on Schedule 3.2(f), each Lease
to which any of the Real Property is subject is valid, binding and
enforceable in accordance with its material terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of rights generally and to general principles
of equity, neither Apex nor any other party thereto is in default under
any Lease and no event or circumstance has occurred which, without
notice or lapse of time or both, would constitute a default under any
material provision of such Lease.
(iii) Except as set forth on Schedule 3.2(f), all Personal
Property is free and clear of all Liens, and Apex has good and
marketable title thereto.
(iv) Except as set forth on Schedule 3.2(f), each Lease to
which the Personal Property is subject is valid, binding and
enforceable in accordance with its material terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of rights generally and to general principles
of equity, neither Apex nor any other party thereto is in default under
any Lease and no event or circumstance has occurred which, without
notice or lapse of time or both, would constitute a default under any
material provision of such Lease.
(v) Apex has not received notice as of the date of this
Agreement that the whole or any portion of the Real Property or any
other assets or property of Apex is subject to any governmental decree
or order to be sold or is being condemned, expropriated or otherwise
taken by any public authority.
(g)Proceedings. There are currently no pending, and Shareholders
and Apex are not aware of any threatened, lawsuits or administrative or other
proceedings against Apex or its assets other than as set forth on Schedule
3.2(g). Apex is not subject to any currently existing order, writ, injunction or
decree. Apex is not aware of any pending or proposed legislation, ordinances or
laws that would affect adversely the business or prospects of Apex.
(h)Compliance With Laws. The business conducted by Apex has been,
and currently is being, conducted in material compliance with all, and Apex is
not in breach of any, applicable laws, rules and regulations or orders,
including but not limited to those relating to telemarketing, of each
jurisdiction in which its business is carried on and all governing instruments
applicable to Apex and to the conduct of its business, except for noncompliance
or breach which, individually or in the aggregate, will not affect adversely the
business or prospects of its business or Apex. Apex has obtained all, and is not
in default under any, permits, licenses, certificates, approvals, orders,
franchises, registrations and other authorizations required for the operation of
its business, except where the failure to obtain a permit, or a default under
such permits, would not, individually or in the aggregate, adversely affect the
business or prospects of Apex. Schedule 3.2(h) identifies each state in which
Apex conducts telemarketing activities and specifies whether Apex conducts those
activities pursuant to all required licenses or permits necessary to conduct
telemarketing activities in that state or whether Apex conducts those activities
pursuant to an exemption from the telemarketing laws of that state.
(i)Employees. Schedule 3.2(i) contains a true and correct list of
all current key employees of Apex, including the commencement date of their
employment and their current compensation including all accrued benefits,
vacation and sick leave. Apex is not a party to any collective bargaining
agreements.
(j)Intellectual Property. Apex does not possess or use any
patents, copyrights, trade names, trademarks, assumed name (fictitious name)
filings or service marks, other than as described in Schedule 3.2(j) hereto.
(k)No Adverse Change. Subsequent to June 30, 1997, there have not
been any material changes in the business, operations, assets or liabilities or
the condition, financial or otherwise, or prospects of Apex, other than changes
in the ordinary course of business none of which individually or in the
aggregate has been materially adverse, nor has there occurred any other event or
condition of any character which has materially and adversely affected or which
could materially and adversely affect the business, operations, properties,
assets or liabilities, the condition, financial or otherwise, or prospects of
Apex or its business.
(l)Contracts. Schedule 3.2(l) contains a list of all contracts,
agreements or other arrangements ("Contracts") to which Apex is party which are
reasonably expected to require the payment of more than $3,000 and which are not
terminable without penalty or termination fee upon no more than 30 days' written
notice, copies of which have been provided to Fairfield. Each of the Contracts
is in full force and effect and is a binding obligation of each party thereto,
and the Merger will not be a default under any of the Contracts. Apex has good
relations with each party to the Contracts and, no party has made or threatened,
any claim against Apex or either or both of Shareholders for breach of or
failure to perform under any Contract and no disputes exist regarding any
Contract. No event has occurred that has caused, or with the passage of time or
giving of notice would cause, Apex to be in default under any Contract.
(m)Environmental Matters. The assets of Apex have not been
associated with any spill, disposal, discharge or release of any hazardous
materials (which includes any hazardous or toxic substance, material or waste
which is regulated by any Governmental Entity) into or upon or over any real
property or into or upon ground or surface water including without limitation in
either case the property which is the subject of any Real Property that is or
has been leased by Apex.
(n)Reserves. Apex has adequately insured for or reserved against
all liabilities which can reasonably be determined to have arisen or may arise
as a result of the operation of its business.
(o)Broker's Fee. Neither Apex nor either Shareholder has made any
agreement or taken any other action which might cause anyone to become entitled
to a broker's fee or commission as a result of the transactions contemplated
under this Agreement.
(p)Capitalization. The authorized capital stock of Apex consists
of 1,000 shares of common stock, par value $.01 per share, of which 1,000 shares
of common stock are issued and outstanding. All outstanding shares of common
stock have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned by Shareholders. No options, warrants,
subscriptions, rights of conversion or exchange exist that may obligate Apex to
issue any additional capital stock. Neither Apex nor either Shareholder is party
to any shareholder, voting or similar voting affecting or restricting the sale,
transfer, disposition, voting or other rights of or relating to the Apex Common
Stock.
(q) Pooling. Neither Apex nor either Shareholder has taken any of the
-------
actions set forth on Schedule 3.2(q).
(r)Absence of Changes in Benefit Plans; Labor Relations.
(i) Schedule 3.2(r) sets forth a true and complete list of all
the following: (x) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, pursuant to which Apex has (A) any
liability in respect of current or former employees, agents, directors,
or independent contractors of Apex ("Apex Employees") or any
beneficiaries or dependents of any Apex Employees or (B) any obligation
to issue capital stock of Apex (each, an "Apex Employee Plan"), and (y)
each other plan, program, policy, contract or arrangement providing for
bonuses, pensions, deferred pay, stock or stock related awards,
severance pay, salary continuation or similar benefits,
hospitalization, medical, dental or disability benefits, life insurance
or other employee benefits, or compensation to or for any Apex
Employees or any beneficiaries or dependents of any Apex Employees
(other than directors' and officers' liability policies), whether or
not insured or funded, (A) pursuant to which Apex has any material
liability or (B) constituting an employment or severance agreement or
arrangement with any officer or director of Apex or with any holder of
shares of Apex Common Stock (each, an "Apex Benefit Arrangement"). Apex
has provided to Fairfield with respect to each Apex Employee Plan and
Apex Benefit Arrangement: (i) a true and complete copy of all written
documents comprising such Apex Employee Plan or Apex Benefit
Arrangement and any related trust agreement, insurance contract or
other funding vehicle (including amendments and individual agreements
relating thereto, or, if there is no such written document, an accurate
and complete description of such Apex Employee Plan or Apex Benefit
Arrangement); (ii) the most recent Form 5500 or Form 5500-C/R
(including all schedules thereto), if applicable; (iii) the most recent
financial statements and actuarial reports or valuations, if any; (iv)
the summary plan description currently in effect and all material
modifications thereof, if any; and (v) the most recent Internal Revenue
Service determination letter, if any.
(ii) Each Apex Employee Plan and Apex Benefit Arrangement has
been established, operated and maintained in all material respects in
accordance with its terms and in material compliance with all
applicable laws and the rules and regulations thereunder, including,
but not limited to, ERISA and the Code. None of Shareholders or Apex or
any of its respective current or former directors, officers, or
employees, nor, to the best knowledge of Shareholders and Apex, any
other disqualified person or party-in-interest with respect to any Apex
Employee Plan, have engaged directly or indirectly in any "prohibited
transaction," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA, with respect to which Apex could reasonably be
expected to have or has any material liability. All contributions and
other payments required to be made for any period through the date to
which this representation speaks to the Apex Employee Plans and Apex
Benefit Arrangements (or to any person pursuant to the terms thereof)
have been made or paid in a timely fashion, or, to the extent not
required to be made or paid on or before the date to which this
representation speaks, have been reflected in the Unaudited Financial
Statements. Each Apex Employee Plan that is intended to be qualified
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified or an application for such a
determination, which was filed before the expiration of the applicable
remedial amendment period, is pending, and, to the best knowledge of
Apex and Shareholders, no circumstances exist that are reasonably
expected by Apex and Shareholders to result in the revocation of any
such determination.
(iii) With respect to each Apex Employee Plan that is subject
to Title IV of ERISA: (i) as of the last applicable annual valuation
date, the present value of all benefits under such Apex Employee Plan
did not exceed the value of the assets of such Apex Employee Plan
allocable to such benefits, on a projected benefits basis, using the
actuarial methods, factors and assumptions used for the most recent
actuarial report with respect to such Apex Employee Plan; and (ii)
there has been no termination, partial termination or "reportable
event" (as defined in Section 4043 of ERISA) with respect to any such
Apex Employee Plan. No Apex Employee Plan that is subject to Section
412 of the Code has incurred any "accumulated funding deficiency" (as
defined in Section 412 of the Code), whether or not waived. No event
has occurred, and, to the best knowledge of Apex and Shareholders,
there do not exist any circumstances, that could reasonably be expected
to subject Apex to any material liability arising under ERISA. With
respect to the Apex Employee Plans and Apex Benefit Arrangements,
individually and in the aggregate, no event has occurred, and, to the
best knowledge of Apex and Shareholders, there do not exist any
circumstances, that could reasonably be expected to subject Apex to any
material liability under the Code or other applicable law, or under any
indemnity agreement to which Apex is a party, excluding liability for
benefit claims, administrative expenses and funding obligations payable
in the ordinary course.
(iv) No Apex Employee Plan is a "multiemployer plan" as that
term is defined in Section 3(37) of ERISA or a "multiple employer plan"
described in Section 4063(a) of ERISA, nor has Apex or any ERISA
Affiliate of Apex at any time since January 1, 1992, contributed to or
been obligated to contribute to such a multiemployer plan or multiple
employer plan.
(v) Except with respect to an Apex Employee Plan, neither Apex
nor any ERISA Affiliate of Apex has any Controlled Group Liability, nor
do any circumstances exist that could result in any of them having any
Controlled Group Liability. "Controlled Group Liability" means any and
all liabilities under (i) Title IV of ERISA, (ii) Section 302 of ERISA,
(iii) Sections 412 and 4971 of the Code and (iv) the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B
of the Code.
(vi) Neither the execution or delivery of this Agreement, nor
the consummation of the transactions contemplated hereby (either alone
or together with any additional or subsequent events), constitutes an
event under any Apex Employee Plan, Apex Benefit Arrangement, loan to,
or individual agreement or contract with, an Apex Employee that may
result in any payment (whether of severance pay or otherwise),
restriction or limitation upon the assets of any Apex Employee Plan or
Apex Benefit Arrangement, acceleration of payment or vesting, increase
in benefits or compensation, or required funding, with respect to any
Apex Employee, or the forgiveness of any loan or other commitment of
any Apex Employees.
(vii) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for
benefits) pending or, to the knowledge of Apex or Shareholders,
threatened, with respect to any Apex Employee Plan or Apex Benefit
Arrangement.
(viii) No Apex Employees and no beneficiaries or dependents of
Apex Employees are or may become entitled under any Apex Employee Plan
or Apex Benefit Arrangement to post-employment or retiree welfare
benefits of any kind, including without limitation death or medical
benefits, other than coverage mandated by Part 6 of Title I of ERISA or
Section 4980B of the Code or other applicable law.
(s)Taxes.
(i) Except as set forth in Schedule 3.2(s), Apex has filed all
tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and
granted and have not expired, and all tax returns and reports are
complete and accurate in all respects, except to the extent that such
failures to file or be complete and accurate in all respects, as
applicable, individually or in the aggregate, would not have a material
adverse effect on Apex. Apex has paid or made provision for all taxes
shown as due on such tax returns and reports. No claim has been made
since September 1, 1992 by any authority in a jurisdiction where Apex
does not file tax returns that it is or may be subject to taxation by
that jurisdiction. The Unaudited Financial Statements reflect adequate
reserves for all taxes payable by Apex for all taxable periods and
portions thereof accrued through the date of such financial statements,
and no deficiencies for any taxes have been proposed, asserted or
assessed against Apex that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved deficiencies that
would not, individually or in the aggregate, have a material adverse
effect on Apex. There are no liens for taxes (other than for current
taxes not yet due and payable) on the assets of Apex. No requests for
waivers of the time to assess any taxes against Apex have been granted
or are pending, except for requests with respect to such taxes that
have been adequately reserved for in the Unaudited Financial
Statements, or, to the extent not adequately reserved, the assessment
of which would not, individually or in the aggregate, have a material
adverse effect on Apex. Apex is not a party to or bound by any
agreement providing for the allocation or sharing of taxes. Apex has
not filed a consent pursuant to or agreed to the application of Section
341(f) of the Code. Apex has disclosed on its federal income tax
returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning of
Section 6662 of the Code. All taxes that are required by the laws of
the United States, any state or political subdivision thereof, or any
foreign country to be withheld or collected by Apex have been duly
withheld or collected and, to the extent required, have been paid to
the proper Governmental Entities or properly deposited as required by
applicable laws. Apex (i) has not been a member of an affiliated group
filing a consolidated federal income tax return (other than a group the
common parent of which was Apex), or (ii) has no any liability for the
taxes of any person (other than Apex) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract or otherwise. For purposes of
this Agreement, the term tax (including, with correlative meaning, the
terms "taxes" and "taxable") shall include all federal, state, local,
and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, and other taxes,
duties, or assessments of any nature whatsoever, together with all
interest, penalties, and additions imposed with respect to such
amounts.
(ii) Schedule 3.2(s) sets forth each state in which Apex has
collected or remitted any sales and/or use taxes since September 1,
1992. To knowledge of Apex and Shareholders, Apex has not conducted
activities in any other state that would require such taxes to be
collected or remitted. No claim has ever been made since September 1,
1992 by any authority in a jurisdiction where Apex does not pay sales
and/or use taxes that it is or may be subject to a requirement to remit
such taxes in that jurisdiction.
(iii) Apex has not taken any action that is reasonably likely
to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(t)Voting Requirements. The affirmative vote of the Shareholders
(the "Apex Shareholder Approval") to approve this Agreement is the only vote of
the holders of capital stock of Apex necessary to approve this Agreement and the
transactions contemplated by this Agreement.
(u)No Excess Parachute Payments. Except as described in Schedule
3.2(u), no amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of Apex or any of its Affiliates
who is a "disqualified individual" (as such term is defined in Section 280G(c)
of the Code or proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Apex Employee Plan or Benefit Arrangement currently in effect would be an
"excess parachute payment" (as such term is defined in Section 280G(b) (l) of
the Code).
(v)Ownership of Fairfield Common Stock. Except as set forth in
Schedule 3.2(v), neither Apex nor, to its or Shareholders' knowledge, any of its
affiliates (including but not limited to Shareholders), (i) beneficially owns
(as such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, or (ii) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of capital stock of Fairfield. For each beneficial owner, Schedule 3.2(v)
sets forth the name of the beneficial owner, the number of shares owned and the
date such shares were acquired by the beneficial owner.
III.3 Additional Representations of Shareholders. Each Shareholder
represents and warrants on behalf of such Shareholder to Fairfield and Merger
Sub as follows:
(a)Exchanged Shares Not Registered. Shareholder understands that
the Exchanged Shares have not been registered under the Securities Act and may
be transferred only if so registered or if an exemption therefrom is available.
Shareholder will not sell or dispose of any of the Exchanged Shares without (1)
the registration, qualification, approval and listing of the Exchanged Shares,
or (2) the delivery to Fairfield of an opinion of counsel, in form and substance
reasonably satisfactory to counsel for Fairfield, that such proposed sale or
disposition is exempt from the provisions of Section 5 of the Securities Act and
any applicable states securities laws.
(b)Restrictions on Transfer. Until such time as, and unless, the
registration, qualification, approval and listing of the Exchanged Shares is
effected, Shareholder understands that the certificates for the Exchanged Shares
received by him pursuant to the transactions set forth herein shall bear legends
and be subject to the restrictions set forth in Section 5.10.
(c)Tax Advice. Each Shareholder has relied and will rely upon his
own tax advisor(s) or tax advisor(s) for Apex, for advice and counseling in
regard to the structure, accounting or tax treatment and all other tax or
accounting issues relating to the transactions contemplated by the parties
hereunder. Neither Shareholder has relied, nor will either Shareholder rely, on
Fairfield or its tax advisors, for any tax advice or counseling in regard to the
transactions contemplated hereunder.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
IV.1 No Solicitation. Prior to the Effective Time, Apex and
Shareholders will not (a) offer for sale any of the assets of or any interest in
Apex; (b) solicit any offers to purchase or make any attempts by preliminary
conversations or negotiations to dispose of any of the assets of or any equity
interest in Apex to any person, firm or entity, other than to Fairfield, or to
engage in any type of business combination with any person, firm or entity,
other than Fairfield; or (c) provide anyone with any written or oral offer to
sell, invitation to purchase or any offering or sales material with respect to
any of the assets of or the equity of Apex.
IV.2 Conduct of Business Prior to Effective Time. Except for
transactions specifically permitted by this Agreement or consented to in writing
by Fairfield, prior to the Effective Time Apex shall (and the Shareholders will
cause Apex to):
(a) operate its business only in the ordinary course, and
employ no additional persons or promote or otherwise expand the responsibilities
of any present officer of Apex;
(b) except as set forth on Schedule 4.2(b) or otherwise in the
ordinary course of its business and consistent with past practices, make (i) no
increase in the current rate of salary or other compensation payable to any
officer, employee or agent; (ii) no bonus payment to any officer, employee or
agent; or (iii) no contract for any of the foregoing;
(c) except as set forth on Schedule 4.2(c), neither make, nor
incur any obligation to make, any capital expenditures except capital
expenditures in the ordinary course of businesses in an amount not to exceed
$3,000;
(d) act in a manner that will preserve or attempt to preserve
the goodwill of Apex, and suppliers, customers and others having business
relations with Apex;
(e) make no such sale or other disposition of any asset owned
or used by Apex in its business (whether or not capitalized or expensed for tax
or financial reporting purposes), except (i) sales or other dispositions in the
ordinary course of business in an amount not to exceed $3,000; and (ii) sales or
other dispositions pursuant to commitments existing on the date hereof that are
identified on Schedule 4.2(e) hereto;
(f) not enter into, amend, rescind or terminate any Contract,
arrangement or commitment except contracts, arrangements or commitments made in
the ordinary course of its business consistent with its past practices;
(g) except as set forth on Schedule 4.2(g), not declare, set
aside or make any dividend, distribution, loan or other advance to either
Shareholder or any other person;
(h) not amend its Articles of Incorporation or Bylaws, nor
issue any additional shares of capital stock, or any options, warrants or other
securities under which any additional shares of its capital stock might be
directly or indirectly authorized or issued;
(i) not fail to comply in any material respect with the laws,
regulations, ordinances or governmental actions or orders applicable to Apex;
(j) not enter into or materially modify or alter any Employee
Plan or Benefit Arrangement;
(k) not make any material tax elections or settle or compromise
any material tax liability;
(l) not take any action that would prevent the Merger from
qualifying (i) as a reorganization within the meaning of Section
368(a) of the Code or (ii) for "pooling of interest" accounting
treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and Apex and Shareholders will
use all reasonable efforts to achieve both such qualifications;
(m) not take any action that would materially adversely affect
the ability of Apex or Shareholders to obtain the consents required
for Apex and Shareholders to consummate the transactions contemplated
hereby or materially adversely affect the ability of Apex or
Shareholders to perform their respective covenants and agreements
under this Agreement;
(n) not change its method of accounting in effect April 30, 1997;
and
(o) not change its method of reporting income and deductions for
federal or state income taxes in effect April 30, 1997.
Notwithstanding the foregoing, Apex may, prior to Closing, distribute any or all
of the property set forth in Schedule 4.2(g) to either or both Shareholders
provided that (i) Apex is released in writing from any liability in connection
with mortgages, liens or encumbrances on such property and such liability is
assumed by Shareholders and (ii) prior to any such distribution(s), Apex
provides Fairfield with a written opinion of Apex's certified public accountants
that such distribution(s) will not (x) violate the requirements for the
transactions contemplated under this Agreement to be accounted for under the
"pooling-of-interest" method of accounting or (y) prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Apex and Shareholders represent and warrant that the property set forth in
Schedule 4.2(g) has an aggregate fair market value of not more than $300,000 and
is not integral or essential to the business of Apex.
IV.3 Cooperation Between the Parties. During the period from the
date hereof through the Closing, Apex shall cause the employees and agents of
Apex to cooperate with Fairfield and its agents for the purpose of effecting the
transactions contemplated by this Agreement, including without limitation,
providing all information and materials pertaining to Apex and access to all
premises of Apex reasonably requested by Fairfield or its agents.
IV.4 Covenants of Fairfield. Except for transactions specifically
permitted by this Agreement or consented in writing by Apex, prior to the
Effective Time, Fairfield shall (i) not take any action that would materially
adversely affect the ability of Fairfield to obtain the consents required for
Fairfield to consummate the transactions contemplated hereby or materially
adversely affect the ability of Fairfield to perform its covenants and
agreements under this Agreement or (ii) not take any action that would prevent
the Merger from qualifying (A) as a reorganization within the meaning of Section
368(a) of the Code or (B) for "pooling of interest" accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and Fairfield will use all reasonable efforts to achieve both such
qualifications.
IV.5 Adverse Changes in Condition. Each party hereto agrees to give
written notice promptly to the other party upon becoming aware of the occurrence
or impending occurrence of any event or circumstance relating to it or any of
its Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a material adverse effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties or covenants contained
herein, and to use its reasonable efforts to prevent or promptly to remedy the
same.
ARTICLE V
ADDITIONAL AGREEMENTS
V.1 Confidentiality. The terms of this Agreement and related
agreements, the terms of all transactions contemplated hereby, and all
confidential and proprietary information furnished to any party pursuant to this
Agreement, or in connection with the transactions contemplated by this
Agreement, shall be treated as confidential, and none of the parties shall use
or disclose such information except with consent of the other parties hereto;
provided, however, Fairfield may disclose such information to comply with any
legal requirement.
V.2 Indemnification of Shareholders. Fairfield agrees to indemnify
and hold each of Shareholders harmless from and against all expenses, losses,
costs, deficiencies, liabilities and damages (including, without limitation,
reasonable attorneys' fees and expenses) incurred or suffered by Shareholders
(collectively, "Shareholder Indemnifiable Damages") from or arising out of (a)
any breach of a representation or warranty made by Fairfield in or pursuant to
this Agreement, (b) any breach of the covenants or agreements made by Fairfield
in this Agreement, or (c) any inaccuracy in any certificate delivered by
Fairfield pursuant to this Agreement. Notwithstanding the foregoing, the maximum
amount for which Fairfield may be liable for indemnification hereunder shall not
exceed 10% of the value of the Exchanged Shares based on the Closing Price Per
Share.
V.3 Indemnification of Fairfield.
(a) Indemnity. Shareholders, severally (each in proportion to his
Apex Stock Percentage), and not jointly, agree to indemnify and hold Fairfield
harmless from and against all expenses, losses, costs, deficiencies, liabilities
and damages (including, without limitation, reasonable attorneys' fees and
expenses) incurred or suffered by Fairfield, Merger Sub or any Subsidiary
(including without limitation Apex) of Fairfield (collectively, "Fairfield
Indemnifiable Damages") resulting from or arising out of (a) any breach of a
representation or warranty made by either Shareholder or both of them or Apex in
or pursuant to this Agreement, (b) any breach of the covenants or agreements
made by either Shareholder or both of them or Apex in this Agreement, or (c) any
inaccuracy in any certificate delivered by either Shareholder or both of them or
Apex pursuant to this Agreement. If the Closing occurs, the maximum amount for
which Shareholders may be liable for indemnification hereunder shall not exceed
the aggregate amount of the value of the Holdback Shares at the Closing Date and
the maximum amount payable by each Shareholder shall not exceed the value of the
Holdback Shares deposited by that Shareholder.
(b) Security and Procedures. As security for the agreement by
Shareholders to indemnify and hold Fairfield harmless as described in Section
5.3(a), at the Closing, Shareholders shall place in an escrow with an escrow
agent designated by Fairfield (the "Escrow Agent") pursuant to the Escrow
Agreement, certificates representing the Holdback Shares issued pursuant to this
Agreement. Further, there shall also be deposited with the Escrow Agent, all
shares of Fairfield Common Stock issued to Shareholders as a result of any stock
split, dividend or reclassification with respect to the Holdback Shares. Any
shares of Fairfield Common Stock that are applied by Fairfield to satisfy
indemnification claims hereunder shall be valued for this purpose at the Closing
Price Per Share (subject to appropriate adjustment in the event of any stock
split, dividend or reclassification). All Holdback Shares shall be deemed to be
beneficially owned by Shareholders, and Shareholders shall be entitled to vote
the Holdback Shares, and subject to the terms of the Escrow Agreement, to
receive promptly as paid by Fairfield all cash dividends or distributions paid
thereon in respect thereof until any such shares are actually delivered to
Fairfield as provided in the Escrow Agreement. The procedures to be followed in
applying the Holdback Shares to satisfy Fairfield Indemnifiable Claims shall be
as follows:
(i) Fairfield shall give written notice (the "Fairfield Claim
Notice") to Shareholders that Fairfield believes that it has the right
to apply the Holdback Shares to satisfy a claim for Fairfield
Indemnifiable Damages. The Fairfield Claim Notice shall include all of
the information required by the Escrow Agreement.
(ii) Shareholders shall have the right to contest the
Fairfield Claim Notice by written notice (the "Contest Notice") to
Fairfield given within the 45-day period (the "Notice Contest Period")
following the receipt by Shareholders of the Fairfield Claim Notice.
(iii) If Shareholders contest the Fairfield Claim Notice,
Shareholders and Fairfield shall attempt in good faith to resolve any
disputed matter within the 45-day period following the date of the
delivery of the Contest Notice to Fairfield (the "Resolution Period").
If Shareholders and Fairfield are unable to resolve the matter, then
the parties shall settle the dispute through final and binding
arbitration in Little Rock, Arkansas. The arbitration shall be
conducted by a committee of three arbitrators (one appointed by
Shareholders, one appointed by Fairfield and one appointed by the two
arbitrators so appointed), all of which appointments shall be made
within thirty (30) days after the expiration of the Resolution Period.
If Shareholders do not appoint an arbitrator within such period, then
the arbitrator appointed by Fairfield shall arbitrate the dispute. If
Fairfield does not appoint an arbitrator within such period, then
Fairfield shall be deemed to have irrevocably withdrawn its claim for
indemnification with respect to the matter covered by the applicable
Fairfield Claim Notice. The arbitrators shall abide by the rules of the
American Arbitration Association and their decision shall be made
within 45 days following their appointment, and the Escrow Agent shall
act accordingly, as provided in the Escrow Agreement, and such decision
shall be final and binding on all parties and enforceable by the
parties as a final judgment.
(iv) Notwithstanding the foregoing provisions of this Section
5.3(b), in the event that the Fairfield Indemnifiable Claim for which
Fairfield is seeking to apply the Holdback Shares relates to a claim
for liquidated damages by a third-party against Fairfield, Merger Sub
or any Subsidiary of Fairfield covered under this Section 5.3, which
has not been satisfied or discharged by Shareholders, Fairfield may
cause the Holdback Shares to be released to it to satisfy such claim
upon written notice to the Shareholders, provided that Fairfield shall
thereafter apply the value of the Holdback Shares to satisfy the claim.
(c) Application of Holdback Shares. If Fairfield applies any
Holdback Shares against Fairfield Indemnifiable Damages, such application shall
be effected against Shareholders' Holdback Shares in accordance with their Apex
Common Stock Percentages.
(d) Beneficial Ownership. All Holdback Shares shall be deemed to
be owned by Shareholders, and Shareholders shall be entitled to vote such shares
and to receive promptly as paid by Fairfield all dividends or distributions paid
thereon or issued in respect thereof until any such shares are actually redeemed
by Fairfield as provided in the Escrow Agreement. Further, Shareholders may
require that all or any portion of the Holdback Shares be sold in market
transactions at any time (provided that such sales shall be made in compliance
with state and federal securities laws, are made on a pro rata basis among
Shareholders and not in violation of the provisions of this Agreement), and
Fairfield shall reasonably act to cause the Escrow Agent to sell the shares
requested and deposit the net sales proceeds into an escrow account which shall
be an interest bearing account (invested as directed by Shareholders) with the
interest payable to Shareholders as provided in the Escrow Agreement.
(e) Release of Holdback Shares. If no claim by Fairfield for
indemnification is outstanding on the one-year anniversary of the Closing, all
Holdback Shares shall be released by the Escrow Agent as provided in the Escrow
Agreement. In other circumstances, the release of Holdback Shares shall be
determined in accordance with the terms of the Escrow Agreement.
(f) Counsel; Cooperation. Fairfield shall defend each Fairfield
Indemnifiable Claim and shall retain legal counsel to assist it in such defense
("Counsel") who shall be reasonably satisfactory to the Shareholders. Fairfield
shall have sole authority to instruct Counsel with respect to the Fairfield
Indemnifiable Claims and Counsel shall be entitled to rely on such instructions
without verification or confirmation from any other person or entity. Each of
the Shareholders shall cooperate with and assist Fairfield and Counsel in
Fairfield's defense of the Fairfield Indemnifiable Claims and prosecution of any
claims.
V.4 Exclusivity Of Indemnification For Contractual Breaches. No
party hereto is making any representation, warranty or covenant other than those
contained herein. Anything herein to the contrary notwithstanding, following the
Closing, the rights of the parties under the provisions of Sections 5.2, 5.3 and
5.5 shall be the sole and exclusive remedy available to the parties with respect
to claims or damages arising out of breaches of the representations and
warranties or other contractual obligations of the parties set forth in this
Agreement.
V.5 Arbitration. The parties agree that the arbitrators appointed
to serve in the arbitration proceeding described in Section 5.3(b)(iii) shall
have the authority to consider all qualifying claims for Fairfield Indemnifiable
Damages ("Qualifying Claims") asserted by the parties under this Agreement. All
awards of the arbitrators shall be final and binding on all parties and
enforceable by the parties as a final judgment. In addition to the resolution of
Qualifying Claims under Section 5.3(b)(iii), the parties agree to resolve other
claims for indemnification arising under this Agreement through final and
binding arbitration in Little Rock, Arkansas. The arbitration in such other
cases shall be arbitrated by a committee of three arbitrators (one appointed by
Shareholders, one appointed by Fairfield and one appointed by the two
arbitrators so appointed), all of which appointments shall be made within thirty
(30) days after notice has been given by Fairfield to Shareholders or by
Shareholders to Fairfield that such party or parties desire to resolve a claim
for indemnification arising under this Agreement pursuant to an arbitration
proceeding. If Shareholders do not appoint an arbitrator within such period,
then the arbitrator appointed by Fairfield shall arbitrate the dispute. If
Fairfield does not appoint an arbitrator within such period, then the arbitrator
appointed by Shareholders shall arbitrate the dispute. The arbitrators shall
abide by the rules of the American Arbitration Association and their decision
shall be made within 45 days following their appointment, and such decision
shall be final and binding on all parties and enforceable by the parties as a
final judgment. The costs of any such arbitration and reasonable attorneys' fees
incurred in any such proceeding shall be paid by the non-prevailing party, and
the arbitrators shall have the right, in their discretion, to increase the award
made to the prevailing party by any or all of such costs.
V.6 Reasonable Efforts. Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties will use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all other things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all other
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
other reasonable steps as may be necessary to obtain an approval in waiver form,
or to avoid an action or proceeding by any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, the parties and their respective Board of Directors
shall, if any state takeover statute or similar statute or regulation is or
becomes applicable to the Merger, this Agreement or the other transactions
contemplated by this Agreement, use all reasonable efforts to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other transactions contemplated by this Agreement. In further
connection with and without limiting the foregoing, Apex and Shareholders shall
make employees, contractors and advisors of Apex available to Fairfield and
provide such information as may be requested by Fairfield for the purposes of
conducting the Inspection set forth in Section 6.3(d).
V.7 Expenses and Fees. Regardless of whether the Closing occurs
and notwithstanding any termination of this Agreement, Fairfield shall pay all
of the costs and expenses incurred by Fairfield and Merger Sub in connection
with this Agreement or in consummating the Merger (including, but not limited
to, disbursements and expenses of their respective attorneys, accountants and
advisers) and Apex shall pay all of the reasonable costs and expenses up to an
aggregate of $40,000 incurred by Shareholders and Apex in connection with this
Agreement or in consummating the Merger (including, but not limited to,
disbursements and expenses of their respective attorneys, accountants and
advisers) and any such costs and expenses of Shareholders and/or Apex exceeding
an aggregate of $40,000 shall be paid by Shareholders.
V.8 Consents. Apex shall use its reasonable efforts to obtain the Apex
Consents (as hereinafter defined) before Closing.
V.9 Pooling of Interests. Each of the parties to this Agreement agrees
to use its reasonable efforts to qualify the Merger for pooling of interests
treatment under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations, and such accounting treatment to be accepted by each of
Fairfield's and Apex's independent auditors, respectively, and each of Fairfield
and Apex agrees that it will voluntarily take no action that would cause such
accounting treatment not to be obtained.
V.10 Transfer Restrictions.
(a) Rule 145 Affiliates. Each Shareholder acknowledges that he may
be deemed an "affiliate" of Apex within the meaning of Rule 145 under the
Securities Act or for purposes of qualifying the Merger for pooling of interests
accounting treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations (in either case, a "Rule 145 Affiliate"),
although nothing contained in this Agreement should be construed as admission
that the Shareholder is a Rule 145 Affiliate.
(b) Restrictions on Sale. Each Shareholder represents to and
covenants with Fairfield that he will not sell, assign or transfer any of the
shares of Fairfield Common Stock received by him in connection with the Merger
except (i) pursuant to an effective registration statement under the Securities
Act, (ii) in conformity with the volume and other limitations of Rule 145 or
(iii) in a transaction which, in the opinion of the general counsel of Fairfield
or other counsel reasonably satisfactory to Fairfield or as described in a
"no-action" or interpretive letter from the Staff of the SEC specifically issued
with respect to a transaction to be engaged in by that Shareholder, is not
required to be registered under the Securities Act; provided, however, that in
any such case, such sale, assignment or transfer shall be permitted only if, in
the opinion of counsel to Fairfield, such transaction would not have, directly
or indirectly, any adverse consequences for Fairfield with respect to the
treatment of the Merger for tax purposes.
(c) Results of Operations Published. Each Shareholder further
represents to and covenants with Fairfield that he has not, within 30 days of
the date of this Agreement, sold, transferred or otherwise disposed of any
shares of Apex Common Stock and that he will not sell, transfer or otherwise
dispose of any shares of Fairfield Common Stock received by him in connection
with the Merger until after such time as results covering at least 30 days of
combined operations of Fairfield and Apex have been published by Fairfield, in
the form of a quarterly earnings report, an effective registration statement
filed with the SEC, a report filed with the SEC on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement with includes such combined results of
operations.
(d) Evidence of Compliance. In the event of a sale or other
disposition by a Shareholder of shares of Fairfield Common Stock pursuant to
Rule 145, the Shareholder will supply Fairfield with evidence of compliance with
such Rule, in the form of a letter in the form of Exhibit C hereto and the
opinion of counsel or no-action letter referred to above. Each Shareholder
acknowledges that Fairfield may instruct its transfer agent to withhold the
transfer of any shares of Fairfield Common Stock disposed of by the Shareholder,
but that (provided such transfer is not prohibited by any other provision of
this Agreement) upon receipt of such evidence of compliance, Fairfield shall
cause the transfer agent to effectuate the transfer of the shares of Fairfield
Common Stock sold as indicated in such letter.
(e) Covenant of Fairfield. Fairfield covenants that it will take
all such actions as may be reasonably available to it to permit the sale or
other disposition of shares of Fairfield Common Stock by the Shareholder under
Rule 145 in accordance with the terms thereof.
(f) Legend. A legend in substantially the following form will be
placed upon the certificates representing shares of Fairfield Common Stock
issued to the Shareholders pursuant to the Merger, which legends shall be
removed by delivery of substitute certificates upon receipt of an opinion in
form and substance reasonably satisfactory to Fairfield to the effect that such
legends are no longer required for the purposes of the Securities Act:
"The shares represented by this certificate were issued
pursuant to a business combination which is being accounted for as a
pooling of interests, in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares have not been
acquired by the holder with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act
of 1933. The shares may not be sold, pledged or otherwise transferred
(i) until such time as Fairfield shall have published financial results
covering at least 30 days of combined operations after the effective
time of the business combination and (ii) except in accordance with an
exemption from the registration requirements of the Securities Act of
1933 or pursuant to an effective registration statement under that
act."
V.11 Tax Treatment. Each of Fairfield and Apex shall use reasonable
efforts to cause the Merger to qualify as a reorganization under the provisions
of Section 368(a) of the Code.
V.12 Non-Competition and Non-Solicitation Covenants.
(a) Condition to Closing. The parties recognize that Fairfield's
willingness to proceed with the transactions contemplated under this Agreement
is conditioned upon each Shareholder's agreement that he will not engage in any
businesses in competition with the business to be conducted by Apex after the
Closing or solicit any employees of Fairfield or any of its subsidiaries or
affiliated entities all as set forth in this Section 5.12.
(b) Non-Competition. Each Shareholder shall not until the
expiration of a period of 3 years from the Effective Time, directly or
indirectly, engage in or have any interest in any sole proprietorship,
partnership, corporation, limited liability company, firm, association or
business or any other person or entity (whether as an employee, officer,
director, partner, member, agent, security holder, creditor, consultant or
otherwise) that, directly or indirectly engages in sales of leads for marketing,
or sales of vacation packages relating to or associated with, vacation ownership
products (the "Business") in the District of Columbia and States of Arkansas,
Arizona, Colorado, Florida, Georgia, Illinois, Maryland, Michigan, Missouri, New
Jersey, North Carolina, South Carolina, Tennessee, Texas and Virginia.
(c) Non-Solicitation. Each Shareholder shall not, for a period of
one year from the Effective Time, directly or indirectly, for himself or for any
sole proprietorship, partnership, corporation, limited liability company, firm,
association or business or any other person or entity, employ or attempt to
employ, or enter into any contractual arrangement with any employee or sale
agent or former employee or former sales agent of Fairfield or any of its
subsidiaries or affiliated entities (collectively, "Fairfield Subsidiaries"),
unless such person has not been employed or otherwise engaged by Fairfield or
any Fairfield Subsidiary for a period in excess of six months.
(d) Reasonableness. Shareholders agree and acknowledge that Apex
is currently and has been engaged in the Business and in the geographic areas
described in Section 5.12(b) and that the restrictions set forth in this Section
5.12 are reasonable.
V.13 Payment of Bonus. Fairfield agrees that if prior to Closing
Apex pays less than the entire amount of the bonus payment or payments described
on Schedule 4.2(b), Fairfield shall cause Apex to pay any unpaid portion of such
bonus payment or payments on or prior to May 1, 1998.
V.14 Registration Rights.
(a) Registration. Fairfield shall use its reasonable best efforts
to file as promptly as practicable after the Effective Time, but no later than
the close of business on the tenth day following the Effective Time, the
registration on Form S-3 and/or qualification with, or the approval of, any
Governmental Entity under any federal or state securities laws of the Exchanged
Shares issued as consideration hereunder. Fairfield may, upon written notice to
Shareholders, defer such registration for a reasonable period but not in excess
of 90 days if it has made a good faith determination that the filing of a
registration statement at such time would require the disclosure of material
information which Fairfield has a bona fide business interest for preserving as
confidential or that Fairfield is unable to comply with Securities and Exchange
Commission requirements. Fairfield shall be under no obligation to effect an
underwritten offering of the Exchanged Shares.
(b) Effectiveness. Fairfield shall use its reasonable best efforts
to keep effective and maintain any registration, qualification, approval or
listing of the Exchanged Shares required pursuant to this Section 5.14, and from
time to time to amend or supplement the prospectus used in connection therewith
to the extent necessary in order to comply with applicable federal and state
securities laws, until the earlier of the date on which all of the Exchanged
Shares covered by the registration statement have been sold by Shareholders or
the first anniversary of the Effective Time. Fairfield shall furnish to
Shareholders such number of copies of such prospectus, as amended from time to
time, and supplements thereto, as Shareholders may reasonable request.
(c) Expenses. All expenses incident to the obligations of
Fairfield under Sections 5.14(a) and 5.14(b) hereof (including without
limitation, registration fees, printing or document reproduction expenses, and
fees and expenses of its counsel and accountants) shall be born by Fairfield,
and all the other expenses incident to the disposition by a Shareholder of the
Exchanged Shares (including, without limitation, fees and expenses of his
counsel and all underwriting discounts, if any, brokerage commissions and
similar fees) shall be born by such Shareholder.
(d) Shareholder Agreements. Each Shareholder shall (i) furnish to
Fairfield such information as Fairfield may from time to time reasonably request
in connection with the registration statement and prospectus, any amendment or
supplement thereto or any other filings required by this Section 5.14, (ii) from
and after the Effective Time and for so long as the registration, qualification,
approval or listing remains effective, promptly after the sale or any other
disposition by him of Exchanged Shares, give Fairfield written notice of same,
(iii) promptly notify Fairfield of any event which comes to his attention which
would necessitate an amendment or supplement to the registration statement,
prospectus or any of the other filings required by this Section 5.14, and (iv)
suspend sales of Exchanged Shares under such registration statement promptly
upon receipt of notice from Fairfield that such sales may not be made until such
registration statement and prospectus are amended or supplemented as necessary.
(e) Indemnification of Shareholders. Fairfield agrees to
indemnify, to the extent permitted by law, each Shareholder and hold him
harmless all times after the date of this Agreement from and against and in
respect of any and all liabilities, losses, damages, settlements, claims, costs
or expenses, including, without limitation, attorneys' fees (collectively, the
"Liabilities"), under the Securities Act, common law or otherwise, arising out
of or due to (i) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus relating to the
registration or qualification of the Exchanged Shares, or (ii) any omission or
alleged omission to state in such registration statement or prospectus a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, except insofar as such Liabilities arise out of or are due to any
untrue statement of a material fact contained in, or omission of a material fact
from, information furnished in writing to Fairfield by such Shareholder
expressly for use in such registration statement or prospectus.
(f) Indemnification of Fairfield. Each Shareholder agrees to
indemnify, to the extent permitted by law, Fairfield, its directors and officers
and each person, if any, who controls Fairfield within the meaning of Section 15
of the Securities Act and hold them harmless at all times after the date of this
Agreement from and against and in respect of any and all Liabilities arising out
of or due to (i) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus relating to the
registration or qualification of the Exchanged Shares, or (ii) any omission or
alleged omission to state in such registration statement or prospectus a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, but only to the extent that such Liabilities arise out of or are due
to any untrue statement of material fact contained in, or omission of a material
fact from, information furnished in writing to Fairfield by Shareholder
expressly for use in such registration statement or prospectus.
(g) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 5.14 is for any reason held to be unenforceable although applicable
in accordance with its terms, Fairfield and Shareholders will contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by Fairfield and Shareholders,
in such proportion as is appropriate to reflect the relative fault of Fairfield
on the one hand and each Shareholder on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, the indemnifying party or the indemnified party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action. The parties hereto agree that it would not be
just or equitable if contribution pursuant to this Section 5.14(g) 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 foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5.14(g), each
director of Fairfield, each officer of Fairfield who signed the applicable
registration statement and each person, if any, who controls Fairfield within
the meaning of Section 15 of the Securities Act will have the same rights to
contribution as Fairfield.
(h) No Other Obligation to Register. Except as otherwise expressly
provided in this Section 5.14, Fairfield will have no obligation to register the
Exchanged Shares under the Securities Act.
V.15 Exchange Listing. Fairfield shall use its reasonable efforts to
list as soon as practicable after the Effective Time, on the New York Stock
Exchange ("NYSE"), subject to official notice of issuance, the Exchanged Shares
and Fairfield shall give all notices and make all filings with the NYSE required
in connection with the transactions contemplated herein.
V.16 Schedules. Except for Schedule 3.1(g), Apex shall deliver the
Schedules to this Agreement to Fairfield within 20 days after the date of this
Agreement.
V.17 Delivery of Information. Two business days before the end of the
Inspection Period, Shareholders shall deliver to Fairfield a certificate
executed by each Shareholder certifying that Apex has delivered all relevant
information, documents, agreements, and other materials related to any written
request made by Fairfield during the Inspection Period.
ARTICLE VI
CONDITIONS PRECEDENT; CLOSING
VI.1 Conditions to each party's obligation to effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Corporate Approval. The approval of the transactions hereunder by
Fairfield's board of directors or appropriate committee thereof shall have been
received.
(b) Consent of Fairfield's Lender. Fairfield shall have obtained all
applicable consents required under Fairfield's and its subsidiaries' credit
agreements.
(c) Apex Consents. Apex shall have obtained all applicable consents
required from the parties identified on Schedule 6.1(c) (the "Apex Consents").
(d) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Governmental Entity or
other legal restraint or prohibition (collectively, "Restraints") preventing the
consummation of the Merger shall be in effect; provided, however, that each of
the parties shall have used reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(e) No Litigation. There shall not be pending any suit, action or
proceeding, in each case brought by any Governmental Entity against Apex,
Fairfield or Merger Sub with respect to or that would adversely affect the
Merger or the transactions contemplated under this Agreement.
VI.2 Condition to obligation of Apex and Shareholders. The obligations
of Apex and Shareholders to effect the Merger are further subject to the
following conditions:
(a) Actions of Fairfield. Fairfield and Merger Sub shall have performed
and complied with all the covenants, agreements and obligations and satisfied
all of the conditions required by this Agreement to be performed or complied
with or satisfied by them at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of Fairfield and Merger Sub set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Fairfield and Merger Sub set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time as though made on and as
of the Effective Time, except as otherwise contemplated by this Agreement.
(c) No Material Adverse Change. At any time on or after the date of
this Agreement there shall not have occurred any material adverse change in
Fairfield.
VI.3 Conditions to obligations of Fairfield and Merger Sub. The
obligations of Fairfield and Merger Sub to effect the Merger are further
subject to the following conditions:
(a) Actions of Shareholders and Apex. Shareholders and Apex shall have
performed and complied with all covenants, agreements and obligations and
satisfied all the conditions required by this Agreement to be performed or
complied with or satisfied by them at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of Apex and Shareholders set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Apex and Shareholders set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time as though made on and as
of the Effective Time, except as otherwise contemplated by this Agreement.
(c) No Material Adverse Change. At any time on or after the date of
this Agreement there shall not have occurred any material adverse change in
Apex.
(d) Audit and Inspection. The completion by Fairfield of an audit of
the books and records and inspection of the business of Apex (the "Inspection")
and Fairfield's satisfaction, in its sole discretion, with the results of the
Inspection. Apex shall cooperate fully with Fairfield in the conduct of the
Inspection, including but not limited to allowing Fairfield to have access to
the books and records of Apex, which shall be completed by Fairfield within 30
calendar days of its receipt of the Schedules to this Agreement (the "Inspection
Period").
(e) Pooling Letter. Fairfield shall have received a letter from Ernst &
Young LLP dated as of the Closing Date, addressed to Fairfield, stating in
substance that the Merger will qualify as a pooling of interests transaction
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations.
(f) Tax Certificates. Fairfield shall have received from Shareholders
and Apex the representation letters and certificates substantially in the form
attached hereto as Exhibit D.
(g) Employment Agreements. As soon as the final terms can be negotiated
after the Closing Date, each Shareholder will enter into an employment agreement
with Apex upon the terms and in the substantial form set forth in Exhibit E
hereto (the "Employment Agreements").
(h) Opinion of Apex Counsel. Fairfield shall have received a favorable
opinion of counsel for Apex with respect to the matters set forth on Schedule
6.3(h).
VI.4 Frustration of Closing Conditions. Neither Fairfield, Shareholders,
Merger Sub nor Apex may rely on the failure of any condition set forth in
Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable efforts to consummate the
Merger and the other transactions contemplated by this Agreement, as required by
and subject to Section 5.6.
VI.5 Closing Documents and Procedures. In addition to the other obligations
and procedures to be performed at the Closing, the parties will undertake the
following actions:
(a) Deliveries of Shareholders. At the Closing, Shareholders shall
deliver to Fairfield:
(i) a certificate executed by each Shareholder certifying that
the representations and warranties set forth in Sections 3.2 and 3.3
are true and correct on and as of the Effective Time, with the same
force and effect as though such representations and warranties had been
made on, as of and with reference to the Effective Time and that
Shareholders have performed and complied with all covenants and
agreements and satisfied all conditions required by this Agreement to
be performed or complied with or satisfied by them for the benefit of
Fairfield at or prior to the Effective Time;
(ii) the Employment Agreements set forth in Section 6.3(g),
each executed by the appropriate Shareholder; and
(iii) the Escrow Agreement, executed by Shareholders.
(b) Deliveries of Apex. At the Closing, Apex shall deliver to
Fairfield:
(i) a certificate of an officer of Apex certifying that the
representations and warranties set forth in Section 3.2 are true and
correct on and as of the Effective Time, with the same force and effect
as though such representations and warranties had been made on, as of
and with reference to the Effective Time and that Apex has performed
and complied with all covenants and agreements and satisfied all
conditions required by this Agreement to be performed or complied with
or satisfied by it for the benefit of Fairfield at or prior to the
Effective Time;
(ii) the Escrow Agreement, executed by Apex;
(iii) the representation letters and certificates in
substantially the form set forth in the form attached hereto as Exhibit
D, executed by Shareholders and Apex;
(iv) the consent of each of the lessors under the Real
Property, if consent of such lessor is required under the relevant
agreements or documents, and each of the other persons, if any,
identified on Schedule 6.1(c) to the transactions contemplated
hereunder;
(v) certificates of good standing and corporate existence for Apex;
(vi) the Employment Agreements set forth in Section 6.3(g), executed
by Apex; and
(vii) the opinion of counsel to Apex as set forth in Section 6.3(h) .
(c) Fairfield's Deliveries. At the Closing, Fairfield shall deliver to
Apex:
(i) the Exchanged Shares;
(ii) the Escrow Agreement, executed by Fairfield; and
(iii) a certificate of an officer of Fairfield certifying that
the representations and warranties set forth in Section 3.1 are true
and correct on and as of the Effective Time, with the same force and
effect as though such representations and warranties had been made on,
as of and with reference to the Effective Time and that Fairfield has
performed and complied with all covenants and agreements and satisfied
all conditions required by this Agreement to be performed or complied
with or satisfied by it for the benefit of Apex at or prior to the
Effective Time.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
VII.1 Termination. This Agreement may be terminated, and the Merger
contemplated hereby may be abandoned, at any time prior to the Effective Time:
(a) by mutual written consent of Fairfield, Merger Sub and Apex;
(b) by either Fairfield or Apex;
(i) if the Merger shall not have been consummated on or before
December 1, 1997, unless the failure to consummate the Merger is the
result of a breach of this Agreement by the party seeking to terminate
this Agreement; provided, however, that the passage of such period
shall be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or
the calling or holding of the related shareholders meeting; or
(ii) if any Governmental Entity of competent jurisdiction
shall have issued a Restraint or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger or any of
the other actions contemplated under the Agreement and such Restraint
shall have become final and nonappealable;
(c) by Fairfield if Apex does not deliver the Schedules to this
Agreement pursuant to Section 5.16;
(d) by Fairfield, if on the date that is two business days before the
Closing Date the Closing Price Per Share of Fairfield Common Stock is less than
$20;
(e) by Fairfield, at or prior to the expiration of the Inspection
Period, without cause and for whatever reason and without liability on the part
of any party hereto, by delivering to Apex at or prior to the expiration of the
Inspection Period, written notice of Fairfield's election to terminate this
Agreement;
(f) by either Fairfield or Apex if the other shall fail to fulfill or
satisfy any condition precedent to the performance of the first party's
obligations in accordance with the terms hereof; and
(g) by Apex, if prior to the close of business on the 20th day
following the date of this Agreement, Apex delivers to Fairfield a copy of
written notice from legal counsel or tax advisors of Apex advising that the
Merger will not qualify as a reorganization under the provisions of Section
368(a) of the Code.
VII.2 Effect of Termination. In the event of termination of this
Agreement by Apex or Fairfield as provided in Section 7.1, this Agreement shall
terminate and there shall be no liability on the part of either Apex or
Fairfield, except for (a) liabilities arising from a breach of this Agreement
prior to such termination if the termination is made under Section 7.1(b)(i),
and (b) liabilities arising from a breach of a provision of this Agreement which
is to be performed regardless of any such termination.
VII.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
VII.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso of Section 7.3, waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
VIII.1 Survival of Representations and Warranties. The respective
covenants, representations and warranties and the indemnities set forth in this
Agreement shall survive for a period of one year after the Effective Time and
shall continue in full force and effect during such period. No claim may be
asserted against any party hereto and no party hereto shall have any liability
to the other party hereto, with respect to any inaccuracy in or any breach of
any representation or warranty after the survival period, except that if a claim
shall be first asserted within the applicable period, such claim shall not
thereafter be barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right to
fully rely on the representations, warranties, covenants and agreements of the
other parties contained in this Agreement or in any other documents or papers
delivered in connection herewith. Each representation, warranty, covenant and
agreement of the parties contained in this Agreement is independent of each
other representation, warranty, covenant and agreement.
VIII.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Apex:
Apex Marketing, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Attention: President
with a copy to:
Xxxxxxx Xxxxx, Esq.
Xxxxx, Xxxxxxxxxxxxx & Xxxxxx
000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
(b) if to Shareholders:
Xxxx Xxxxxxxxx
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx Xxxxxx Xxxx, XX 00000
C. Xxxxxxx Xxxxxxxxx, Xx.
00 Xxxxxx
Xxxxxxxx, XX 00000
with a copy to:
Xxxxxxx Xxxxx, Esq.
Xxxxx, Xxxxxxxxxxxxx & Xxxxxx
000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
(c) if to Fairfield or Merger Sub:
Fairfield Communities, Inc.
00000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx X. XxXxxxxxx
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
VIII.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Code" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time;
(c) an "environmental law" means any law, statute, regulation, rule,
order, decree, judgment, consent decree, settlement agreement or governmental
requirement, which relates to or otherwise imposes liability or standards of
conduct concerning mining or reclamation of mined land, discharges, emissions,
releases or threatened releases of noises, odors or any pollutants, contaminants
or hazardous or toxic wastes, substances or materials, whether as matter or
energy, into ambient air, water, or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants, or
hazardous wastes, substances or materials, including (but not limited to) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Resource Conservation and Recovery Act of 1976, as amended, the Toxic Substances
Control Act of 1976, as amended, the Federal Water Pollution Control Act
Amendments of 1972, the Clean Water Act of 1977, as amended, any so-called
"Superlien" law, and any other similar Federal, state or local statutes;
(d) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and all regulations promulgated thereunder, as in effect from time
to time;
(e) "ERISA Affiliate" means any trade or business, whether or not
incorporated, that is now or has at any time in the past been treated as a
single employer with Apex or Fairfield (as applicable) or any of their
respective Subsidiaries under Section 414(b), (c), (m) or (o) of the Code and
the Treasury Regulations thereunder;
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder, as in effect from
time to time;
(g) "Governmental Entity" means any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, federal, state, local or foreign;
(h) "key employee" means any employee whose current salary and
targeted bonus exceeds $40,000 per annum;
(i) "knowledge" of any person means actual knowledge of the directors
and executive officers of such person;
(j) "material adverse change" or "material adverse effect" means, when
used in connection with Apex or Fairfield, any change or effect that is
materially adverse to the business, properties, assets, financial condition,
prospects, or results of operations of such party and its Subsidiaries taken as
a whole;
(k) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity; and
(l) "Securities Act" means the Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder, as in effect from time to
time.
VIII.4 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
VIII.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signet by each of
the parties and delivered to the other parties.
VIII.6 Entire Agreement; No Third-party Beneficiaries. This Agreement
(a) constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) are not intended to confer upon any
person other than the parties any rights or remedies.
VIII.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Arkansas, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
VIII.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Merger Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Fairfield or to any direct wholly owned corporate subsidiary of
Fairfield. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
VIII.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Arkansas or in Arkansas state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Arkansas or
any Arkansas state court in the event any dispute arises out of this Agreement
or the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a federal court sitting in the State of Arkansas or an
Arkansas state court.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Fairfield, Merger Sub and Apex have caused this
Agreement to be signed by their respective officers thereunto duly authorized
and Shareholders have signed this Agreement, all as of the date first written
above.
FAIRFIELD COMMUNITIES, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------
Xxxxxxx X. Xxxxx, Xx.
Senior Vice President
FA, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------
Xxxxxxx X. Xxxxx, Xx.
President
APEX MARKETING, INC.
By: /s/ C. Xxxxxxx Xxxxxxxxx, Xx.
---------------------------------
C. Xxxxxxx Xxxxxxxxx, Xx.
President
/s/ Xxxx Xxxxxxxxx
---------------------------------
Xxxx Xxxxxxxxx
/s/ C. Xxxxxxx Xxxxxxxxx, Xx.
---------------------------------
C. Xxxxxxx Xxxxxxxxx, Xx.
EXHIBIT A
SURVIVING CORPORATION
ARTICLES OF INCORPORATION
EXHIBIT B
SURVIVING CORPORATION BYLAWS
EXHIBIT C
FORM OF RULE 145 LETTER
EXHIBIT D
RELATING TO TAX ISSUES CERTIFICATES OF APEX AND SHAREHOLDERS
EXHIBIT E
FORMS OF EMPLOYMENT AGREEMENTS
Schedule 3.1 (g)
FAIRFIELD LIABILITIES
The liabilities of Fairfield under an Agreement and Plan of Merger among
Fairfield, FCVB Corp. and Vacation Break USA, Inc. dated as of August 8, 1997
Schedule 3.2(q)
POOLING CONDITIONS
No changes in the equity interest of the Apex Common Stock in contemplation of
effecting the Merger for a period of two years before the Merger is initiated
and between initiation and the Closing (hereinafter collectively referred to as
the "Prohibited Period").
No reacquisitions of outstanding Apex Common Stock unless for purposes other
than the Merger, and then not in an abnormal amount.
No entering into other financial arrangements for the benefit of any
Shareholder, such as guaranty of a loan.
No purchases of Fairfield Common Stock prior to the Closing except as set forth
on Schedule 3.2(v).
No distributions to any Shareholder that are greater than normal dividends, and
only if based on established dividend policy.
No changes in the voting rights of outstanding Apex Common Stock during the
Prohibited Period.
No stock option plans during the Prohibited Period.
No arrangements to sell any Shareholder's interests to an independent third
party.
No new agreements during the Prohibited Period to purchase interests of any
Shareholder in Apex.
No dispositions of significant assets during the Prohibited Period.
No stock dividends prior to the Closing.
No reacquisitions of outstanding Apex Stock for purposes of effecting the
Merger.
No new employment contracts with any Shareholder other than the employment
agreement described in Section 6.5(c).
No agreements to assist any Shareholder to sell his shares after the Merger,
which involve compensation or other financial inducements.
No purchases of Apex Common Stock by any Shareholder.
No transfer of Apex Common Stock from any Shareholder to any employee or
employees of Apex in contemplation of the Merger, unless in compensation of past
service.
No agreements which would restrict any Shareholder's individual voting rights
after the Merger.
No sales of Exchanged Shares within thirty days prior to consummation of the
Merger.
Schedule 4.2(b)
SALARY AND BONUS
Apex may, in its sole discretion, pay at or before the Closing each of
Xxxx Xxxxxxxxx, C. Xxxxxxx Xxxxxxxxx, Xx. and Xxxxx Xxxxxxxxx a bonus for the
months of May 1997 through October 1997. Such bonus shall be no more than 6/12
of the total bonus actually paid to such person for the 1996 fiscal year,
regardless of such person's 1997 sales or performance.
Schedule 4.2(g)
PERMITTED DISTRIBUTIONS
1) Xxxxxxx Xxxxx Xxxxxxxxxxx, Xxxx X-0, located in Hollister, Missouri
2) 1997 GMC Yukon
3) Wattensaw Land Company
4) Xxx 00, Xxxxx X, Xxxxxxx Xxxxxx Xxxxxxxx, Xxxx of Maumelle, Arkansas
Schedule 6.3(h)
OPINION OF COUNSEL FOR APEX
1. Apex is a corporation duly organized, validly existing and in good standing
under the laws of the State of Arkansas, has full power to own its properties
and to the knowledge of counsel, to carry on the business currently being
conducted by it, and to the knowledge of counsel, does not conduct business in
any state other than Arkansas, Missouri and Texas. To the knowledge of counsel,
Apex does not now own and has never owned any capital stock any or equity
interest in any corporation, limited liability company, partnership or other
entity and has no Subsidiary.
2. The execution, delivery, and consummation of the Agreement has been duly
authorized and approved by all necessary action. The Agreement has been duly
executed and delivered and constitutes the valid and binding agreement of Apex
enforceable in accordance with its terms.
3. To the knowledge of counsel, neither the execution of the Agreement nor the
consummation of the transactions contemplated thereby will result in the breach
of any term or provision of, or constitute a default under, or be in violation
of any charter provision, bylaw, agreement, instrument, order, law or regulation
to which Apex is a party or which is otherwise applicable.
4. To the knowledge of counsel, there is not (i) any pending or threatened
lawsuits or administrative or other proceedings against Apex or its assets other
than as set forth on Schedule 3.2(g) to the Agreement or (ii) any currently
existing order, writ, injunction or decree to which Apex is subject.
5. To the knowledge of counsel (i) the business conducted by Apex has been, and
currently is being, conducted in material compliance with all, and Apex is not
in breach of any, applicable laws, rules and regulations or orders, including
but not limited to those relating to telemarketing, of each jurisdiction in
which its business is carried on and all governing instruments applicable to
Apex and to the conduct of its business, except for noncompliance or breach
which, individually or in the aggregate, will not affect adversely the business
or prospects of its business or Apex, and (ii) Apex has obtained all, and is not
in default under any, permits, licenses, certificates, approvals, orders,
franchises, registrations and other authorizations required for the operation of
its business, except where the failure to obtain a permit, or a default under
such permits, would not, individually or in the aggregate, adversely affect the
business or prospects of Apex.
6. Except as set forth in Schedule 3.2(v) to the Agreement, to the knowledge of
counsel, neither Apex nor any of its affiliates (including but not limited to
Shareholders), (i) beneficially owns (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, or (ii) is a party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of capital stock of Fairfield.
7. To the knowledge of counsel, there is no fact or circumstance that would
cause any representation or warranty, in whole or in part, of Apex contained in
the Agreement not to be true.
