EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of
July 17, 1998 by and among Equivest Finance, Inc., a Florida corporation
("Purchaser"), ERC Acquisition Corp., a Delaware corporation ("Acquisition
Corp."), and Eastern Resorts Corporation, a Rhode Island corporation ("ERC").
W I T N E S S E T H:
WHEREAS, R. Xxxxx Xxxxxx and Xxxxx Xxxxxx (the "ERC
Shareholders") own all of the issued and outstanding stock of ERC; and
WHEREAS, ERC is the sole member and the sole manager of
Eastern Resorts Company, LLC, a Rhode Island limited liability company (the
"LLC"), which develops, owns and operates timesharing resorts in Rhode Island
and Massachusetts; and
WHEREAS, Purchaser desires to acquire ERC and has formed
Acquisition Corp. for the sole and express purpose of completing such
acquisition; and
WHEREAS, the Board of Directors of ERC (i) has determined that
the merger of ERC with and into Acquisition Corp. (the "Merger") is fair to and
in the best interests of ERC and the ERC Shareholders and has approved this
Agreement and the Merger and (ii) has recommended the approval of this Agreement
and the Merger by the ERC Shareholders;
WHEREAS, the ERC Shareholders have approved this Agreement and
the Merger;
WHEREAS, the Board of Directors of Purchaser has determined
that the Merger is fair to and in the best interests of Purchaser and its
shareholders and has approved this Agreement and the Merger;
WHEREAS, the Board of Directors of Acquisition Corp. (i) has
determined that the Merger is fair to and in the best interests of Acquisition
Corp. and its shareholder and has approved this Agreement and the Merger and
(ii) has recommended the approval of this Agreement and the Merger by the
shareholder of Acquisition Corp., and Purchaser, as sole shareholder of
Acquisition Corp., has approved this Agreement and the Merger;
WHEREAS, the Merger will be consummated upon the terms and
subject to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law (the "DGCL") and the Rhode Island Business Corporation
Act (the "RBCA"); and
WHEREAS, for federal (and applicable state and local) income
tax purposes, it is intended that the Merger shall qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, the parties hereto, intending
legally to be bound, hereby agree as follows:
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ARTICLE I
TERMS OF MERGER
SECTION 1.1 MERGER.
Purchaser, Acquisition Corp. and ERC acknowledge and agree
that their representations, covenants, warranties, agreements, indemnities and
other undertakings contained in this Agreement are made and given to induce the
other parties to enter into this Agreement and to consummate the Merger and that
each party in reliance thereon has agreed to execute this Agreement and
consummate the Merger. Subject to the satisfaction or waiver of the conditions
set forth in this Agreement, at the Closing (as defined in Section 1.2),
pursuant to the terms and provisions of this Agreement and all relevant laws,
ERC shall be merged with and into Acquisition Corp. As a result of the Merger,
the separate corporate existence of ERC shall cease and Acquisition Corp. shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 1.2 TIME AND PLACE OF CLOSING.
As promptly as practicable and in no event later than the
fifth business day following the satisfaction or waiver of the conditions
specified in Article VI (other than conditions which, by their nature, are to be
satisfied at the Closing, but subject to those conditions), the closing of the
Merger (the "Closing") shall take place at the offices of Shearman & Sterling,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, X.X. 00000. At the Closing, there shall be
delivered to Purchaser and the ERC Shareholders the consideration, certificates
and other documents and instruments required to be delivered under Articles VI
and VII. The parties shall prepare, execute and file a certificate of merger and
articles of merger and any other related documents in order to comply in
effecting the Merger in all respects with the respective requirements of the
DGCL and the RBCA. Upon filing of the articles of merger with the Secretary of
State of the State of Rhode Island and a certificate of merger with the
Secretary of State of the State of Delaware, the Merger shall become effective
(the time of such effectiveness being referred to as the "Effective Time").
SECTION 1.3 EFFECTS OF MERGER.
At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL and the RBCA. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of ERC and Acquisition
Corp. shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of ERC and
Acquisition Corp. shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.4 CONVERSION OF SECURITIES. (a) At the Effective Time, by virtue
of the Merger and without any action on the part of Acquisition Corp., ERC or
the ERC Shareholders:
(i) each issued and outstanding share (each a "Share" and,
collectively, the "Shares"), of common stock, no par value per share,
of ERC ("ERC Common Stock") issued and outstanding immediately prior to
the Effective Time (other than any Shares to be canceled pursuant to
Section 1.4(a)(ii)) shall be converted into the right to receive (A)
$1,500 (the "Per Share Cash Amount") plus (B) 320 shares (the "Per
Share Stock Amount" and, together with the Per Share Cash Amount, the
"Merger Consideration") of common stock, $.05 par value per share, of
Purchaser ("Purchaser Common Stock"); provided, however, that if,
between the date of this Agreement and the Effective Time, the
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Purchaser Common Stock or the ERC Common Stock shall have been
reclassified for any reason (other than pursuant to any action
described in Schedule 2.4 hereto) including, without limitation, any
reclassification, recapitalization, split, stock dividend, combination
or exchange of shares, the Per Share Cash Amount and the Per Share
Stock Amount shall be equitably adjusted to reflect such change; and
(ii) each Share held in the treasury of ERC and each Share
owned by Purchaser or any direct or indirect wholly owned subsidiary of
Purchaser or ERC immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof, and no
payment shall be made with respect thereto.
SECTION 1.5 EXCHANGE OF CERTIFICATES.
(a) Exchange Procedures. At the Closing, each ERC Shareholder
shall surrender to Purchaser for cancellation a certificate or certificates
representing the Shares held by such holder (collectively, the "Certificates"),
duly endorsed in blank, or with appropriate stock powers, duly executed in
blank, attached thereto, in proper form for transfer, and with all applicable
taxes, if any, paid or provided for. At the Closing, Purchaser shall deliver to
such ERC Shareholder, in exchange for the surrendered Certificates, (i) cash (by
wire transfer) in an amount equal to the number of Shares to be exchanged by
such holder pursuant to Section 1.4(a) multiplied by the Per Share Cash Amount
and (ii) a certificate representing that number of shares of Purchaser Common
Stock that such holder shall have the right to receive in respect of the Shares
formerly represented by such Certificate or Certificates (after taking into
account all Shares then held by such holder), and the Certificate or
Certificates so surrendered shall forthwith be canceled.
(b) No Further Rights in Shares. All Merger Consideration
transferred to the ERC Shareholders upon conversion of the Shares in accordance
with the terms hereof (including any cash paid pursuant to Section 1.5(c)) shall
be deemed to have been issued in full satisfaction of all rights pertaining to
such Shares.
(c) No Fractional Shares. No certificates or scrip
representing fractional shares of Purchaser Common Stock shall be issued upon
the surrender for exchange of Certificates. Each holder of a fractional share
interest shall be paid an amount in cash equal to the product obtained by
multiplying (i) such fractional share interest to which such holder (after
taking into account all fractional share interests then held by such holder)
would otherwise be entitled by (ii) the Exchange Price. As used herein, the
"Exchange Price" means an amount equal to the average of the per share closing
prices, as reported by NASDAQ SmallCap Market, of shares of Purchaser Common
Stock for the 20 consecutive trading days ending on (and including) the trading
day immediately preceding the Effective Time.
(d) Withholding Rights. Purchaser shall be entitled to deduct
and withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to the ERC Shareholders such amounts, if any, as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. However, if Purchaser will
in fact have an obligation to deduct and withhold from the Merger Consideration,
then to the extent such obligation can be avoided or minimized by either (i) the
ERC Shareholders' compliance with any applicable certification requirement or
other exemption or (ii) Purchaser's compliance with any applicable certification
requirement or other exemption, or by both (i) and (ii), each party agrees to
individually undertake such action or actions prior to the Closing as will be
necessary to so comply with any such certification requirement or other
exemption that is available to it (and, to the extent reasonably necessary, to
assist the other party in so complying with any certification requirement or
other exemption that is available to such other party). To the extent that
amounts are so
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deducted and withheld from the Merger Consideration by Purchaser, (i) such
deducted and withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the ERC Shareholders in respect of which such
deduction and withholding was made by Purchaser and (ii) such deducted and
withheld amounts shall be paid by Purchaser to the appropriate governmental
bodies and agencies.
(e) Dividends. Holders of shares of Purchaser Common Stock
issued pursuant to the Merger shall be entitled to any dividends paid with
respect to such shares of Purchaser Common Stock that become payable to persons
who are holders of record of Purchaser Common Stock as of any record date
following the Effective Time.
SECTION 1.6 STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of ERC shall
be closed and there shall be no further registration of transfers of Shares
thereafter on the records of ERC. From and after the Effective Time, the holders
of Certificates representing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided herein or by applicable law. On or after the
Effective Time, any Certificates presented to Purchaser for any reason shall be
converted into Merger Consideration and any cash in lieu of fractional shares of
Purchaser Common Stock to which the holders thereof are entitled pursuant to
Section 1.5(c).
SECTION 1.7 METHOD OF CARRYING MERGER INTO EFFECT.
Purchaser, Acquisition Corp. and ERC shall cooperate in all
reasonable respects in effecting the Merger, including, without limitation,
taking, or causing to be taken, such actions as may be required in order to
cause the Merger to become effective, subject to and in accordance with the
provisions hereof.
SECTION 1.8 CHARTER, BY-LAWS AND BOARD OF DIRECTORS OF THE SURVIVING
CORPORATION.
At the Effective Time: (a) the Certificate of Incorporation
and By-Laws of Acquisition Corp., as the Surviving Corporation in the Merger, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation; provided, however, that,
at the Effective Time, Article I of the Certificate of Incorporation of the
Surviving Corporation shall read as follows: "The name of the Corporation is
Eastern Resorts Corporation" and (b) the directors of Acquisition Corp.
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of ERC
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
SECTION 1.9 TAX-FREE REORGANIZATION.
(a) The parties intend that (i) the Merger shall qualify as a
reorganization pursuant to Section 368(a) of the Code, (ii) the ERC Shareholders
shall recognize no gain or loss and shall take into account no income as a
result of the Merger (except for gain recognition with respect to the cash
portion of the Merger Consideration received by the ERC Shareholders), (iii) the
tax basis of ERC's assets that are directly transferred to Acquisition Corp. by
ERC in exchange for the Merger Consideration, as well as the tax basis of the
LLC's assets that are indirectly transferred by ERC to Acquisition Corp. as a
result of the Merger shall remain unchanged by reason of the Merger, and (iv)
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any elections made by ERC or the LLC with respect to periods ending on or prior
to the date of the Effective Time to account for the sale of certain timeshare
units (as set forth in Schedule 3.17 hereto) on an installment basis shall be in
effect and be similarly accounted for by the Purchaser Group (as defined in
Section 4.5(a)) after the date of the Effective Time. Each party shall report
the transactions contemplated by this Agreement to the Internal Revenue Service
and other taxing authorities in a manner consistent with this Section 1.9, and
no party will take or fail to take (or permit any of its subsidiaries or
affiliates to take or fail to take) any action or position if the taking of such
action or position or the failure to take such action or position, as the case
may be, would be inconsistent with or would jeopardize such treatment, unless
and until such party is required pursuant to a Final Determination (as defined
below) under applicable law to report the transaction in another manner. The
parties do not intend that the transfer of the equity interests in ERC Ventures,
Inc. by R. Xxxxx Xxxxxx on or prior to the Closing shall constitute a
transaction contemplated or otherwise governed by this Agreement.
(b) If, pursuant to a Final Determination (as defined below),
the ERC Shareholders are required to report the transactions contemplated by
this Agreement or the income associated with the sale of certain timeshare units
described in Section 1.9(a)(iv), or both, in a manner inconsistent with Section
1.9(a), Purchaser agrees to use its reasonable efforts to cause the members of
the Purchaser Group (as defined in Section 4.5(a)) to revise their reporting of
the transactions or the sale of certain timeshare units as contemplated by this
Agreement (including, but not limited to, by the filing of an amended return or
claim for a refund of Taxes (as such term is defined in Section 3.17); provided
that Purchaser shall have no obligation to take any action that it concludes
would have an adverse effect on the Purchaser Group.
(c) For purposes of this Agreement, "Final Determination"
shall mean the final resolution of liability for any Tax for a taxable period,
including any related interest or penalties, (i) by Internal Revenue Service
Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance
by or on behalf of the Internal Revenue Service (the "IRS"), or by a comparable
form under the laws of other jurisdictions; except that a Form 870 or 870-AD or
comparable form that reserves (whether by its terms or by operation of law) the
right of the taxpayer to file a claim for refund and/or the right of a taxing
authority to assert a further deficiency with respect to an item or items shall
not constitute a Final Determination with respect to such item or items; (ii) by
a decision, judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable; (iii) by a closing
agreement or accepted offer in compromise under Section 7121 or 7122 of the
Code, or comparable agreements under the laws of other jurisdictions; (iv) by
any allowance of a refund or credit in respect of an overpayment of Tax, but
only after the expiration of all periods during which such refund may be
recovered (including by way of offset) by a taxing authority; or (v) by any
other final disposition, including by reason of the expiration of the applicable
statute of limitations.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to ERC and the ERC
Shareholders as follows:
SECTION 2.1 ORGANIZATION.
Each of Purchaser and Acquisition Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, is duly qualified and in good standing as a foreign
corporation in the jurisdictions where the ownership of its assets or the
conduct of its business requires such qualification (except where the failure to
so qualify would not have a Purchaser Material Adverse Effect), and has full
power and authority to own its properties and assets and to carry on lawfully
its business as currently conducted. Purchaser owns all of the stock of, and
controls all of the voting power of, Acquisition Corp. The term "Purchaser
Material Adverse Effect" means any change in or effect on the business of
Purchaser and its subsidiaries that, individually or together with all other
related adverse changes and effects, is reasonably likely to be materially
adverse to the business, results of operations, properties or financial
condition of Purchaser and its subsidiaries taken as a whole.
SECTION 2.2 ARTICLES OF INCORPORATION, BYLAWS AND AGREEMENTS.
A true, complete and correct copy of the Articles of
Incorporation and By-Laws of Purchaser and the Certificate of Incorporation and
By-Laws of Acquisition Corp. as currently in effect have been delivered to ERC.
There are no agreements by and between or among Purchaser, Acquisition Corp. and
any or all of their respective shareholders imposing any restrictions upon the
transfer of or otherwise pertaining to the Purchaser Common Stock to be received
by the ERC Shareholders or the ownership thereof.
SECTION 2.3 AUTHORIZATION.
Each of Purchaser and Acquisition Corp. has full legal right,
power and authority to enter into this Agreement and consummate the Merger. The
execution, delivery and performance by Purchaser and Acquisition Corp. of this
Agreement and the Related Agreements (as defined in Section 7.1(g)) and the
actions contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate action, and this Agreement and (upon their execution)
each of the Related Agreements constitute or will constitute valid and binding
obligations of Purchaser or Acquisition Corp., as applicable, enforceable
against it in accordance with their terms.
SECTION 2.4 CAPITAL STRUCTURE.
(a) Since March 31, 1998 (except as disclosed in the SEC
Documents (as defined in Section 2.5) filed prior to the date hereof or as set
forth on Schedule 2.4 hereto), there has been no change in the authorized and
outstanding equity securities and rights to acquire equity securities of
Purchaser.
(b) Since March 31, 1998, Purchaser has not taken any action
prohibited by Section 4.1(c) of this Agreement.
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SECTION 2.5 SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) Except as set forth on Schedule 2.5(a) hereto, Purchaser
has filed all required reports, forms and documents required to be filed by it
with the Securities and Exchange Commission (the "SEC") since June 30, 1996 (the
"SEC Documents"). All of the SEC Documents (i) were prepared in accordance with
the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, (ii) did not, at the time they were filed, 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, except to
the extent such statements have been modified or superseded by subsequent SEC
Documents filed prior to the date hereof.
(b) Except as set forth on Schedule 2.5(b) hereto, the
consolidated financial statements of Purchaser included in the SEC Documents
have been prepared in accordance with generally accepted accounting principles
("GAAP") (except, in the case of interim financial statements, as permitted by
the applicable forms of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto), fairly
presented, in all material respects, the consolidated financial position of
Purchaser and its subsidiaries, taken as a whole, as of the dates thereof and
the consolidated results of operations and cash flows for the periods then ended
(subject, in the case of interim financial statements, to normal year-end
adjustments) and include all adjustments (consisting only of normal recurring
accruals) that are necessary for a fair presentation of the consolidated
financial condition of Purchaser and its subsidiaries and the results of
operations and cash flows of Purchaser and its subsidiaries as of the dates
thereof or for the periods covered thereby.
SECTION 2.6 PURCHASER COMMON STOCK.
The shares of Purchaser Common Stock to be issued in the
Merger have been duly authorized by all necessary corporate action on the part
of Purchaser and, upon issuance to the ERC Shareholders in accordance with this
Agreement, will be validly issued, fully paid and non-assessable and not subject
to preemptive rights.
SECTION 2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth on schedule 2.7 hereto or disclosed in the
SEC Documents filed prior to the date hereof, since the date of the most recent
financial statements included in the SEC Documents filed prior to the date
hereof, there has not been any change in or effect on the business of Purchaser
and its subsidiaries that, individually or together with all other adverse
changes and effects, is reasonably likely to be materially adverse to the
business, results of operations, properties or financial condition of Purchaser
and its subsidiaries taken as a whole.
SECTION 2.8 NONCONTRAVENTION; REQUIRED CONSENTS.
(a) Except as described in Schedule 2.8 hereto, the execution
and delivery of this Agreement and the Related Agreements by Purchaser, the
consummation by Purchaser of the Merger and compliance by Purchaser with the
provisions of this Agreement and the Related Agreements will not conflict with,
or result in any violation of, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under, or result in the creation of any lien upon any of the properties
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or assets of Purchaser or any of its subsidiaries under, (i) the Articles of
Incorporation or By-Laws of Purchaser or the comparable charter or
organizational documents or limited liability or partnership or similar
agreement (as the case may be) of any such subsidiary, (ii) any material loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, instrument, permit, concession, franchise
or license of Purchaser or any of its subsidiaries or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Purchaser or
any of its subsidiaries or their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or liens that individually or in the aggregate would not (x) constitute a
Purchaser Material Adverse Effect or (y) prevent the consummation of the Merger.
(b) The execution and delivery of this Agreement by Purchaser
does not, and the performance of this Agreement by Purchaser will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign
("Governmental Entity"), except (i) for applicable requirements, if any, of the
Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws"), the
National Association of Securities Dealers, Inc. (the "NASD"), and state
takeover laws, and filing and recordation of appropriate merger documents as
required by the DGCL and the RBCA, and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger or
otherwise prevent Purchaser from performing its obligations under this
Agreement, and would not constitute a Purchaser Material Adverse Effect.
SECTION 2.9 LIABILITIES.
There are no material liabilities of Purchaser or its
subsidiaries, except (i) as set forth in Schedule 2.9(a) hereto, (ii) as and to
the extent reflected or reserved against in the financial statements of
Purchaser, or (iii) incurred since the date of this Agreement in the ordinary
course of business, consistent with past practice of Purchaser and its
subsidiaries, and which do not and are not reasonably likely to have a Purchaser
Material Adverse Effect. For purposes of this Section 2.9 only, "material" means
in excess of $25,000 individually or $100,000 in the aggregate. Except as set
forth on Schedule 2.9(b) hereto, reserves are reflected on the financial
statements of Purchaser and its subsidiaries against all liabilities of
Purchaser and its subsidiaries in amounts that have been established on a basis
consistent with past practices of Purchaser and its subsidiaries and in
accordance with GAAP.
SECTION 2.10 CONTRACTS.
Except as set forth in Schedule 2.10 hereto, neither Purchaser
nor any of its subsidiaries is in material breach of any provisions of, or is in
material violation or default under the terms of, any material contract (except
for such defaults which individually or, in the aggregate, would not constitute
a Purchaser Material Adverse Effect).
SECTION 2.11 LITIGATION AND COMPLIANCE.
Except as set forth in Schedule 2.11 hereto and except as set
forth in the SEC Documents filed prior to the date hereof, there is no
litigation, suit, claim, action, arbitration, administrative proceeding, or, to
the knowledge of Purchaser, investigation of Purchaser or any of its
subsidiaries or the operation of any of their businesses pending before any
court, arbitrator, administrative agency or other governmental authority or, to
the knowledge of Purchaser, threatened against Purchaser or any of its
subsidiaries, by or before any court, arbitrator, administrative agency or other
governmental authority, that is not adequately covered by available insurance
(subject to normal deductibles). There are no pending or threatened collective
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strikes, controversies, slowdowns, work stoppages or other labor disturbances
between the Company and its employees. Except as otherwise set forth in this
Agreement and except where such non-compliance that would not have a Purchaser
Material Adverse Effect, Purchaser and its subsidiaries are in compliance in all
material respects with all federal, state and local laws and regulations and
administrative orders (collectively, "Laws") and there is no order, writ,
injunction or decree of any court, arbitrator, administrative agency or other
governmental authority materially affecting the operations or the business of
Purchaser or any of its subsidiaries or prohibiting the consummation of the
Merger.
SECTION 2.12 CONSOLIDATED TAX LIABILITY.
Neither Purchaser nor any of its subsidiaries has or could
have any liability for any Taxes (as defined in Section 3.17) pursuant to
Treasury Regulation ss. 1.1502-6, (or comparable provisions of state, local or
foreign tax law), or otherwise with respect to Xxxxxxx Funding Group, Inc. or
Xxxxxxx Management and Development Corporation) that would result in a Purchaser
Material Adverse Effect. Set forth in Schedule 2.12 hereto is a list of those
taxable years for which the Purchaser and its subsidiaries could potentially be
liable under Treasury Regulation ss.1.1502-6 or otherwise for Taxes attributable
to the Xxxxxxx Funding Group, Inc. or Xxxxxxx Management and Development
Corporation.
SECTION 2.13 KNOWLEDGE OF PURCHASER.
For purposes of this Article II, "knowledge" means with
respect to Purchaser, the actual knowledge of the persons listed in Schedule
2.13 hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ERC AND THE ERC SHAREHOLDERS
ERC and each ERC Shareholder does hereby represent and warrant
to Purchaser as follows:
SECTION 3.1 ORGANIZATION.
(a) Each of ERC and the LLC has been duly organized as a
corporation or limited liability company, as appropriate, and is validly
existing and in good standing under the laws of the State of Rhode Island and is
duly qualified and in good standing as a foreign corporation in the states set
forth in Schedule 3.1(a) hereto (which list of states includes all states in
which the ownership of its assets or the nature of its business, including the
advertising, soliciting or consummating the sale of Intervals (as defined in
Section 3.6(a)), requires such qualification), except where the failure to so
qualify would not have an ERC Material Adverse Effect. The term "ERC Material
Adverse Effect" means any change in or effect on the business of ERC, the LLC or
any Subsidiary (as defined below) that, individually or together with all other
related adverse changes and effects, is reasonably likely to be materially
adverse to the business, properties, results of operations or financial
condition of ERC, the LLC and the Subsidiaries taken as a whole. Except as set
forth on Schedule 3.1(a), neither ERC nor the LLC (i) owns, directly or
indirectly, the stock of any corporation, (ii) is a partner in any partnership
or (iii) is an equity owner in any limited liability company or other entity
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(excluding the Associations (as defined in subsection (b) of this Section 3.1)).
Each Subsidiary is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and is qualified to do business and in good standing in all jurisdictions where
such qualification is necessary to carry on its business as now conducted,
except where the failure to so qualify would not have an ERC Material Adverse
Effect. Each of ERC, the LLC and each Subsidiary has full power and authority to
own its properties and assets and to carry on lawfully its business as currently
conducted in all material respects in the states set forth in Schedule 3.1(a)
hereto.
(b) Except as set forth in Schedule 3.1(b) hereto, there are
no condominium, timeshare or other homeowner associations (each, an
"Association" and, collectively, the "Associations") for any of the Resorts (as
defined in Section 3.6(a)). To ERC's knowledge, each Association is organized
and validly existing under the laws of the state of Massachusetts or Rhode
Island, and is duly qualified and in good standing, with full power and
authority to own its properties and assets and to carry on lawfully its business
as currently conducted in all material respects.
SECTION 3.2 ARTICLES OF INCORPORATION, BYLAWS AND AGREEMENTS.
A true, complete and correct copy of the articles of
incorporation, by-laws, limited liability company certificate, operating
agreement or other organizational documents of ERC, the LLC, each Subsidiary and
each Association, together with all amendments thereto, have been delivered to
Purchaser, as set forth on Schedule 3.2 hereto. There are no agreements by and
between or among ERC, the LLC or any Subsidiary imposing any restrictions upon
the transfer of or otherwise pertaining to the securities of ERC, the LLC or any
Subsidiary (including but not limited to the ERC Stock and the LLC membership
interests).
SECTION 3.3 CAPITAL STRUCTURE AND OWNERSHIP.
Each of ERC, the LLC and each Subsidiary has authorized,
issued and outstanding the number of shares of stock or other securities so
indicated on Schedule 3.3 hereto. All such outstanding securities have been duly
and validly issued, are fully paid and nonassessable, are owned, free and clear
of all encumbrances, by the ERC Shareholders and have not been issued in
violation of (a) any preemptive rights of any person or (b) applicable federal
or state securities laws. No shares of any other class of capital stock or
security of ERC, the LLC or any Subsidiary are outstanding. There are no
outstanding options, warrants or other rights to acquire securities of ERC, the
LLC or any Subsidiary, nor are there securities outstanding which are
convertible into securities of ERC, the LLC or any Subsidiary. The name and
residence address of each of the ERC Shareholders, and the holder of the
securities of the LLC and each Subsidiary and the respective number and
description of outstanding securities held by each holder are set forth on
Schedule 3.3 hereto.
SECTION 3.4 AUTHORIZATION.
(a) ERC and (to the extent they are parties thereto), the ERC
Shareholders, have full legal right, capacity, power and authority to enter into
this Agreement and each Related Agreement and to consummate the Merger. The
execution, delivery and performance by ERC of this Agreement and the Related
Agreements and the actions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action, and this Agreement and
(upon their execution) each of the Related Agreements constitute or will
constitute valid and binding obligations of ERC and (to the extent they are
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parties hereto), the ERC Shareholders, enforceable against such persons in
accordance with their terms. Moreover, this Agreement has been approved by the
ERC Shareholders pursuant to a unanimous consent resolution, a copy of which is
attached hereto as Schedule 3.4.
(b) The ERC Shareholders hereby agree not to revoke such
unanimous written consent and not to take any other action to prevent the
consummation of the Merger, including, without limitation, transferring any
Shares held by the ERC Shareholders to any other person or granting any proxy,
lien or other rights to any person in respect of such Shares. The ERC
Shareholders also agree to vote their Shares against any business combination
transaction, recapitalization or other transaction which could result in any of
the conditions to the consummation of the Merger not being fulfilled.
SECTION 3.5 FINANCIAL STATEMENTS AND ABSENCE OF CHANGES.
(a) True and complete copies of (i) the audited consolidated
balance sheet of ERC for each of the three fiscal years ended as of December 31,
1995, December 31, 1996, and December 31, 1997, and the related audited
consolidated statements of income, retained earnings, stockholders' equity and
changes in financial position of ERC, together with all related notes and
schedules thereto, accompanied by the reports thereon of Xxxxxxx, Xxxxxxxx &
Xxxx (collectively referred to herein as the "Financial Statements") and (ii)
the unaudited consolidated balance sheet of ERC as of May 31, 1998, and the
related consolidated statements of income of ERC for the five months ended May
31, 1998, together with all related notes and schedules thereto (collectively
referred to herein as the "Interim Financial Statements") have been delivered by
ERC to Purchaser. The Financial Statements and the Interim Financial Statements
(i) present fairly in all material respects the consolidated financial
condition, results of operations, and cash flows of ERC, the LLC and the
Subsidiaries as of the dates thereof or for the periods covered thereby, (ii)
were prepared in accordance with GAAP applied on a basis consistent with the
past practices of ERC, (iii) were prepared in accordance with the books of
account and other financial records of ERC, and (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the consolidated financial condition of ERC and the Subsidiaries
and the results of the operations, and cash flows of ERC and the Subsidiaries as
of the dates thereof or for the periods covered thereby.
(b) The books of account and other financial records of ERC,
the LLC and the Subsidiaries: (i) reflect all items of income and expense and
all assets and liabilities required to be reflected therein in accordance with
GAAP applied on a basis consistent with the past practices of ERC, the LLC and
the Subsidiaries, respectively, (ii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good business
and accounting practices. Except as set forth in Schedule 3.5 hereto, since
December 31, 1997, there has not been any change in or effect on the business of
ERC, the LLC and the Subsidiaries that, individually or together with all other
adverse changes and effects, is reasonably likely to be materially adverse to
the business, properties, results of operations or financial condition of ERC,
the LLC and the Subsidiaries taken as a whole.
SECTION 3.6 TITLE TO AND CONDITION OF ASSETS AND PROPERTY.
(a) As of the date hereof, Schedule 3.6(a) hereto sets forth
(i) a list of each of the condominium or timesharing resorts, properties under
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development and undeveloped real property holdings or interests therein
(collectively, the "Resorts") in which ERC, the LLC or any Subsidiary directly
or indirectly owns real property, (ii) a description of all real property which
comprises the Resorts (the "Real Property" or "Real Properties") (which
description includes a description of all land comprising the Resorts (the
"Land"), a description of all condominium, undivided interests and other
dwelling units which have been constructed on the Land (the "Dwelling Units"),
including all Dwelling Units which have been dedicated to timeshare regimes and
which have not been dedicated to timeshare regimes, as well as a list of all
timeshare interests therein which have not been sold and which are owned by ERC,
the LLC and/or the Subsidiaries as of five business days prior to the date
hereof (the "Unsold Inventory") and (iii) a list of all material real property
leases, material easements, material licenses or similar material possessory
agreements pursuant to which ERC, the LLC and/or any Subsidiary uses or occupies
real property (the "Leases"), true, correct and complete (in all material
respects) copies of which have been delivered to Purchaser. As of the date
hereof, except as set forth on Schedule 3.6(a) hereto, neither ERC nor the LLC
or any Subsidiary owns any interest in any real property or any leasehold
interest therein and has not entered into any agreements to acquire additional
Real Property ("Purchase and Option Agreements"). ERC, the LLC and/or the
Subsidiaries have good title to all Real Property, including Unsold Inventory,
and good title to all other assets reflected in the Financial Statements or
currently owned and used in the operation of their businesses, and such Real
Property and other assets are free and clear of all material liens (except for
liens for Taxes that are (i) not yet due and payable or (ii) being contested in
good faith by proper proceedings, and in each case as to which appropriate
reserves are being maintained), claims, charges, security interests, purchase
options, or other material encumbrances, except for the "Encumbrances" described
on Schedule 3.6(a) hereto or set forth on the title policies (other than general
exceptions) listed on Schedule 3.6(a) hereto attached hereto (which liens,
claims, charges, security interests, purchase options, or other encumbrances set
forth on such title policies (other than general exceptions) or listed on
Schedule 3.6(a) hereto, together with Interval Sales or the creation of interval
ownership or condominium regimes in each case in the ordinary course of business
since the date hereof) are collectively referred to herein as the "Permitted
Exceptions" and such title policies are referred to herein as the "Title
Policies").
(b) Except as set forth on Schedule 3.6(b) hereto, neither
ERC, the LLC nor any of the Subsidiaries has any patents, copyrights, trade
names, trademarks, service marks, other such names or marks or applications
therefor. There are no pending, nor to the knowledge of ERC, threatened claims
of infringement upon the rights to any intellectual property referred to on
Schedule 3.6(b) hereto of others or, except as set forth on Schedule 3.11
hereto, any agreements or undertakings with respect to any such rights.
(c) Except as noted on Schedule 3.6(c) hereto, with respect to
the Leases and the Purchase and Option Agreements, there is no material breach
or event of default on the part of ERC, the LLC or any Subsidiary which would
have an ERC Material Adverse Effect. The Leases and the Purchase and Option
Agreements are in full force an effect and, to the knowledge of ERC, are valid
and enforceable against the parties thereto in accordance with their terms
(subject to bankruptcy, insolvency and other similar laws or equitable
principles relating to, affecting or qualifying the rights of creditors
generally) and all rental and other payments currently due under each of the
Leases and all option and other payments currently due under each of the
Purchase and Option Agreements have been duly paid or are outstanding for fewer
than 30 days.
(d) There is no pending or, to the knowledge of ERC,
threatened condemnation, eminent domain or similar proceeding with respect to
any Real Property.
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(e) ERC, the LLC and the Subsidiaries have not granted any
outstanding options or rights of first refusal to purchase or lease any of the
Real Property, or any portion thereof or interest therein, except as noted in
Schedule 3.6(e) hereto.
(f) Prior to Closing, no portion of the Real Property or any
interest of ERC, the LLC or any Subsidiary therein shall be further (after the
date hereof) alienated, encumbered, conveyed or otherwise transferred except for
sales and financing of Intervals in the ordinary course of business and
borrowings on currently existing construction loans. Except as set forth on
Schedule 3.6(a) hereto, there are no agreements (whether or oral or written) to
sell, convey or transfer any Intervals, except sales and financing of Intervals
in the ordinary course of business (i.e., for a price and upon terms which are
in the ordinary course of business of ERC, the LLC and any Subsidiary).
(g) ERC has made available to Purchaser true and complete
copies of each deed for each parcel of Real Property and all the title insurance
policies, title reports, surveys, certificates of occupancy, environmental
reports and audits, appraisals, permits, other title documents and other
documents relating to or otherwise affecting the Real Property in the possession
of ERC, the operations of ERC, the LLC or any Subsidiary thereon or any other
uses thereof. ERC, the LLC or a Subsidiary, as the case may be, is in peaceful
and undisturbed possession of each parcel of Real Property and to the knowledge
of ERC there are no contractual or legal restrictions that preclude or restrict
the ability to use the Real Property for the purposes for which they are
currently being used.
(h) With respect to each of the Leases:
(i) except as otherwise disclosed in Schedule 3.6(h), with
respect to each such lease or sublease: (A) none of ERC, the LLC nor
any Subsidiary has received any notice of cancellation or termination
under such lease or sublease and no lessor has any right of termination
or cancellation under such lease or sublease except as set forth
therein, (B) none of ERC, the LLC nor any Subsidiary has received any
notice of a breach or default under such lease or sublease, which
breach or default has not been cured, and (C) none of ERC, the LLC nor
any Subsidiary has assigned or sublet all or any portion of its
interest under such Leases, except in connection with a collateral
assignment thereof; and
(ii) none of ERC, the LLC, any Subsidiary nor (to the
knowledge of ERC) any other party to such lease or sublease, is in
breach or default in any material respect, and, to the knowledge of
ERC, no event has occurred that, with notice or lapse of time would
constitute such a breach or default or permit termination, modification
or acceleration under such lease or sublease.
(i) All the Real Property is occupied under a current
certificate of occupancy or similar permit, the transactions contemplated by
this Agreement will not require the issuance of any new or amended certificate
of occupancy.
SECTION 3.7 INSURANCE.
Schedule 3.7 hereto sets forth a list of all policies of
insurance which insure the properties, business or liabilities of ERC, the LLC
and each of the Subsidiaries setting forth the types and amounts of coverage.
Each of such policies is current and in full force and effect and neither ERC,
the LLC nor any of the Subsidiaries has received notice of default under, or
notice of intended cancellation or nonrenewal of, any such policies. ERC, the
LLC and each of the Subsidiaries will use their commercially reasonable efforts
to keep all insurance policies listed in Schedule 3.7 in effect through the
Closing.
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SECTION 3.8 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings: (i) "Environmental Law" means any Law now in effect
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment, health, safety or natural resources,
including without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials; (ii) "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law; (iii) "Hazardous Materials" means (a) petroleum
and petroleum products, by-products or breakdown products, radioactive
materials, asbestos-containing materials and polychlorinated biphenyls and (b)
any other chemicals, materials or substances regulated as toxic or hazardous or
as a pollutant, contaminant or waste under any applicable Environmental Law and
(iv) "Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
environment. Except as noted on Schedule 3.8 hereto and except for violations
which would not have an ERC Material Adverse Effect: (i) each of ERC, the LLC
and each Subsidiary have conducted and are conducting their respective
businesses in substantial compliance with all applicable Environmental Laws and
have all permits, licenses and other approvals and authorizations necessary for
the operation of their respective businesses as presently conducted, (ii) ERC
has not, and (to the knowledge of ERC) no other Person has, Released Hazardous
Materials on any of the Real Property, (iii) neither ERC, the LLC nor any
Subsidiary has received any written notice that it is the subject of any pending
or threatened investigation or inquiry by any governmental authority, or subject
to any remedial obligations under any Environmental Laws, (iv) no Hazardous
Materials have been disposed of, released or transported in violation of any
applicable Environmental Law from any properties owned by ERC, the LLC or any
Subsidiary and (v) neither ERC, the LLC nor any Subsidiary nor any of their
respective properties are subject to any material liabilities relating to any
suit, settlement, court order, administrative order, judgment or claim asserted
or arising under any applicable Environmental Laws.
SECTION 3.9 MINUTE AND STOCK BOOKS; RECORDS.
The respective minute books of ERC, the LLC and each of the
Subsidiaries made available to Purchaser contain accurate records of all
meetings held and reflect all other material corporate or similar actions of the
respective shareholders, directors, partners and members (and committees
thereof). The copies of the corporate charter, bylaws, limited liability company
agreement and certificate which are contained in or kept with said minute books
are true, complete and correct and contain all amendments thereto duly adopted
and in force. The stock transfer ledger maintained by ERC and made available to
Purchaser is complete and accurate. The respective stock or other interests
transfer records maintained by LLC and each of the Subsidiaries and made
available to Purchaser are complete and accurately disclose all issuances and
transfers of stock or other interest of the LLC and each of the Subsidiaries.
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SECTION 3.10 LIABILITIES.
There are no material liabilities of ERC, the LLC or the
Subsidiaries, except (a) as set forth on Schedule 3.10(a) hereto, (b) as and to
the extent reflected or reserved against in the Financial Statements, or (c)
incurred since the date of this Agreement in the ordinary course of business,
consistent with past practice of ERC, the LLC and the Subsidiaries and which do
not and are not reasonably likely to have an ERC Material Adverse Effect. For
purposes of this Section 3.10 "material" means in excess of $25,000 individually
or $100,000 in the aggregate. Except as set forth on Schedule 3.10(b) hereto,
reserves are reflected on the Financial Statements dated December 31, 1997 and
May 31, 1998 against all liabilities of ERC, the LLC and the Subsidiaries in
amounts that have been established on a basis consistent with past practices of
ERC, the LLC and the Subsidiaries and in accordance with GAAP.
SECTION 3.11 CONTRACTS.
Except as set forth in Schedule 3.11 hereto, as of the date
hereof neither ERC, the LLC nor any Subsidiary is a party to or bound by any of
the following (each a "Contract" and collectively the "Contracts") and true,
correct and complete copies of which referenced items have previously been
delivered to Purchaser:
(a) any contract for the purchase or sale of services,
equipment, inventory, materials, supplies, or any capital item or items (the
cost or expense of which is more than $100,000 in any single instance or which
cannot be terminated without penalty on 90 days or less notice), or supply
agreements with the federal government or any state or local government or any
agency thereof;
(b) any employment, consulting or similar agreements which
individually are likely to result in payments by ERC, the LLC or any Subsidiary
in excess of $100,000 during any consecutive 12-month period;
(c) any executive severance agreements, non-competition and
retainer agreements, executive compensation plans, bonus plans, deferred
compensation agreements, employee pension plans or retirement plans, employee
stock option or stock purchase plans, employee stock ownership plans and group
life, health and accident insurance and other employee benefit or welfare plans,
agreements or arrangements;
(d) any loan agreements, indentures, mortgages (other than
mortgages securing notes receivable issued to the Company by purchasers of
Intervals ("Timeshare Notes Receivable")), notes (other than Timeshare Notes
Receivable), capital leases or other instruments relating to the borrowing of
money (or guarantees thereof);
(e) any licenses, leases or other agreements to provide or
acquire services or equipment related to the timeshare industry;
(f) any contracts relating to the sale, hypothecation or
factoring of accounts receivable, notes receivable or servicing of accounts
receivable;
(g) any instruments or agreements relating to indebtedness by
way of lease-purchase agreements, conditional sale, guarantee or other
undertakings on which others rely in extending credit, any joint venture
agreements or any chattel mortgages or other security agreements not otherwise
disclosed;
16
(h) any agreements or contracts with, or any obligation to or
from an ERC Shareholder or any of its affiliates. For purposes of this
Agreement, "Affiliate" shall mean any person or entity that controls or is
controlled by or is under common control with, the person involved;
(i) any joint venture, "partnering" and similar agreements or
understandings;
(j) any agreements relating to the management of, or provision
of services at, each Resort.
(k) any broker, distributor, dealer, franchise, agency, sales
promotion, market research, marketing consulting and advertising agreements to
which ERC, the LLC or any Subsidiary is a party;
(l) any management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which ERC, the LLC or
any Subsidiary is a party and which are not cancellable without penalty or
further payment and without more than 30 days' notice;
(m) any contracts and agreements with the federal government
or any state or local government or any agency thereof to which ERC, the LLC or
any Subsidiary is a party;
(n) any contracts and agreements that limit or purport to
limit the ability of ERC, the LLC or any Subsidiary to compete in any line of
business or with any Person or in any geographic area or during any period of
time;
(o) any contracts and agreements between or among ERC, the LLC
or any Subsidiary and any affiliates of ERC, the LLC or any Subsidiary; and
(p) any other contracts and agreements whether or not made in
the ordinary course of business, which are material to ERC, the LLC or any
Subsidiary or the conduct of the business of ERC, the LLC or any Subsidiary or
the absence of which would have an ERC Material Adverse Effect.
Except as set forth in Schedule 3.11 hereto, none of ERC, the
LLC or any Subsidiary is in material breach of any provisions of, or is in
material violation or default under the terms of, any Contract.
SECTION 3.12 LITIGATION AND COMPLIANCE.
Except as set forth on Schedule 3.12 hereto, there is no
litigation, suit, claim, action, arbitration, administrative proceeding, or, to
the knowledge of ERC, investigation of ERC, the LLC or a Subsidiary or the
operation of any of their businesses pending before any court, arbitrator,
administrative agency or other governmental authority or, to the knowledge of
ERC, threatened against ERC, the LLC or any Subsidiary, by or before any court,
arbitrator, administrative agency or other governmental authority which is not
adequately covered by available insurance (subject to normal deductibles).
Except as otherwise set forth in this Agreement and except where such
non-compliance would not have an ERC Material Adverse Effect, ERC, the LLC and
17
the Subsidiaries are in compliance in all material respects with all Laws
including, without limitation, all Laws regarding the advertising, marketing,
offer to sell, or sale of Intervals in each state and local jurisdiction in
which ERC, the LLC and the Subsidiaries are doing business and there is no
order, writ, injunction or decree of any court, arbitrator, administrative
agency or other governmental authority materially affecting the operations or
the business of ERC, the LLC or any of the Subsidiaries or the Merger.
SECTION 3.13 NON-CONTRAVENTION; CONFLICTS.
(a) Except as described on Schedule 3.13, the execution and
delivery of this Agreement and the Related Agreements, the consummation of the
Merger and the compliance with the provisions of this Agreement and the Related
Agreements by ERC, the LLC and ERC Shareholders (in each case to the extent each
is a party thereto) will not conflict with, or result in any violation of, or
default under, or give rise to a right of termination, cancellation or
acceleration of any material obligation of or to a loss of a material benefit
under or result in the creation of any lien upon any of the properties or assets
of ERC, the LLC, or any Subsidiary under, (i) the Articles of Incorporation or
By-laws of ERC or the comparable limited liability agreement, charter or
organizational documents or partnership or joint venture or similar agreement
(as the case may be) of the LLC or any Subsidiary, (ii) any material loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulations applicable to ERC, the LLC or any
Subsidiary (or such other party) or their respective properties or assets, other
than, in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights or liens that individually or, in the aggregate, would not (x)
constitute an ERC Material Adverse Effect or (y) prevent the consummation of the
Merger.
(b) The execution and delivery of this Agreement by ERC and
the ERC Shareholders do not, and the performance of this Agreement by ERC and
the ERC Shareholders will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except
(i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws, the
NASD and state takeover laws, and filing and recordation of appropriate merger
documents as required by the DGCL and the RBCA, and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent ERC from performing its obligations under this Agreement, and
would not, individually or in the aggregate, have an ERC Material Adverse
Effect.
SECTION 3.14 LICENSES, PERMITS AND REQUIRED CONSENTS.
ERC, the LLC and each of the Subsidiaries have all federal,
state and local licenses, certifications, approvals, authorizations and permits
necessary to the conduct of their businesses as currently conducted, including,
but not limited to licenses and other permits required by federal, state and
local laws (i) to sell the Intervals in the states and local jurisdictions in
which the Resorts are located, as well as all other state and local
jurisdictions in which the Intervals are being advertised, marketed and sold
(ii) to occupy and operate the Real Property (collectively, "Licenses and
Permits" or in the case of permits issued by any governmental authority, a
"Governmental Permit"). A list of the Licenses, Permits and Governmental Permits
is set forth on Schedule 3.14(a) hereto, true, correct and complete copies of
which have previously been delivered to Purchaser. Except as would not have an
ERC Material Adverse Effect, all Licenses, Permits and Governmental Permits are
in full force and affect, and, no material violations have been made in respect
thereof and no proceeding is pending which is likely to have the effect of
revoking or limiting any such Licenses and Permits. The execution and delivery
of this Agreement and the Related Agreements, and the consummation of the Merger
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and the compliance with the provisions of this Agreement and the Related
Agreements by ERC, the LLC and the ERC Shareholders will not conflict, or result
in any violation of or default under any License, Permit or Governmental Permit.
SECTION 3.15 LABOR MATTERS.
Neither ERC, the LLC, nor any of the Subsidiaries has any
obligations, contingent or otherwise, under any employment or consulting
agreements (except if and as set forth in Schedule 3.11 hereto), collective
bargaining agreement or other contract with a labor union or other labor or
employee group. To ERC's knowledge, there are no efforts presently being made or
threatened by or on behalf of any labor union with respect to employees of ERC,
the LLC, or any Subsidiary. There are no pending or threatened collective
strikes, controversies, slowdowns, work stoppages or other labor disturbances
between ERC, the LLC or any Subsidiary. To ERC's knowledge, ERC, the LLC and
each of the Subsidiaries are in compliance in all material respects with all
federal, state, or other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and have not
and are not engaged in any unfair labor practice; no unfair labor practice
complaint against ERC, the LLC or any Subsidiary is pending or, to ERC's
knowledge, threatened before the National Labor Relations Board.
SECTION 3.16 EMPLOYEE BENEFIT PLANS.
(a) Plans and Material Documents. Schedule 3.16(a) lists (i)
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements, whether legally
enforceable or not, to which ERC, the LLC and any Subsidiary is a party, with
respect to which ERC, the LLC and any Subsidiary has any obligation or which are
maintained, contributed to or sponsored by ERC, the LLC and any Subsidiary for
the benefit of any current or former employee, officer or director of ERC, the
LLC and any Subsidiary, (ii) each employee benefit plan for which ERC, the LLC
and any Subsidiary could incur liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated, (iii) any plan in respect of
which ERC, the LLC and any Subsidiary could incur liability under Section
4212(c) of ERISA and (iv) any contracts, arrangements or understandings relating
to employee benefit matters between ERC, the LLC and any Subsidiary or any of
its Affiliates and any employee of ERC, the LLC and any Subsidiary including,
without limitation, any such contracts, arrangements or understandings relating
to a sale of ERC, the LLC and any Subsidiary (collectively, the "Plans"). The
LLC and any Subsidiary has furnished Purchaser with a true and complete copy of
each Plan and each material document prepared in connection with each such Plan
including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared financial statement in connection
with each such Plan. Except as disclosed in Schedule 3.16(a), there are no other
employee benefit plans, programs, arrangements or agreements, whether formal or
informal, whether in writing or not, to which ERC, the LLC and any Subsidiary is
a party, with respect to which ERC, the LLC and any Subsidiary has any
obligation or which are maintained, contributed to or sponsored by ERC, the LLC
and any Subsidiary for the benefit of any current or former employee, officer or
director of ERC, the LLC and any Subsidiary. Except as described in Schedule
3,16(a), ERC, the LLC and any Subsidiary has no express or implied commitment,
whether legally
19
enforceable or not, (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter
into any contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Plan, other than with
respect to a modification, change or termination required by ERISA or the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Absence of Certain Types of Plans. None of the Plans is a
multi employer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multi Employer Plan") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which ERC, the LLC and any Subsidiary could
incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer
Plan"). Except as set forth in Schedule 3.16(a), none of the Plans provides for
the payment of separation, severance, termination or similar-type benefits to
any person or obligates ERC, the LLC and any Subsidiary to pay separation,
severance, termination or similar-type benefits solely or partially as a result
of any transaction contemplated by this Agreement or as a result of a "change in
control", within the meaning of such term under Section 280G of the Code. None
of the Plans provides for or promises retiree medical, retiree disability or
life insurance benefits to any current or former employee, officer or director
of ERC, the LLC and any subsidiary. Each of the Plans is subject only to the
laws of the United States or a political subdivision thereof.
(c) Compliance. Except as would otherwise have a Purchaser
Material Adverse Effect, (i) each Plan is now and always has been operated in
all material respects in accordance with its terms and the requirements of all
applicable laws, regulations and rules promulgated thereunder, including,
without limitation, ERISA and the Code, and (ii) ERC, the LLC and any Subsidiary
has performed all obligations required to be performed by it under, is not in
any respect in default under or in violation of, and has no knowledge of any
default or violation by any party to, any Plan. Except as described in Schedule
3.16(c), no action, claim or proceeding is pending or, to the knowledge of ERC,
the LLC and any subsidiary, threatened with respect to any Plan (other than
claims for benefits in the ordinary course) and no fact or event exists that
could give rise to any such action, claim or proceeding.
(d) Qualification of Certain Plans. Each Plan that is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of the Code
has timely received a favorable determination letter from the IRS and to the
knowledge of ERC, the LLC and any Subsidiary, no fact or event has occurred
since the date of such determination letter or letters from the IRS to adversely
affect the qualified status of any such Plan or the exempt status of any such
trust.
(e) Absence of Certain Liabilities. ERC, the LLC and any
Subsidiary has not incurred any liability under, arising out of or by operation
of Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or (ii)
the withdrawal from any Multi Employer Plan or Multiple Employer Plan, and no
fact or event exists which could give rise to any such liability.
SECTION 3.17 TAXES AND RETURNS.
Except as disclosed on Schedule 3.17 hereto:
(a) All federal, state, county and local income, franchise,
excise, tariff, gross receipts, sales and use, payroll, real and personal
property and all other taxes, fees, levies, duties, imposts and governmental
20
charges, assessments and contributions, of any kind whatsoever (including, but
not limited to, any interest and penalties imposed with respect thereto)
("Taxes"), for which ERC, the LLC or any of the Subsidiaries is liable with
respect to any period, or portion of any period, ending on or prior to the date
of the Effective Time and that are or will be required to be paid, collected or
withheld by ERC, LLC or any Subsidiary and remitted to the appropriate
governmental agency or other taxing authority on or prior to the date of the
Effective Time, have been or will be paid collected, withheld, and remitted on
or prior to the date of the Effective Time. Except with respect to certain
receivables from the sale of time share units (as listed in Schedule 3.17
hereto), neither ERC, nor the LLC or any Subsidiary has any liability for any
Taxes that are attributable to any period, or any portion of any period,
beginning prior to the date of the Effective Time but as to which payment is not
actually required until after the date of the Effective Time other than Taxes
(i) attributable to the current taxable year and (ii) the payment of which has
been adequately provided for and separately set forth in the Financial
Statements or the Interim Financial Statements. Copies of all returns, reports,
notices, forms and other documents (including all schedules, exhibits and other
attachments thereto) required to be filed by ERC, the LLC or any Subsidiary on
or prior to the date of the Effective Time with respect to Taxes (including,
without limitation, information returns) ("Tax Returns") have been or will be
timely filed with the appropriate governmental agency or other taxing authority
on or prior to the date of the Effective Time and such Tax Returns and the
copies thereof which have been or will be provided to Purchaser (as set forth in
Schedule 3.17) are or will be true, accurate and complete in all material
respects.
(b) ERC or the LLC has made or will make any elections (and
has taken or will take any other acts) necessary to receive installment sale
treatment under Section 453 of the Code with respect to the sale of certain time
share receivables (as set forth in Schedule 3.17 hereto), and no acts or
omissions have been or will be committed by ERC , the LLC or any of the
Subsidiaries on or prior the Effective Time (other than any acts necessary to
effect the Merger or the transactions contemplated by this Agreement) (i) that
have caused or will cause a disposition of such receivables for purposes of
Section 453 of the Code or (ii) that have otherwise caused or will cause any
income with respect to such receivables to be realized sooner than anticipated
by the terms of such receivables. The amount of income associated with the
deferred Taxes attributable to certain time share receivables of the LLC (as set
forth in Schedule 3.17 hereto) with respect to the 1997 taxable year and the
first five months of the 1998 taxable year of the LLC will not be in excess of
approximately $7,000,000.
(c) Neither ERC, nor the LLC or any of the Subsidiaries is
currently subject to a Tax audit or any other similar proceeding nor has
received from any governmental or taxing authority any written notice of
proposed adjustment, deficiency or underpayment of any Taxes, which notice has
not been satisfied by payment or been withdrawn, and there are no claims
relating to Taxes that have been asserted or threatened against ERC, the LLC or
any of the Subsidiaries. There are no agreements or waivers relating to the
extension of time for the assessment of any Taxes of ERC, the LLC or any of the
Subsidiaries other than routine audit extensions granted in the ordinary course
of business. No consent under Section 341(f) of the Code has been filed with
respect to ERC, the
LLC or any of the Subsidiaries. There are no proposed reassessments of any
property owned by ERC, the LLC or any of the Subsidiaries that could increase
the amount of any Tax to which ERC, LLC or any of the Subsidiaries would be
subject. Neither ERC, nor the LLC or any of the Subsidiaries has (i) been a
member of any affiliated group (other than the affiliated group of which each
such party is currently a member) or (ii) filed a Tax Return on a consolidated,
combined or unitary basis. Neither ERC, nor the LLC or any of the Subsidiaries
is subject to any accumulated earnings tax penalty nor has received any
notification regarding a personal holding company tax. Except with respect to
21
certain receivables from the sale of time share units (as listed in Schedule
3.17 hereto) neither ERC, nor the LLC or any of the Subsidiaries has any
deferred income reportable for a period ending after the date of the Effective
Time but that is attributable to a transaction (e.g. an installment sale)
occurring in, or resulting from a change in accounting method made for, a period
ending on or prior to the date of the Effective Time. Neither ERC, nor the LLC
or any of the Subsidiaries is obligated under any agreement with respect to
industrial development bonds or other obligations with respect to which the
excludability from gross income of the holder for U.S. federal income tax
purposes could be affected by the transactions contemplated by this Agreement.
No power of attorney that is currently in force has been granted with respect to
any currently ongoing audits of Taxes that could affect ERC, the LLC or any of
the Subsidiaries. At all times since August 25, 1994, ERC has had in effect (i)
a valid election under Section 1362(a) of the Code (or a comparable election
under any successor provision) to be taxed as an S Corporation for federal
income tax purposes (an "S Election") (or comparable election under state or
local law), (ii) to the extent permitted by law, a comparable election in each
state in which it conducts business, and (iii) to the extent permitted by law, a
comparable local law election in each locality in which it conducts business and
is subject to a local income tax. ERC has not received and is not aware of any
proposal from any federal, state or local taxing authority to disallow such S
Election (or comparable state or local law election) for any taxable year. ERC
has not been and is not subject to Taxes imposed by (i) Section 1371 of the
Code, (ii) Section 1375 of the Code, or (iii) Section 1374 of the Code. Neither
ERC, nor the LLC or any of the Subsidiaries is a party to any agreement relating
to allocating or sharing the payment of, or liability for, Taxes for any taxable
period (or portion thereof). Neither ERC, nor the LLC nor any of the
Subsidiaries has any liability for any Taxes pursuant to Treasury Regulation ss.
1.1502-6 or comparable provisions of state, local or foreign tax law or as a
transferee or successor, by contract or otherwise. ERC, the LLC, each Subsidiary
and each of the ERC Shareholders qualifies as a "United States person" within
the meaning of Section 7701(a)(30) of the Code.
SECTION 3.18 RECEIVABLES
Schedule 3.18 sets forth an aged list of the Receivables of
ERC, the LLC and the Subsidiaries as of May 31, 1998 showing separately those
receivables that as of such date had been outstanding (i) 30 days or less, (ii)
31 to 60 days, (iii) 61 to 90 days, and (iv) more than 90 days. All receivables
reflected on the Financial Statements arose from, and the receivables existing
at the Effective Time will have arisen from, the sale of inventory, Intervals or
services to persons not affiliated with ERC, the ERC Stockholders, the LLC or
any Subsidiary (except for receivables arising from sales of Intervals to
employees of ERC, the LLC or any Subsidiary) and in the ordinary course of the
business consistent with past practice.
SECTION 3.19 CONDUCT IN THE ORDINARY COURSE; ABSENCE OF CERTAIN CHANGES,
EVENTS AND CONDITIONS.
Since December 31, 1997, except as disclosed in Schedule 3.19,
the business of ERC, the LLC and the Subsidiaries has been conducted in the
ordinary course and consistent with past practice. As amplification and not
limitation of the foregoing, except as disclosed in Schedule 3.19, since
December 31, 1997, neither ERC, the LLC nor any Subsidiary has:
(i) permitted or allowed any of the real property of ERC, the
LLC or any Subsidiary to be subjected to any material encumbrance,
other than encumbrances (A) that will be released at or prior to the
Closing or (B) in existence on or prior to December 31, 1997;
22
(ii) redeemed or repurchased any of the capital stock or
declared, made or paid any dividends or distributions (whether in cash,
securities or other property) to the holders of capital stock of ERC,
the LLC or any Subsidiary or otherwise, other than dividends,
distributions and redemptions declared, made or paid by the LLC or any
Subsidiary solely to ERC;
(iii) merged with, entered into a consolidation with or
acquired an interest of 5% or more in any material person or acquired a
substantial portion of the assets or business of any material person or
any material division or line of business thereof, or otherwise
acquired any material assets other than in the ordinary course of
business consistent with past practice, or sold, transferred, leased,
subleased, licensed or otherwise disposed of any material assets other
than in the ordinary course of business consistent with past practice;
(iv) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, ERC, the LLC or any Subsidiary;
(v) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with
any relative, beneficiary, spouse or affiliate of such person);
(vi) (A) granted any increase, or announced any increase, in
the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by ERC, the LLC or any Subsidiary to any of its
employees, including, without limitation, any increase or change
pursuant to any employee benefit plan or (B) established or increased
or promised to increase any benefits under any employee benefit plan,
in either case except as required by Law or involving ordinary
increases consistent with the past practices of ERC, the LLC or such
Subsidiary;
(vii) incurred any indebtedness (other than draws under credit
facilities existing as of the date hereof in the ordinary course of
business consistent with past practice) (A) in excess of $500,000 or
(B) pursuant to any credit agreement, loan agreement, indenture or
other financing arrangement or agreement entered into after the date
hereof;
(viii) made any capital expenditure or commitment for any
capital expenditure other than capital expenditures in the ordinary
course of business and not in excess of $2,000,000 individually or in
the aggregate;
(ix) except in the ordinary course of business, consistent
with past practice, materially amended, modified or consented to the
termination of any material Contract or ERC's, the LLC's or any
Subsidiary's rights thereunder;
(x) amended or restated the Articles of Incorporation or the
By-laws (or other organizational documents) of ERC, the LLC or any
Subsidiary; or
(xi) except with respect to any required elections that are
necessary to account for the sale of time share units on an installment
basis, made any Tax election or settled or compromised any material
federal, state or local income tax liability.
23
SECTION 3.20 CERTAIN INTERESTS
(a) Except as disclosed in Schedule 3.20, no officer or
director of ERC, the LLC or any Subsidiary and no relative or spouse (or
relative of such spouse) who resides with, or is a dependent of, any such
officer or director:
(i) has any direct or indirect financial interest in any
competitor, supplier or customer of ERC, the LLC or any Subsidiary,
provided, however, that the ownership of securities representing no
more than one percent of the outstanding voting power of any
competitor, supplier or customer, and which are listed on any national
securities exchange or traded actively in the national over-the-counter
market, shall not be deemed to be a "financial interest" so long as the
person owning such securities has no other connection or relationship
with such competitor, supplier or customer;
(ii) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which ERC,
the LLC or any Subsidiary uses or has used in the conduct of its
business or otherwise; or
(iii) has outstanding any material indebtedness to ERC, the
LLC or any Subsidiary.
(b) Except as disclosed in Schedule 3.20(b), no officer or
director of ERC, the LLC or any Subsidiary and no relative or spouse (or
relative of such spouse) who resides with, or is a dependent of, any such
officer or director has outstanding any indebtedness to the ERC Shareholders.
(c) Except as disclosed in Schedule 3.20(c), neither ERC, the
LLC nor any Subsidiary has any liability or any other obligation of any nature
whatsoever to any officer, director or shareholder of ERC, the LLC or any
Subsidiary or to any relative or spouse (or relative of such spouse) who resides
with, or is a dependent of, any such officer, director or shareholder.
SECTION 3.21 BROKERS.
Except for Xxxxxxx Xxxxx Xxxxxx, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of ERC. Except for fees and
expenses paid by ERC prior to June 1, 1998, the ERC Shareholders are solely
responsible for the fees and expenses of Xxxxxxx Xxxxx Barney.
SECTION 3.22 PRIVATE PLACEMENT.
(a) Each ERC Shareholder understands that (i) the shares of
Purchaser Common Stock will not be registered under the Securities Act on the
ground that the offering and sale of the shares of Purchaser Common Stock are
exempt from registration pursuant to Section 4(2) of the Securities Act, (ii)
the resale or other disposition of the shares of Purchaser Common Stock is
restricted pursuant to the securities laws and the Stockholders' Agreement and
(iii) there can be no assurance that such ERC Shareholder will be able to sell
or dispose of such shares purchased by it pursuant to this Agreement.
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(b) The shares of Purchaser Common Stock to be issued to each
ERC Shareholder are being acquired for investment only and not with a view to
any sale or distribution of such shares or any part thereof in violation of the
Securities Act. Each ERC Shareholder agrees at all times to sell or otherwise
dispose of all or any part of the shares of Purchaser Common Stock only pursuant
to a registration, or exemption therefrom, under the Securities Act and in
compliance with applicable state securities laws. Each such ERC Shareholder
shall take any steps necessary to ensure that any purchaser thereof shall agree
not to sell or otherwise dispose of shares of Purchaser Common Stock except in
compliance with the requirements contained in the preceding sentence.
(c) Each ERC Shareholder is an "accredited investor" within
the meaning of Rule 501 promulgated under the Securities Act and has such
knowledge and experience, or has consulted with persons having knowledge and
experience, in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the shares of Purchaser Common Stock. Such
ERC Shareholder has received all the information that such ERC Shareholder deems
material to his or her evaluation of the business, assets, liabilities,
financial condition and results of operations of Purchaser and all the
information that such ERC Shareholder has requested from Purchaser and considers
necessary or appropriate for deciding whether to acquire the shares of Purchaser
Common Stock. Such ERC Shareholder has the ability to bear the economic risks of
such ERC Shareholder's prospective investment and such ERC Shareholder is able,
without materially impairing such financial condition, to hold the shares of
Purchaser Common Stock for an indefinite period of time and to suffer complete
loss on such ERC Shareholder's investment, in the event such a loss should
occur. Each ERC Shareholder acknowledges that the shares of Purchaser Common
Stock received by such person are subject to the various restrictions and other
provisions contained in the Stockholders' Agreement.
SECTION 3.23 KNOWLEDGE OF ERC; DELIVERY OF INFORMATION.
(a) For purposes of this Article III, "knowledge" means, with
respect to ERC, the actual knowledge of the persons listed on Schedule 3.23.
(b) For purposes of this Article III "delivery" when used in
connection with documents to be provided to or disclosed to Purchaser, shall
include the review of (or opportunity to review) such documents by Purchaser,
provided that such documents are listed in the relevant schedule attached hereto
and ERC, upon the request of Purchaser, provides the Purchaser and its
representatives with copies of all such documents or the opportunity to conduct
such review or additional review of such documents as the Purchaser deems
necessary.
ARTICLE IV
ADDITIONAL AGREEMENTS AND REPRESENTATIONS
OF THE PARTIES
SECTION 4.1 CONDUCT OF BUSINESS OF ERC, THE LLC AND PURCHASER
(a) The ERC Shareholders and ERC covenant and agree that,
except as described in Schedule 4.1, between the date hereof and the time of the
Closing, none of the ERC Shareholders, ERC, the LLC nor any Subsidiary shall
conduct its business other than in the ordinary course and consistent with
ERC's, the LLC's and such Subsidiary's past practice. Without limiting the
generality of the foregoing, except as described in Schedule 4.1, the ERC
Shareholders shall
25
cause ERC, the LLC and each Subsidiary to (i) continue its advertising,
marketing and promotional activities, and selling, pricing and purchasing
policies, in accordance with past practice; (ii) use its commercially reasonable
efforts to (A) preserve intact their business organizations, (B) keep available
to Purchaser the services of the employees of ERC, the LLC and each Subsidiary,
(C) continue in full force and effect without material modification all existing
policies or binders of insurance currently maintained in respect of ERC, the LLC
and each Subsidiary, and (D) preserve and manage its current relationships with
its customers, suppliers and other persons with which it has significant
business relationships in the ordinary course of business consistent with past
practice; (iii) maintain or refrain from terminating, canceling or compromising
any material claims of ERC, the LLC or any Subsidiary and refrain from waiving
any other rights of substantial value to ERC, the LLC or any Subsidiary, except
in the ordinary course of business consistent with past practice, (iv) maintain
or renew any permit or Environmental Permit issued or related to ERC, the LLC or
any Subsidiary and (v) not engage in any practice, take any action, fail to take
any action or enter into any transaction which would be likely to cause any
representation or warranty of the ERC Shareholders or ERC to be untrue or result
in a breach of any covenant made by the ERC Shareholders or ERC in this
Agreement.
(b) Except as described in Schedule 4.1, ERC and each ERC
Shareholder covenant and agree that, prior to the Closing, without the prior
written consent of Purchaser (not to be unreasonably withheld or delayed),
neither ERC, the ERC Shareholders nor any Subsidiary will do any of the things
enumerated in the second sentence of Section 3.19. In the event ERC, any ERC
Shareholder or any Subsidiary desires to obtain the consent of Purchaser to take
any action restricted by this Section 4.1(b), such person shall submit a request
for such consent to Purchaser in accordance with Section 10.2 hereof, and
communicate such request to Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxx, Xxxxxx x.
Xxxxxx, or Xxxx Xxxxxx, in a conversation by telephone. Purchaser shall respond
to such request by the end of the second business day after receipt of such
written request. In the event Purchaser does not so respond, ERC may proceed
with the proposed transaction.
(c) Except for such actions as are listed on Schedule 2.4
hereto, Purchaser covenants and agrees that, between the date hereof and the
Closing, Purchaser will not, without the prior written consent of ERC (not to be
unreasonably withheld or delayed): (i) issue or sell any capital stock or any
option, warrant or other right to acquire the same, of Purchaser or any of its
subsidiaries or (ii) redeem or repurchase any of its capital stock or declare,
make or pay any dividends or distributions (whether in cash, securities, or
other property) to the holders of capital stock of Purchaser or any of its
subsidiaries or otherwise, other than dividends, distributions and redemptions
declared, made or paid of any subsidiary of Purchaser solely to Purchaser. In
the event Purchaser desires to obtain the consent of ERC to take any action
restricted by this Section 4.1(c), Purchaser shall submit a request for such
consent to ERC in accordance with Section 10.2 hereof, and communicate such
request to R. Xxxxx Xxxxxx, Xxxxx X. Xxxxxxxx or Xxxxxxx Xxxxxxx in a
conversation by telephone. ERC shall respond to such request by the end of the
second business day after receipt of such written request. In the event ERC does
not so respond, Purchaser may proceed with the proposed transaction.
26
SECTION 4.2 ACCESS PRIOR TO CLOSING.
(a) Upon reasonable notice from the date hereof through the
Closing, ERC, the LLC and the Subsidiaries, and their respective directors,
officers, agents, and employees, shall afford Purchaser and its representatives
reasonable access to, and opportunity to examine, during normal business hours,
any and all of the premises, properties, contracts, books, records, business,
data, personnel, customers and vendors of or relating to ERC, the LLC and any of
the Subsidiaries.
(b) Upon reasonable notice from the date hereof through
Closing, Purchaser and its subsidiaries and their respective directors,
officers, agents, and employees, shall afford ERC, the LLC and the Subsidiaries
and their respective representatives access to, and opportunity to examine,
during normal business hours, any and all of the premises, properties,
contracts, books records, business, data, personnel, customers and vendors of or
relating to Purchaser and its subsidiaries.
SECTION 4.3 REGULATORY AND OTHER AUTHORIZATIONS.
(a) ERC, the ERC Shareholders, the LLC and the Subsidiaries
(i) shall obtain all governmental, regulatory and third-party approvals,
consents, filings, authorizations or certifications necessary in order for such
parties to consummate the Merger and (ii) will cooperate fully with Purchaser in
promptly seeking to obtain all such approvals, consents, filings authorizations
or certificates.
(b) Purchaser and its subsidiaries (i) shall obtain all
governmental, regulatory and third-party, consents, filings, authorizations or
certificates necessary in order for Purchaser and Acquisition Corp. to
consummate the Merger and (ii) will cooperate fully with ERC, the ERC
Shareholders, the LLC and the Subsidiaries in promptly seeking to obtain all
such approvals, consents, filings, authorizations or certifications.
(c) The parties hereto will not take any action that will have
the effect of delaying, impairing or impeding the receipt of any of the
foregoing and will use their commercially reasonable efforts to secure the same
as promptly as possible.
SECTION 4.4 FURTHER ASSURANCES.
At any time and from time to time at or after the Closing,
Purchaser, ERC and the ERC Shareholders agree to cooperate with each other, to
execute and deliver such other documents, instruments of transfer or assignment,
files, books, and records and do all such further acts and things as may be
reasonably required to carry out the transactions contemplated hereby.
SECTION 4.5 CERTAIN TAX MATTERS.
(a) The ERC Shareholders shall pay (i) all Taxes arising out
of or related to their receipt of the Merger Consideration as contemplated by
this Agreement and (ii) (x) if the transactions contemplated by this Agreement
are not characterized as intended for tax purposes (as described in Section 1.9,
including, but not limited to, the Merger qualifying as a reorganization within
the meaning of Section 368(a) of the Code) for any reason (other than by the
breach by any member of the Purchaser Group (as defined below) of a covenant
contained in this Agreement) or (y) the sale of the timeshare units described in
Section 1.9(a)(iv) are not accounted for as intended in Section 1.9(a)(iv) for
tax purposes for any reason (other than by the breach by any member of the
Purchaser Group (as defined below) of an agreement or covenant contained in this
27
Agreement), or in the case of both (x) and (y), then the ERC Shareholders shall
indemnify and hold Purchaser, its affiliates (including, following the Closing,
ERC, the LLC and the Subsidiaries), and their successors, transferees and
assigns (collectively, the "Purchaser Group") harmless from and against all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable attorney's fees and expenses) incurred or
suffered by such Purchaser Group with respect to Taxes resulting from or arising
out of such alternative characterization or accounting, or both.
(b) The ERC Shareholders shall prepare and file, or cause to
be prepared and filed, with the appropriate governmental authority all federal,
state, local and foreign Tax Returns (as defined in Section 3.17) required to be
filed (with extensions) by or with respect to ERC or the LLC on or prior to the
date of the Effective Time. The ERC Shareholders shall prepare (or cause to be
prepared) and the Purchaser shall timely file (or cause to be timely filed), all
Tax Returns of ERC, the LLC or any Subsidiary with respect to periods ending on
or prior to the date of the Effective Time that are required to be filed after
the date of the Effective Time. In connection with such Tax Returns and the
preparation thereof, the ERC Shareholders shall be permitted to utilize the
installment method under Section 453 of the Code (or similar provisions of
state, local or foreign law), provided all necessary elections are properly made
with respect to the sale of timeshare units (as set forth in Schedule 3.17
hereto).
(c) INTENTIONALLY OMITTED.
(d) Purchaser agrees that it will and will cause ERC and the
LLC and each Subsidiary to make available all such information, employees and
records of ERC and the LLC and each Subsidiary to the ERC Shareholders and their
employees and advisors as the ERC Shareholders may reasonably request with
respect to matters relating to Taxes (including, without limitation, the right
to make copies of such information and records) and will cooperate as requested
by either ERC Shareholder with respect to all matters relating to Taxes
(including, without limitation the filing of Tax Returns, audits, and
proceedings). No member of the Purchaser Group shall file or permit to be filed
any amended Tax Returns with respect to ERC or the LLC or any Subsidiary for any
period (or portion thereof) ending on or prior to the date of the Effective Time
without the prior written consent of the ERC Shareholders, which consent shall
not be unreasonably withheld and no member of the Purchaser Group shall with
respect to Taxes attributable to periods ending on or prior to the date of the
Effective Time take or advocate any position, initiate any claim or otherwise
take any action that would adversely affect the ERC Shareholders, ERC, the LLC
or any Subsidiary.
(e) Notwithstanding any other provision of this Agreement, all
transfer, registration, stamp, documentary, sales, use and similar Taxes
(including, but not limited to, all applicable real estate transfer or gains
Taxes and any stock transfer Taxes) incurred in connection with this Agreement
and the transactions contemplated hereby shall be the responsibility of and be
paid by the ERC Shareholders. The ERC Shareholders and Purchaser shall cooperate
in the timely making of all filings, returns, reports and forms as may be
required in connection therewith.
(f) If for any reason whatsoever (i) the Merger fails to
qualify as a reorganization within the meaning of Section 368(a) of the Code,
(ii) the transactions contemplated by this Agreement are not characterized as
intended in Section 1.9 for tax purposes, or (iii) sales of the timeshare units
described in Section 1.9(a)(iv) are not accounted for as intended in Section
1.9(a)(iv) for tax purposes and, in the case of (i), (ii), or (iii), or any
combination of the foregoing, the Purchaser Group obtains any basis increase in
any asset (other than the equity interests in ERC Ventures, Inc.) (a "Purchaser
28
Group Basis Increase") then (in addition to any other remedies which may be
available to the ERC Shareholders but without duplication thereof) Purchaser
shall pay to the ERC Shareholders an amount (the "Amount") equal to (a) the
excess of (i) with respect to a taxable period, the liability for the aggregate
amount of Taxes to which the Purchaser Group would have been subject in each
relevant jurisdiction had no such Purchaser Group Basis Increase occurred (and
had Purchaser not been required to make any such payments pursuant to this
Section 4.5(f)), over (ii) the actual liability for such Taxes for such taxable
period (after taking into account any Purchaser Group Basis Increase), plus
(b)(i) professional fees and related costs and expenses, if any, incurred by the
ERC Shareholders in connection with the events described in this Section 4.5(f)
less (ii) professional fees and related costs and expenses, if any, incurred by
Purchaser Group in connection with the events described in this Section 4.5(f);
provided, however, that no payment of such Amount, if any, shall be required if,
to the extent that and for as long as (x) any Taxes (for any reason whatsoever,
other than by the breach by any member of the Purchaser Group of a covenant
contained in this Agreement) have become the obligation of, or are otherwise
imposed on or assessed against, the Purchaser Group by a taxing authority in
connection with the Purchaser Group obtaining a Purchaser Group Basis Increase
and (y) such Taxes have not been paid by the ERC Shareholders or been the
subject of a Final Determination that relieves the members of the Purchaser
Group that have become so obligated or against which such Taxes are imposed or
assessed against from any potential liability for such Taxes. In addition,
Purchaser shall have no obligation to make payment under this Section 4.5(f) to
the extent that the Amount required to be paid is in excess of the amount of
Taxes, if any, that become imposed on or otherwise assessed against the ERC
Shareholders (and that are not otherwise reimbursed by Purchaser under this
Agreement) in connection with a Purchaser Group Basis Increase (taking into
account Taxes imposed on the ERC Shareholders as a result of payments, if any,
made under this Section 4.5(f)). Such payment will be due (subject to a 10 day
grace period) when, as, and to the extent the Purchaser Group derives an actual
benefit (including in the form of any refund or reduction in Tax liability) as
the result of such excess. Any dispute concerning the calculation of payments
due under this Section 4.5(f) will be resolved by a nationally recognized
accounting firm that is jointly selected and mutually engaged by ERC
Shareholders and Purchaser (the fees and expenses of which shall be shared
equally by the ERC Shareholders and the Purchaser).
(g) With respect to the transactions contemplated by this
Agreement and the sale of certain timeshare units as described in Section 1.9
(a)(iv) and their intended treatment for federal state, and local tax purposes
as set forth in Section 1.9, neither the ERC Shareholders, nor ERC, the LLC or
Purchaser, nor any of their respective subsidiaries or other affiliates shall
take any action, or fail to take any action, that would jeopardize such intended
treatment of the transactions contemplated by this Agreement (including, but not
limited to, the Merger qualifying as a reorganization within the meaning of
Section 368(a) of the Code) or the sale of certain timeshare units as described
in Section 1.9(a)(iv) for federal, state and local tax purposes, or both;
provided, however, that in no event shall Purchaser be deemed to have breached
its obligation under this Section 4.5(g) to the extent that the ERC Shareholders
elect to make an indemnification payment to Purchaser in Purchaser Common Stock
pursuant to Section 9.2(b) and such election and payment cause the transactions
contemplated by this Agreement, as a result of a Final Determination, to be
characterized for tax purposes other than in the manner contemplated by Section
1.9. Without limiting the foregoing, no member of the Purchaser Group shall take
a position with respect to tax basis in the assets of a member of the Purchaser
Group that is inconsistent with an acquisition of a "carryover" tax basis in
such assets.
29
(h) If any member of the Purchaser Group receives any written
notice from any taxing authority proposing any adjustment to any Tax relating to
ERC or the LLC, such member shall give prompt written notice thereof to the ERC
Shareholders, which notice shall describe in detail each proposed adjustment. If
the ERC Shareholders receive any written notice from any taxing authority
proposing any adjustment to any Tax or are notified of any Final Determination
relating to the ERC Shareholders, ERC or the LLC (in each case, with respect to
the transactions contemplated by this Agreement or with respect to the sale of
certain timeshare units as described in Section 1.9(a)(iv), or both), the ERC
Shareholders shall give prompt written notice thereof to either Purchaser or
Acquisition Corp., which notice shall describe in detail each proposed
adjustment or such Final Determination, as applicable.
(i) The parties hereto agree that, except as prohibited by
applicable law, all indemnity payments made pursuant to this Agreement shall be
treated as adjustments to the applicable Merger Consideration. In the event that
the laws of a jurisdiction provide otherwise, such indemnity payments shall be
made in an amount sufficient to indemnify the relevant party on an after-Tax
basis (i.e., such amounts shall be grossed-up for Tax detriments and reduced for
Tax benefits).
(j) Purchaser shall make no claim against the ERC Shareholders
for indemnification pursuant to Section 9.2(a) of this Agreement in respect of
income or withholding Taxes unless the aggregate of all claims for such income
and withholding Taxes exceeds $25,000, in which case the ERC Shareholders shall
be required, subject to the provisions of Article IX (other than the dollar
limitations set forth in the first sentence of Section 9.2(b)) to pay or be
liable for all such claims.
(k) For purposes of determining whether the conditions to
Closing have been satisfied (but not for purposes of the ERC Shareholders'
indemnification of Purchaser for Taxes) the representations in Section 3.17 of
this Agreement shall apply only with respect to items which could have a
Material Adverse Effect. For purposes of Article IX of this Agreement, the
representations in Section 2.12 and Section 3.17 of this Agreement shall be
deemed to have been made without any exception for items identified in Schedule
2.12 and Schedule 3.17 (other than, in the case of Schedule 3.17, with respect
to certain receivables from the sale of time share units so identified and
listed on such Schedule).
SECTION 4.6 DELIVERY.
Subject to the terms and conditions of this Agreement,
Purchaser, ERC and the ERC Shareholders shall cause the delivery of the
respective documents required to be delivered or caused to be delivered by them
pursuant to Article VII below. In addition to their respective obligations under
Section 4.3 and elsewhere in this Agreement, each of Purchaser and ERC also
agree to cooperate and take or cause to be taken all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each condition to such party's obligations contained in this Agreement and to
consummate the Merger as promptly as practicable.
SECTION 4.7 EMPLOYEES.
The parties contemplate that the employees of ERC, the LLC and
the Subsidiaries shall continue employment on substantially the same terms as in
effect on the Closing Date; provided, however, that nothing herein contained is
30
intended to limit the discretion of Purchaser to change or eliminate such
employment for any employees following the Closing, subject to severance rights
of certain executive employees as set forth in the severance agreements
described on Schedule 3.11.
SECTION 4.8 EMPLOYMENT AGREEMENT.
Each of Purchaser and R. Xxxxx Xxxxxx hereby covenant and
agree to enter into an employment agreement on the Closing Date substantially in
the form attached as Exhibit 4.8 (the "Employment Agreement").
SECTION 4.9 CONFIDENTIALITY.
(a) That certain Confidentiality Agreement dated February 6,
1998 (the "CA") executed between Purchaser and Xxxxxxx Xxxxx Barney Inc. on
behalf of ERC, is hereby incorporated by reference in its entirety and Purchaser
and Acquisition Corp agree to abide by all of the covenants and agreements set
forth in the CA, as if they were each an original party thereto. Notwithstanding
the foregoing, (a) Purchaser may issue or make a press release, announcement or
other disclosure regarding this Agreement and the transactions contemplated
hereby which it reasonably determines necessary or desirable under applicable
law or NASDAQ SmallCap Market rule or regulation, and (b) Purchaser may, at any
time after the date of this Agreement, file with the SEC a Form 8-K pursuant to
the Exchange Act with respect to the transactions contemplated by this
Agreement, provided that Purchaser will provide to ERC a copy of any proposed
release or Form 8-K in advance of its dissemination or filing to provide ERC an
opportunity to comment thereon.
(b) ERC and the ERC Shareholders agree to, and shall cause
their Affiliates, agents, representatives and employees to: (i) treat and hold
as confidential (and not disclose or provide access to any person) all
information relating to trade secrets, price, customer and supplier lists,
pricing and marketing plans, policies and strategies, details of client and
consultant contracts, operations methods, business acquisition plans, new
personnel acquisition plans and all other confidential information with respect
to the business, of Purchaser, its subsidiaries, ERC, the LLC and the
Subsidiaries, (ii) in the event that ERC or the ERC Shareholders or any such
agent, representative or employee becomes legally compelled to disclose any such
information, provide Purchaser with prompt written notice of such requirement so
that Purchaser or any of its subsidiaries may seek a protective order or other
remedy or waive compliance with this Section 4.9(b), (iii) in the event that
such protective order or other remedy is not obtained, or Purchaser waives
compliance with this Section 4.9(b), furnish only that portion of such
confidential information which is legally required to be provided and exercise
its best efforts to obtain assurances that confidential treatment will be
accorded such information. ERC and the ERC Shareholders agree and acknowledge
that remedies at law for any breach of their obligations under this Section
4.9(b) are inadequate and that in addition thereto Purchaser shall be entitled
to seek equitable relief, including injunction and specific performance, in the
event of any such breach.
SECTION 4.10 NOTICE OF DEVELOPMENTS. (a) Prior to the Closing, ERC and the ERC
Shareholders shall promptly notify Purchaser in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could result in any breach of a representation or warranty or
covenant of ERC in this Agreement or which could have the effect of making any
representation or warranty of ERC in this Agreement untrue or incorrect in any
material respect (ii) all other material developments affecting the assets,
liabilities, business, financial condition, operations, results of operations,
customer relations, employee relations, projections or prospects of ERC, the LLC
31
or any Subsidiary and (iii) all acquisition of real property or any interest
therein.
(b) Prior to the Closing, Purchaser and its subsidiaries shall
promptly notify ERC, the LLC and the Subsidiaries in writing of (i) all events,
circumstances, facts, and occurrences arising subsequent to the date of this
Agreement which could result in a breach of a representation or warranty or
covenant of Purchaser in this Agreement or which could have the effect of making
any representation or warranty of Purchaser in this Agreement untrue or
incorrect in any material respect, (ii) all other material developments
affecting the assets, liabilities, business, financial condition, operations,
results of operations, customer relations, employee relations, projections or
prospects of Purchaser or any of its subsidiaries and (iii) all acquisitions of
real property or an interest therein.
SECTION 4.11 NO SOLICITATION OR NEGOTIATION.
Each of ERC and the ERC Shareholders agree that between the
date of this Agreement and the earlier of (i) the Closing and (ii) the
termination of this Agreement pursuant to Article VIII, none of the ERC
Shareholders, ERC, the LLC or any Subsidiary nor any of their respective
affiliates, officers, directors, investment bankers, representatives or agents
will (a) solicit, initiate, consider, encourage or accept any other proposals or
offers from any person (i) relating to any acquisition or purchase of all or any
portion of the capital stock of ERC, the LLC or any Subsidiary or assets of ERC,
the LLC or any Subsidiary (other than assets to be sold in the ordinary course
of business consistent with past practice), (ii) to enter into any business
combination with the ERC, the LLC, or any Subsidiary or (iii) to enter into any
other extraordinary business transaction involving or otherwise relating to ERC,
the LLC or any Subsidiary, or (b) participate in any discussions, conversations,
negotiations and other communications regarding, or furnish to any other person
any information with respect to, or otherwise cooperate in any way, assist or
participate in, facilitate or encourage any effort or attempt by any other
person to seek to do any of the foregoing. ERC and the ERC Shareholders
immediately shall cease and cause to be terminated all existing discussions,
conversations, negotiations and other communications with any Persons conducted
heretofore with respect to any of the foregoing. ERC and the ERC Shareholders
agree not to, and to cause the LLC and each Subsidiary not to, without the prior
written consent of Purchaser, release any Person from, or waive any provision
of, any confidentiality or standstill agreement to which the ERC Shareholders,
ERC, the LLC or any Subsidiary is a party.
ARTICLE V
INTENTIONALLY OMITTED
32
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 CLOSING CONDITIONS OF ERC AND THE ERC SHAREHOLDERS.
The obligations of ERC and the ERC Shareholders under this
Agreement are subject to the reasonable satisfaction, or waiver by the ERC
Shareholders, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Purchaser contained
in this Agreement shall be true and correct in all material respects on the date
hereof and on the Closing Date as though made on and as of the Closing Date or,
in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date, provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
6.1(a) has been satisfied with respect to such portion of such representation or
warranty, such portion of such representation or warranty as so qualified must
be true and correct in all respects.
(b) Purchaser shall have performed and complied with all of
the covenants and agreements in all material respects and satisfied all of the
conditions in all material respects required by this Agreement to be performed
or complied with or satisfied by Purchaser at or prior to the Closing;
(c) On the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental authority
in effect that restrains or prohibits the consummation of the transactions
contemplated by this Agreement;
(d) Purchaser shall have executed and delivered the Related
Agreements to the respective parties thereto.
(e) Acquisition Corp. shall have received, from R. Xxxxx
Xxxxxx, 100% of the equity interests in ERC Ventures, Inc., free and clear of
all liens and encumbrances, in exchange for (i) a payment of nominal
consideration of $10, and (ii) a payment of $150,000 to reimburse R. Xxxxx
Xxxxxx for a deposit delivered on behalf of ERC Ventures, Inc to the Bankruptcy
Court in the District of Rhode Island in relation to the purchase of certain
assets.
SECTION 6.2 CLOSING CONDITIONS OF PURCHASER.
The obligations of Purchaser under this Agreement are subject
to the reasonable satisfaction, or waiver by Purchaser, at or prior to the
Closing, of each of the following conditions:
(a) The representations and warranties of ERC and the ERC
Shareholders contained in this Agreement shall be true and correct in all
material respects on the date hereof and on the Closing Date as though made on
and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 6.2(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects.
(b) ERC, the LLC and each of the Subsidiaries shall have
performed and complied with all of the covenants and agreements in all material
33
respects and satisfied all of the conditions in all material respects required
by this Agreement to be performed or complied with or satisfied by it or them at
or prior to the Closing;
(c) All authorizations, consents, licenses, approvals and
other actions by, and all notices to and filings with, any lender, governmental
authority, or other persons that are required for the due execution, delivery
and performance of this Agreement listed on Schedule 6.2(c) hereto, or the
failure of which to be obtained would constitute an ERC Material Adverse Effect,
shall have been made or obtained in form and substance reasonably satisfactory
to Purchaser, and all waiting periods which are required by law to have expired
or to have been terminated prior to consummation of the Merger shall have
expired or been terminated;
(d) On the Closing Date, (i) there shall be no injunction,
restraining order or decree of any nature of any court or governmental authority
in effect that restrains or prohibits the consummation of the transactions
contemplated by this Agreement and (ii) no action, order to show cause, or other
motion or pleading brought by any third party seeking such an injunction,
restraining order or decree shall be pending before any court or governmental
authority;
(e) (i) On or prior to July 31, 1998 (A) the Bankruptcy Court
of the Northern District of New York (the "Bankruptcy Court"), which currently
has jurisdiction over the bankruptcy estate of The Xxxxxxx Funding Group, Inc.,
Xxxxxxx Management and Development Corporation and certain other related
entities (the "Estate"), shall not have taken any action to assert jurisdiction
over or otherwise impede the Merger or the other transactions contemplated
hereby, (B) neither the Official Creditors Committee of the Estate nor any other
person shall have asserted in writing to the Estate or the Bankruptcy Court that
such court's approval is required with respect to the Merger or the other
transactions contemplated hereby and (C) the Company shall not have reasonably
concluded that the approval of the Bankruptcy Court is required with respect to
the Merger or the other transactions contemplated hereby, unless (ii) the
Bankruptcy Court shall have subsequently (A) determined that its approval of the
Merger is not required or (B) approved the Merger.
(f) Acquisition Corp. shall have received, from R. Xxxxx
Xxxxxx, 100% of the equity interests in ERC Ventures, Inc., free and clear of
all liens and encumbrances, in exchange for (i) a payment of nominal
consideration of $10, and (ii) a payment of $150,000 to reimburse R. Xxxxx
Xxxxxx for a deposit delivered on behalf of ERC Ventures, Inc to the Bankruptcy
Court in the District of Rhode Island in relation to the purchase of certain
assets.
(g) (i) R. Xxxxx Xxxxxx shall have executed and delivered to
Purchaser the Employment Agreement and (ii) the ERC Shareholders shall have
executed and delivered to Purchaser the Stockholders' Agreement (as defined in
Section 7.1(g)).
(h) Purchaser shall have received an undertaking which shall
not have been withdrawn prior to Closing of Xxxxxxx, Xxxxxxxx & Xxxx,
independent public accountants to ERC, to cooperate with Purchaser in causing to
become effective an registration statement with the Securities and Exchange
Commission for a public offering of Purchaser Common Stock, by providing such
assistance, including such comfort letters and other accounting opinions and
consents to be included in a registration statement for Purchaser Common Stock,
as shall be necessary or desirable to effect such a registration and public
offering, consistent with customary practices; and
(i) Each of the directors of ERC shall have resigned.
34
ARTICLE VII
THE CLOSING
SECTION 7.1 DELIVERIES BY ERC AND ERC SHAREHOLDERS.
At the Closing, ERC or Purchaser shall receive from ERC or the
ERC Shareholders (as applicable) the following and the ERC Shareholders (as
applicable) shall cause the same to be delivered to Purchaser:
(a) A certificate or certificates representing the stock of
ERC, duly endorsed in blank by the ERC Shareholders for transfer, or accompanied
by a duly executed stock power or assignment form, duly executed in blank;
(b) The resignation of all officers and directors of ERC,
effective as of the Closing Date;
(c) Certificate of good standing from the Secretary of State
of each of the states in which ERC, the LLC or any of the Subsidiaries is
incorporated or organized, stating that each such entity is a validly existing
corporation (or limited liability company, as the case may be);
(d) A certificate, dated as of the Closing, signed by an
officer of ERC to the effect that the conditions specified in Sections 6.2(a)
and (b) above have been satisfied in all material respects.
(e) Copies of duly adopted resolutions approving the
execution, delivery and performance of this Agreement and the other instruments
contemplated hereby certified by the Secretary of ERC;
(f) A true, correct and complete copy of the Articles of
Incorporation (or similar public record of formation), as amended, of ERC, the
LLC and each Subsidiary, certified by the Secretary of State of its state of
incorporation or formation, and a true, correct and complete copy of the Bylaws,
operating agreement or partnership limited liability company agreement (as
applicable) as amended, of ERC, the LLC and each Subsidiary, certified by the
secretary of other appropriate party of each such entity;
(g) Executed counterparts of (i) the Stockholders' Agreement
substantially in the form attached hereto as Exhibit 7.1(g) (the "Stockholders'
Agreement"; and together with the Employment Agreement, the "Related
Agreements") and (ii) the Employment Agreement, executed by the parties thereto
other than Purchaser;
(h) A certificate of the secretary of ERC certifying (i) the
resolutions referred to in clause in clause (f) above, (ii) the Bylaws of ERC
and (iii) the names and signatures of the officers of ERC authorized to sign
this Agreement and each certificate or other document delivered on behalf of ERC
pursuant hereto.
(i) An affidavit from each of ERC, the LLC, each Subsidiary,
and each ERC Shareholder stating that such party qualifies as a "United States
person" within the meaning of Section 7701(a)(30) of the Code.
35
SECTION 7.2 PURCHASER'S DELIVERIES.
At the Closing, the ERC Shareholders shall receive from
Purchaser the following and Purchaser shall cause the same to be delivered to
the ERC Shareholders:
(a) the Merger Consideration in accordance with the provisions
of Section 1.3 hereof;
(b) Certificate of good standing from the Secretary of State
of the State of Florida (in the case of Purchaser) and the Secretary of State of
the State of Delaware (in the case of Acquisition Corp.) stating that Purchaser
and Acquisition Corp are each validly existing corporations in good standing;
(c) A certificate, dated as of the Closing, signed by an
officer of Purchaser to the effect that the conditions specified in Section
6.1(a) and (b) above have been satisfied in all material respects;
(d) Copies of duly adopted resolutions of Purchaser's Board of
Directors and Acquisition Corp.'s shareholders and Board of Directors approving
the execution, delivery and performance of this Agreement and the Related
Agreements, certified by their respective Secretaries;
(e) The Stockholders' Agreement and the Employment Agreement
each executed by Purchaser.
(f) A true, correct and complete copy of the Articles of
Incorporation, as amended, of each of Purchaser and Acquisition Corp., certified
by the Secretary of State of its state of incorporation or formation, and a
true, correct and complete copy of the Bylaws, certified by the secretary of
Purchaser and Acquisition Corp.
(g) A certificate of the secretary of Purchaser and
Acquisition Corp. certifying (i) the resolutions referred to in clause (d)
above, (ii) the By-laws of Purchaser and Acquisition Corp., and (iii) the names
and signatures of the officers of Purchaser and Acquisition Corp. authorized to
sign this Agreement and each certificate or other document delivered on their
behalf pursuant hereto.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION.
Notwithstanding anything in this Agreement to the contrary,
this Agreement may be terminated only:
(a) by mutual consent of the Boards of Directors of Purchaser
and ERC;
(b) by Purchaser or ERC if, for any reason, the Closing has
not occurred on or before September 15, 1998;
36
(c) by Purchaser, upon a breach of any representation,
warranty, agreement or covenant on the part of ERC or the ERC Shareholders set
forth in this Agreement, such that the conditions set forth in Section 6.2(a) or
6.2(b), as the case may be, would be incapable of being satisfied by September
15, 1998;
(d) by ERC, upon a breach of any representation, warranty,
agreement or covenant on the part of Purchaser, such that the conditions set
forth in Section 6.1(a) or 6.1(b), as the case may be, would be incapable of
being satisfied by September 15, 1998; or
(e) by Purchaser or ERC if any court of competent jurisdiction
in the United States or other governmental authority shall have issued an order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
is or shall have become non-appealable.
SECTION 8.2 EFFECT OF TERMINATION.
Upon the termination of this Agreement pursuant to Section
8.1, this Agreement shall forthwith be void and of no further force and effect
without any liability or obligation on the part of either party, except (a) that
the provisions set forth in Sections 4.9, Article X, Section 8.3, Section 8.4
and in this Section 8.2 shall continue in full force and effect and (b) that
nothing herein shall relieve either party from liability for any breach of this
Agreement.
SECTION 8.3 FEES AND EXPENSES.
All expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger or any other transaction is consummated,
provided, however, that, irrespective of whether the Merger is consummated,
Purchaser shall pay the reasonable legal and accounting fees and expenses of ERC
and the ERC Shareholders up to a maximum of $250,000, except in the event that
the transaction is terminated due to a breach by ERC or the ERC Shareholders of
their obligations hereunder.
SECTION 8.4 SPECIFIC PERFORMANCE.
It is expressly agreed and understood that nothing in this
Agreement shall preclude either party from seeking specific performance,
injunctive relief or any other remedies not involving the payment of monetary
damages in the event of any material breach or material violation of any
provision of this Agreement by the other party (whether or not this Agreement is
terminated as a result of such breach or violation) and each party acknowledges
that, in light of the unique benefit to it of its rights under this Agreement,
such remedies shall be available in respect of any such breach or violation by
it in any suit properly instituted in a court of competent jurisdiction.
37
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties made by Purchaser
and ERC and each ERC Shareholder in this Agreement or pursuant hereto shall
survive for a period of 18 months after the Closing Date; provided, however,
that representations, warranties, covenants and promises made by Purchaser and
ERC and each ERC Shareholder with respect to Tax matters shall survive until 60
days after the expiration of the statute of limitations (including any
extensions thereof pursuant to the delivery of waivers or other documents having
similar effect) applicable to any assessments by any taxing authority of Taxes
with respect to which such representations, warranties, covenants and promises
relate. 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. Each representation,
warranty, covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant, and agreement. The
Closing of the Merger shall not constitute a waiver of any rights to
indemnification. The rights of each indemnified party to obtain indemnification
with respect to each indemnifying party's representations and warranties shall
not be reduced by any investigation made at any time by or on behalf of such
indemnified party.
SECTION 9.2 INDEMNIFICATION OF PURCHASER.
(a) The ERC Shareholders agree, jointly and severally, subject
to the limitations in Section 4.5(j) and Section 9.2(b), to indemnify and hold
Purchaser, its affiliates (including, following the Effective Time, ERC, the LLC
and the Subsidiaries), and their officers, directors, employees, agents,
successors, transferees and assigns (each a "Purchaser Indemnified Party")
harmless from and against all expenses, losses, costs, Taxes, deficiencies,
liabilities and damages (including, without limitation, reasonable attorney's
fees and expenses) incurred or suffered by them (collectively, "Purchaser
Indemnifiable Damages") resulting from or arising out of (i) any breach of a
representation or warranty made by ERC or any ERC Shareholder in or pursuant to
this Agreement, (ii) any breach of the covenants or agreements made by ERC or
any ERC Shareholder in this Agreement, or (iii) any inaccuracy in any
certificate delivered by ERC or any ERC Shareholder pursuant to this Agreement,
or (iv) with respect to any Taxes imposed on the ERC Shareholders, ERC, the LLC
or any of the Subsidiaries with respect to any period, or any portion of any
period, ending on or prior to the date of the Effective Time (except to the
extent such Taxes are imposed by reason of a breach by any member of the
Purchaser Group of a covenant or agreement relating to the treatment of the
transactions contemplated by this Agreement as intended in Section 1.9 or
relating to the sale of certain timeshare units as described in Section 1.9
(a)(iv), or both); provided that no indemnity for Taxes shall arise unless such
Taxes are in excess of the reserve for Taxes reflected on either the Financial
Statements or the Interim Financial Statements.
(b) Notwithstanding the foregoing, no claim other than a claim
in respect of income or withholding Taxes (which shall be subject only to the
limitation set forth in Section 4.5(j)) may be made against the ERC Shareholders
for indemnification pursuant to Section 9.2(a) with respect to any claim by
Purchaser unless such claim shall be for an amount in excess of $10,000 (other
than a claim in respect of income or withholding Taxes which shall be subject to
the limitation set forth in Section 4.5(j)) and the aggregate of all claims
38
shall exceed $500,000, in which case the ERC Shareholders shall be required to
pay or be liable for all claims hereunder; provided the maximum amount for which
all ERC Shareholders may be liable for indemnification hereunder (excluding
claims in respect of income or withholding Taxes) shall not exceed $6,000,000,
of which one-third will be payable in cash, and two-thirds shall be payable (at
the option of the ERC Shareholders) in cash or Purchaser Common Stock (valued at
the greater of its average closing market price for the ten trading days prior
to the payment date or $2.00 per Share). In the event the ERC Shareholders do
not own sufficient shares of Purchaser Common Stock to make the required payment
in such form, such payment will be paid in cash to the extent of shortfall. In
the event that (i) the ERC Shareholders elect to make such an indemnification
payment in Purchaser Common Stock and (ii) such election causes the transactions
contemplated by this Agreement, as a result of a Final Determination (as defined
in Section 1.9), to be characterized for tax purposes in a manner other than the
manner originally intended in Section 1.9 (including, but not limited to, the
Merger qualifying as a reorganization within the meaning of Section 368(a) of
the Code), then (x) Purchaser shall have no obligation to comply with the
covenants made in Section 1.9 and Section 4.5 and (y) the ERC Shareholders shall
be deemed to have breached their covenants made in Section 1.9 and Section 4.5.
For purposes of this Section 9.2, the amount of Purchaser Indemnifiable Damages
hereunder shall be net of any insurance proceeds and any indemnity contribution
or other similar payment payable by any third-party with respect thereto. The
amount of any Purchaser Indemnifiable Damages for purposes of this Section 9.2
shall be (i) reduced by an amount that accounts for any Tax benefits that
Purchaser shall acquire as a result of its receipt or accrual of an
indemnification amount related to such Purchaser Indemnifiable Damages and (ii)
increased by an amount that accounts for any Tax detriment that Purchaser shall
suffer as a result of its receipt of accrual of an indemnification amount
related to such Purchaser Indemnifiable Damages.
(c) Purchaser agrees that it shall give the ERC Shareholders
prompt written notice of any claim by any Purchaser Indemnified Party or any
third party claim that Purchaser receives against any Purchaser Indemnified
Party, ERC, the LLC or any Subsidiary, as to which any Purchaser Indemnified
Party is entitled to request indemnification hereunder (a "Potential Claim
Notice"). The Potential Claim Notice shall include a description of the nature
of the claim, the identity of the party by whom it is being asserted and the
basis for Purchaser's belief that the claim entitles the Purchaser Indemnified
Party to indemnification hereunder. In the case of third-party claims, the ERC
Shareholders shall then have 20 calendar days in which either to (i) agree that
the claim described in the Potential Claim Notice is covered by this indemnify
or (ii) deny that the claim is covered by this indemnity. In the event that the
ERC Shareholders agree that the third-party claim is covered by this indemnity
(such claim being deemed to be a "Covered Claim" for purposes of this
Agreement), (i) the ERC Shareholders shall reimburse Purchaser Indemnified Party
for reasonable costs incurred by the Purchaser Indemnified Party in the defense
of such Covered Claim prior to the assumption of such defense by such ERC
Shareholders (ii) such ERC Shareholders shall have the right to control the
defense of such claim with counsel selected by the ERC Shareholders (subject to
the reasonable approve of Purchaser) and (iii) the ERC Shareholders shall pay
all costs of defense, settlement or judgment relating to such Covered Claim. If
control of the defense is assumed by the ERC Shareholders, Purchaser shall have
the right to participate in the defense of such claim with counsel it selects
but the costs of such counsel shall be borne by Purchaser. In the event that the
ERC Shareholders deny that a third-party claim is covered by this indemnity,
Purchaser shall have the right, subject to the next sentence, to control the
defense of the claim and shall pay all costs of defense, settlement or judgment,
provided that Purchaser shall keep the ERC Shareholders reasonably informed as
to the status of any proceedings and shall consult with the ERC Shareholders
prior to entering into any settlement of the claim (notwithstanding the
39
foregoing, the ERC Shareholders shall not have the right to disapprove of any
settlement unless the ERC Shareholders agree that the claim underlying the
settlement is covered by this indemnity).
(d) Purchaser grants to the ERC Shareholders and its duly
appointed representatives the right to negotiate, resolve, settle or contest any
claim for Tax with respect to which the ERC Shareholders would be obligated to
indemnify Purchaser or any subsidiary or affiliate under this Agreement (if such
contest or claim were not negotiated, resolved or settled in favor of the ERC
Shareholders), provided that the ERC Shareholders acknowledge such obligation in
writing and allow Purchaser to participate at its own expense, and Purchaser
agrees to cooperate and cause its affiliates to cooperate and take all actions
requested by the ERC Shareholders with respect to the foregoing. If the ERC
Shareholders do not assume the defense of any such claim for Tax, Purchaser may
individually defend the same in such manner as it may deem appropriate, but not
settle or otherwise compromise any such audit or proceeding at the expense of
the ERC Shareholders without first obtaining the written consent of the ERC
Shareholders, which consent shall not be unreasonably withheld.
SECTION 9.3 INDEMNIFICATION OF ERC AND THE ERC SHAREHOLDERS.
(a) Purchaser agrees to indemnify and hold each of the ERC
Shareholders harmless from and against all expenses, losses, costs, Taxes,
deficiencies, liabilities and damages (including, without limitation, counsel,
fees and expenses) incurred or suffered by the ERC Shareholders (collectively,
"ERC Indemnifiable Damages") from or arising out of (i) any breach of a
representation or warranty made by Purchaser in or pursuant to this Agreement,
(ii) any breach of the covenants or agreements made by Purchaser in this
Agreement, (iii) any inaccuracy in any certificate delivered by Purchaser
pursuant to this Agreement, or (iv) the operation by Purchaser of the business
of ERC, the LLC or any of the Subsidiaries following the Closing.
(b) Notwithstanding the foregoing, no claim may be made
against Purchaser for indemnification pursuant to Section 9.3(a) with respect to
any claim by the ERC Shareholders unless such claim shall be for an amount in
excess of $10,000 and the aggregate of all claims shall exceed $500,000, in
which case Purchaser shall be required to pay or be liable for all claims
hereunder; provided that the maximum amount for which Purchaser may be liable
for indemnification hereunder shall not exceed $6,000,000 of which one-third
will be payable in cash, and two-thirds shall be payable (at the option of
Purchaser) in cash or Purchaser Common Stock (valued at the greater of its
average closing market price for the ten trading days prior to the payment date
or $2.00 per Share). For purposes of this Section 9.2, the amount of ERC
Indemnifiable Damages hereunder shall be net of any insurance proceeds and any
indemnity contribution or other similar payment payable by any third-party with
respect thereto. The amount of any ERC Indemnifiable Damages for purposes of
this Section 9.3 shall be (i) reduced by an amount that accounts for any Tax
benefits that the ERC Shareholders shall acquire as a result of their receipt or
accrual of an indemnification amount related to such ERC Indemnifiable Damages
and (ii) increased by an amount that accounts for any Tax detriment that the ERC
Shareholders shall suffer as a result of their receipt of accrual of an
indemnification amount related to such ERC Indemnifiable Damages.
(c) The ERC Shareholders agree that they shall give Purchaser
prompt written notice of any claim by the ERC Shareholders or any third party
claim that the ERC Shareholders receive, as to which the ERC Shareholders are
entitled to request indemnification hereunder (a "Potential Claim Notice"). The
Potential Claim Notice shall include a description of the nature of the claim,
40
the identity of the party by whom it is being asserted and the basis for the ERC
Shareholders' belief that the claim entitles them to indemnification hereunder.
In the case of third-party claims, Purchaser shall then have 20 calendar days in
which either to (i) agree that the claim described in the Potential Claim Notice
is covered by this indemnity or (ii) deny that the claim is covered by this
indemnity. In the event that Purchaser agrees that the third-party claim is
covered by this indemnity (such claim being deemed to be a "Covered Claim" for
purposes of this Agreement), (i) Purchaser shall reimburse the ERC Shareholders
for reasonable costs incurred in the defense of such Covered Claim prior to the
assumption of such defense by Purchaser (ii) Purchaser shall have the right to
control the defense of such claim with counsel selected by Purchaser (subject to
the reasonable approve of the ERC Shareholders) and (iii) Purchaser shall pay
all costs of defense, settlement or judgment relating to such Covered Claim. If
control of the defense is assumed by Purchaser, the ERC Shareholders shall have
the right to participate in the defense of such claim with counsel they select
but the costs of such counsel shall be borne by the ERC Shareholders. In the
event that Purchaser denies that a third-party claim is covered by this
indemnity, the ERC Shareholders shall have the right, subject to the next
sentence, to control the defense of the claim and shall pay all costs of
defense, settlement or judgment, provided that the ERC Shareholders shall keep
Purchaser reasonably informed as to the status of any proceedings and shall
consult with Purchaser prior to entering into any settlement of the claim
(notwithstanding the foregoing, Purchaser shall not have the right to disapprove
of any settlement unless Purchaser agrees that the claim underlying the
settlement is covered by this indemnity).
SECTION 9.4 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 this Article IX 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 party set
forth in this Agreement. Nothing in the foregoing shall preclude the parties
from seeking any claims or damages under the Related Agreements to remedy
breaches by the parties under such Agreements.
SECTION 9.5 CONSENT TO JURISDICTION. Each party hereto hereby irrevocably
submits to the non-exclusive jurisdiction of any state or federal court sitting
in the City of New York in any action or proceeding arising out of or relating
to this Agreement or any of the transactions contemplated hereby and hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such state court or, to the extent permitted by law,
in such federal court. Each of the parties hereby irrevocably consents to the
service of process in any such action or proceeding by the mailing by certified
mail of copies of any service or copies of the summons and complaint and any
other process to such party at the address specified in Section 10.2 hereof. The
parties agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Section 9.6 shall affect
the right of a party to serve legal process in any other manner permitted by law
or affect the right of a party to bring any action or proceeding in the courts
of other jurisdictions.
SECTION 9.6 CONTINUATION OF INDEMNITY PROTECTIONS POST-CLOSING.
Purchaser agrees that all rights to indemnification existing
in favor of the present directors, members, officers and managers of each of
ERC, The LLC and the Subsidiaries (collectively, the "Indemnified Fiduciaries")
as provided in the Articles of Incorporation, Articles of Organization, By-Laws,
Operating Agreement or similar organizational documents of any such entity as in
41
effect as of the date hereof or pursuant to the terms of any written agreements
providing for indemnification (other than any such agreements entered into in
contemplation of the execution of this Agreement) entered into between ERC, the
LLC or any Subsidiary and any of the Indemnified Fiduciaries shall survive the
Merger and shall continue in full force and effect (without modification or
amendment, except as required by applicable law or except to make changes
permitted by law that would expand the scope of the Indemnified Fiduciaries'
right of indemnification), to the fullest extent and for the maximum term
permitted by law, and shall be enforceable by the Indemnified Fiduciaries
against the relevant entity.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 GOVERNING LAW AND CONSENT TO JURISDICTION.
This Agreement shall be deemed to be made in, and in all
respects shall be interpreted, construed and governed by and in accordance with
the internal laws of, the State of New York.
SECTION 10.2 NOTICES.
Any notices or other communications required under this
Agreement shall be in writing, shall be deemed to have been given when delivered
in person, by telecopier, when delivered to a recognized next business day
courier, or, if mailed, when deposited in the United States mail first class,
registered or certified, return receipt requested, with proper postage prepaid,
addressed as follows or to such other address as notice shall have been given
pursuant hereto:
If to ERC or any ERC Shareholder:
R. Xxxxx Xxxxxx
Eastern Resorts Company
000 Xxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxx Xxxxxx 00000
Fax # 401-846 -3888
with a copy to
Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxx, Xxxxx & Xxxxxxx, LLP
Watermill Center
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Fax # (000) 000-0000
42
If to Purchaser
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
Equivest Finance, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax # (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax # (000) 000-0000
SECTION 10.3 ASSIGNMENT.
Neither this Agreement nor any rights hereunder may be
assigned, by operation of law or otherwise.
SECTION 10.4 SECTION HEADINGS.
The section headings contained in this Agreements are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 10.5 COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
SECTION 10.6 AMENDMENT.
Except as hereinafter provided, this Agreement may not be
amended except by a writing signed by the party to be charged.
SECTION 10.7 ENTIRE AGREEMENT.
This Agreement and the Related Agreements referred to herein
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. Except as may be expressly stated or provided herein, no
party hereto has relied on any representation, warranty, covenant or agreement
by another party or such other party's agents, officers or employees, in
entering into this Agreement and consummating the transactions contemplated
hereby.
43
SECTION 10.8 BINDING EFFECT.
Subject to Section 10.3, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
SECTION 10.9 SEVERABILITY.
In case any provision in this Agreements shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
EASTERN RESORTS CORPORATION
BY: /s/ R. Xxxxx Xxxxxx
---------------------------------
NAME: R. Xxxxx Xxxxxx
TITLE: Chairman and
Chief Executive Officer
(CORPORATE SEAL)
EQUIVEST FINANCE, INC.
BY: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
NAME: Xxxxxxx X. Xxxxxxx
TITLE: Chairman and
Chief Executive Officer
(CORPORATE SEAL)
45
JOINDER OF SHAREHOLDERS
The undersigned ERC Shareholders join in and execute the
foregoing Agreement for the purposes which expressly apply to such ERC
Shareholders as set forth in the Agreement.
/s/ R. Xxxxx Xxxxxx
--------------------
R. Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
---------------------
Xxxxx Xxxxxx
