EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CENDANT CORPORATION,
GRAND SLAM ACQUISITION CORP.
AND
FAIRFIELD COMMUNITIES, INC.
DATED AS OF NOVEMBER 1, 2000
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER.......................................................................... 2
SECTION 1.1 The Merger..................................................................... 2
SECTION 1.2 Closing........................................................................ 2
SECTION 1.3 Effective Time................................................................. 2
SECTION 1.4 Effects of the Merger.......................................................... 3
SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving Corporation.......... 3
SECTION 1.6 Directors and Officers......................................................... 3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES............................................................ 3
SECTION 2.1 Effect on Capital Stock........................................................ 3
(a) Capital Stock of Merger Sub.............................................. 3
(b) Cancellation of Treasury Stock........................................... 3
(c) Conversion of Company Common Stock; Proration............................ 4
SECTION 2.2 Election Procedure....................................................... 6
SECTION 2.3 Certain Adjustments...................................................... 10
SECTION 2.4 Shares of Dissenting Stockholders........................................ 10
ARTICLE III REPRESENTATIONS AND WARRANTIES...................................................... 11
SECTION 3.1 Representations and Warranties of the Company.................................. 11
(a) Organization, Standing and Corporate Power............................... 11
(b) Subsidiaries............................................................. 11
(c) Capital Structure........................................................ 12
(d) Authority; Noncontravention.............................................. 13
(e) Company Documents; Undisclosed Liabilities............................... 14
(f) Certain Contracts........................................................ 16
(g) VOIs..................................................................... 17
(h) Resorts.................................................................. 19
(i) Condominium Associations................................................. 21
(j) FairShare Plus Program................................................... 22
(k) Absence of Certain Changes or Events..................................... 23
(l) Compliance with Applicable Laws; Litigation.............................. 24
(m) Taxes.................................................................... 25
(n) Employee Benefit Plans................................................... 27
(o) Labor Matters............................................................ 31
(p) Environmental Liability.................................................. 31
(q) Intellectual Property.................................................... 34
(r) Insurance Matters........................................................ 35
(s) Information Supplied..................................................... 35
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(t) Rights Agreement......................................................... 35
(u) Transactions with Affiliates............................................. 36
(v) Voting Requirements...................................................... 36
(w) Opinions of Financial Advisor............................................ 36
(x) State Takeover Statutes.................................................. 36
(y) Brokers.................................................................. 36
(z) Takeover Laws............................................................ 36
(aa) No Other Agreement....................................................... 37
SECTION 3.2 Representations and Warranties of Parent....................................... 37
(a) Organization, Standing and Corporate Power............................... 37
(b) Capital Structure........................................................ 37
(c) Authority; Noncontravention.............................................. 39
(d) Parent Documents......................................................... 40
(e) Information Supplied..................................................... 40
(f) Brokers.................................................................. 41
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS........................................... 41
SECTION 4.1 Conduct of Business by the Company............................................. 41
SECTION 4.2 Advice of Changes.............................................................. 44
SECTION 4.3 No Solicitation by the Company................................................. 45
ARTICLE V ADDITIONAL AGREEMENTS............................................................... 47
SECTION 5.1 Preparation of the Form S-4, Proxy Statement and Form 10; Stockholders Meeting. 49
SECTION 5.2 Letter of the Company's Accountants............................................ 49
SECTION 5.3 Letter of Parent's Accountants................................................. 49
SECTION 5.4 Access to Information; Confidentiality......................................... 49
SECTION 5.5 Reasonable Efforts............................................................. 50
SECTION 5.6 Company Equity-Based Incentives................................................ 51
SECTION 5.7 Indemnification, Exculpation and Insurance..................................... 53
SECTION 5.8 Fees and Expenses.............................................................. 54
SECTION 5.9 Public Announcements........................................................... 55
SECTION 5.10 Affiliates..................................................................... 56
SECTION 5.11 Stock Exchange Listing......................................................... 56
SECTION 5.12 Stockholder Litigation......................................................... 56
SECTION 5.13 DevCo. Distribution............................................................ 56
SECTION 5.14 Rights Agreement............................................................... 57
SECTION 5.15 Standstill Agreements; Confidentiality Agreements.............................. 58
SECTION 5.16 Conveyance Taxes............................................................... 58
SECTION 5.17 Employee Benefits.............................................................. 58
SECTION 5.18 Resignation and Appointment of the Directors of the Trustee.................... 59
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ARTICLE VI CONDITIONS PRECEDENT................................................................ 59
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger..................... 59
(a) Stockholder Approval..................................................... 59
(b) HSR Act.................................................................. 59
(c) Governmental and Regulatory Approvals.................................... 59
(d) Third Party Consents..................................................... 59
(e) No Injunctions or Restraints............................................. 60
(f) Form S-4................................................................. 60
(g) Stock Exchange Listing................................................... 60
SECTION 6.2 Conditions to Obligations of Parent............................................ 60
(a) Representations and Warranties........................................... 60
(b) Performance of Obligations of the Company................................ 60
(c) Regulatory Condition..................................................... 60
(d) Resignation and Appointment of the Directors of the Trustee.............. 61
SECTION 6.3 Conditions to Obligations of the Company....................................... 61
(a) Representations and Warranties........................................... 61
(b) Performance of Obligations of Parent..................................... 61
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................... 61
SECTION 7.1 Termination.................................................................... 61
SECTION 7.2 Effect of Termination.......................................................... 62
SECTION 7.3 Amendment...................................................................... 62
SECTION 7.4 Extension; Waiver.............................................................. 63
SECTION 7.5 Procedure for Termination...................................................... 63
ARTICLE VIII GENERAL PROVISIONS.................................................................. 63
SECTION 8.1 Nonsurvival of Representations and Warranties.................................. 63
SECTION 8.2 Notices........................................................................ 63
SECTION 8.3 Definitions.................................................................... 64
SECTION 8.4 Interpretation................................................................. 65
SECTION 8.5 Counterparts................................................................... 66
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries................................. 66
SECTION 8.7 Governing Law.................................................................. 66
SECTION 8.8 Assignment..................................................................... 66
SECTION 8.9 Consent to Jurisdiction........................................................ 67
SECTION 8.10 Headings....................................................................... 67
SECTION 8.11 Severability................................................................... 67
SECTION 8.12 Enforcement. .................................................................. 67
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
1, 2000, by and among CENDANT CORPORATION, a Delaware corporation ("Parent"),
FAIRFIELD COMMUNITIES, INC., a Delaware corporation (the "Company"), and GRAND
SLAM ACQUISITION CORP., a Delaware corporation and a subsidiary of Parent
("Merger Sub").
WHEREAS, the respective Board of Directors of Parent and the Company
have determined that the Merger (as defined below) and the other transactions
contemplated under this Agreement are in the best interest of Parent and the
Company;
WHEREAS, each of Parent, Merger Sub and the Company desire to enter
into a transaction whereby Merger Sub will merge with and into the Company (the
"Merger"), with the Company being the surviving corporation, upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $0.01 per share, of the Company
(together with the rights associated with such shares issued pursuant to the
Rights Agreement, dated as of September 1, 1992, as amended, between the Company
and The First National Bank of Boston (as successor to Society National Bank),
as Rights Agent (the "Rights Agreement"), "Company Common Stock"), will be
converted into the right to receive the Merger Consideration (as defined in
Section 2.1(c));
WHEREAS, the respective Boards of Directors of Parent and the Company
have each approved the possible transfer of certain assets and liabilities
related to the resort and vacation ownership interest development business
currently operated by the Company to a newly formed corporation ("DevCo.") and
the distribution of DevCo. common stock, on a pro rata basis, to stockholders of
the Company or the transfer of such common stock to a third party immediately
prior to the Effective Time (as defined in Section 1.3), in accordance with the
terms and provisions set forth on Exhibit A attached hereto (each, a "DevCo.
Distribution");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each approved and adopted this Agreement and approved the
Merger in accordance with the General Corporation Law of the State of Delaware
(the "DGCL"), and Parent has approved this Agreement and the Merger as the
parent of Merger Sub;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent and Merger Sub to enter into this Agreement, Parent and
certain stockholders of the Company have entered into a Voting Agreement, dated
as of the date hereof (the "Voting Agreement"), providing, among other things,
that such stockholders will vote, or cause to be voted, at the meeting of the
Company's stockholders for the purpose of voting on the
adoption of this Agreement (the "Company Stockholders Meeting") all of the
shares of Company Common Stock owned by them in favor of the Merger; and
WHEREAS, concurrently with the execution of this Agreement, Parent and
the Company have entered into a Stock Option Agreement , dated as of the date
hereof, providing, among other things, that the Company grants to Parent an
option to purchased shares of Company Common Stock (the "Stock Option
Agreement").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
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conditions set forth in this Agreement, and in accordance with the DGCL, Merger
Sub shall be merged with and into the Company at the Effective Time. Following
the Effective Time, the Company shall be the surviving corporation (the
"Surviving Corporation"), shall become a subsidiary of Parent and shall succeed
to and assume all the rights and obligations of Merger Sub in accordance with
the DGCL.
SECTION 1.2 Closing. Subject to the satisfaction or waiver of
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all the conditions to closing contained in Article VI hereof, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified
by the parties (the "Closing Date"), which shall be no later than the second day
after satisfaction or waiver of the conditions set forth in Article VI (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions; provided, that if
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the DevCo. Distribution shall be scheduled to occur within 15 business days
after satisfaction or waiver of the conditions set forth in Article VI (other
than the Company Stockholders Meeting), the closing shall take place upon
written election of Parent, delivered to the Company prior to 5:00 p.m., New
York City time, on the date of such satisfaction or waiver (the "Closing
Extension Notice") on (subject to the satisfaction or waiver of all of the
conditions set forth in Article VI) the earlier of (i) the date of the DevCo.
Distribution and (ii) the 15/th/ business day after the date of the Closing
Extension Notice, unless another time or date is agreed to by the parties
hereto). The Closing will be held at the offices of Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such other
location as is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
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Agreement, as soon as practicable following the Closing, the parties shall cause
the Merger to be consummated by filing a certificate of merger (the "Certificate
of Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the
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DGCL to effectuate the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware, or at such subsequent date or time as Parent and the Company shall
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being hereinafter referred to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
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effects set forth in Section 259 of the DGCL.
SECTION 1.5 Certificate of Incorporation and By-laws of the
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Surviving Corporation. The certificate of incorporation and the by-laws of
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Merger Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation and the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law, except
that the first article of the certificate of incorporation of the Merger Sub
shall be amended as of the Effective Time to read in its entirety as follows:
"The name of the corporation is Fairfield Communities, Inc."
SECTION 1.6 Directors and Officers. The directors of Merger Sub
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shall, from and after the Effective Time, become the directors of the Surviving
Corporation until their successors shall have been duly elected, appointed or
qualified or until their earlier death, resignation or removal in accordance
with the certificate of incorporation and the by-laws of the Surviving
Corporation. The officers of Merger Sub shall, from and after the Effective
Time, become the officers of the Surviving Corporation until their successors
shall have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the certificate of
incorporation and the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective Time,
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by virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock:
(a) Capital Stock of Merger Sub. Each issued and outstanding
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share of the common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock, par value $.01
per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common
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Stock that is owned by the Company, Parent, Merger Sub or any of their
respective wholly
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owned subsidiaries shall automatically be cancelled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock; Proration. Subject to Section
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2.2 hereof, each issued and outstanding share of Company Common Stock, other
than shares to be cancelled and retired in accordance with Section 2.1(b) and
Dissenting Shares (as defined in Section 2.4), shall be converted, at the
election of the holder thereof, in accordance with the procedures set forth in
Section 2.2 below, into the following (the "Merger Consideration"):
(i) For each share of Company Common Stock with respect to which
an election to receive shares of common stock, par value $0.01 per share,
of Parent, designated as CD common stock ("Parent Common Stock"), has been
effectively made and not revoked pursuant to Section 2.2 ("Stock Election")
and for each Non-Electing Share (as defined in subsection (iv) below), the
right to receive 1.2500 (the "Initial Exchange Ratio" and as adjusted
pursuant to Section 2.3 and this subsection (i), the "Exchange Ratio")
fully paid and nonassessable shares of Parent Common Stock (as may be
adjusted pursuant to the remainder of this subsection (i), the "Stock
Election Consideration"); provided, however, that (x) if the Average
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Trading Price (as defined below) is between $12.0 and $13.5960, then the
Exchange Ratio shall be equal to the sum of (a) the Initial Exchange Ratio
divided by two, and (b) the quotient of $7.5 divided by the Average Trading
Price, (y) if the Average Trading Price is equal to, or greater than,
$13.5960, then the Exchange Ratio shall be equal to the quotient of $16
divided by the Average Trading Price and (z) if the Average Trading Price
is below $12.0, then the Exchange Ratio shall be equal to the quotient of
$15 divided by the Average Trading Price; provided, further, that if the
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Average Trading Price of Parent Common Stock is $7.00 or less, the Exchange
Ratio will be 2.1428. As used herein, the "Average Trading Price" shall
mean the arithmetic average of the 4:00 p.m. Eastern Time closing sales
prices of Parent Common Stock reported on the New York Stock Exchange
("NYSE") Composite Tape for the 20 consecutive NYSE trading days (each, a
"Trading Day") ending on (and including) the Trading Day immediately prior
to the date of the Company Stockholders Meeting (as defined herein).
(ii) For each share of Company Common Stock with respect to which
an election to receive cash has been effectively made and not revoked
pursuant to Section 2.2 ("Cash Election"), the right to receive $15 in
cash, subject to proration pursuant to subsection (iii) below (the "Cash
Election Consideration"); provided, however, that in the event that the
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Average Trading Price is greater than $12.0, for each share of Company
Common Stock with respect to which a Cash Election was made and not subject
to proration, in addition to the Cash Election Consideration received with
respect to such share,
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there shall be a right to receive a fraction of a share of Parent Common
Stock which shall equal the value, based on the Average Trading Price, of
the Stock Election Consideration minus $15 (the "Additional Stock
Consideration"); provided, further, that the Additional Stock Consideration
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shall not exceed $1.
(iii) The manner in which each share of Company Common Stock
(other than shares of Company Common Stock to be cancelled as set forth in
Section 2.1(b) and Dissenting Shares) for which a Cash Election has been
made shall be converted into the right to receive either the Cash Election
Consideration and Additional Stock Consideration, if any, or the Stock
Election Consideration on the Effective Date shall be as set forth in this
subsection (iii). All references to "outstanding" shares of Company Common
Stock in this subsection (iii) shall mean all shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time.
(A) As is more fully set forth below and except as
provided in Section 2.1(c)(v), the aggregate amount of cash which
Parent shall be obligated to pay in the Merger pursuant to this
Agreement (other than in respect of Dissenting Shares) shall not be
more than the product of multiplying $7.5 by the number of outstanding
shares of the Company's Common Stock (the "Total Cash Actual"). "Total
Cash Potential" shall mean the sum of (1) the aggregate Cash Election
Consideration elected by stockholders of the Company, and (2) a cash
amount equal to the number of Dissenting Shares multiplied by the
value, based on the Average Trading Price, of the Stock Election
Consideration.
(B) If the Total Cash Potential is equal to or less than
the Total Cash Actual, each share of Company Common Stock covered by a
Cash Election shall be converted in the Merger into the right to
receive the Cash Election Consideration and the Additional Stock
Consideration, if any.
(C) If the Total Cash Potential is greater than the Total
Cash Actual, each share of Company Common Stock covered by a Cash
Election shall be converted in the Merger into the right to receive
the Cash Election Consideration and the Stock Election Consideration
in the following manner:
(a) The Exchange Agent (as defined in Section 2.2(d)
below) will distribute with respect to each share of Company Common
Stock as to which a Cash Election has been made the Cash Election
Consideration multiplied by a fraction, (x) the numerator of which
shall be the product of multiplying (A) $15 by (B) 50.0% of the number
of outstanding shares of Com-
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pany Common Stock minus the product of multiplying (C) the number of
Dissenting Shares by (D) the value, based on the Average Trading
Price, of the Stock Election Consideration, and (y) the denominator of
which shall be the aggregate Cash Election Consideration elected by
stockholders of the Company; and
(b) Each share of Company Common Stock covered by a
Cash Election and not fully converted into the right to receive the
Cash Election Consideration as set forth in clause (a) above shall be
converted in the Merger into the right to receive a fraction of a
share of Parent Common Stock which shall equal the value, based on the
Average Trading Price, of the sum of (x) the product of multiplying
(A) the Stock Election Consideration by (B) a fraction equal to 1.0
minus the fraction set forth in clause (a) above plus (y) the product
of multiplying (A) the value, based on the Average Trading Price, of
the Additional Stock Consideration, if any, by (B) the fraction set
forth in clause (a) above, subject to subsection (v) below.
(iv) Each share of Company Common Stock for which a valid
Stock Election has been received and each share of Company Common Stock for
which an Election (as defined in Section 2.2 below) is not in effect at the
Election Deadline (a "Non-Electing Share"), shall be converted into the
right to receive the Stock Election Consideration in the Merger, subject to
subsection (v) below. If Parent and the Company shall determine that any
Election is not properly made with respect to any shares of Company Common
Stock, such Election shall be deemed to be not in effect, and the shares of
Company Common Stock covered by such Election shall, for purposes hereof,
be deemed to be Non-Electing Shares.
(v) Notwithstanding subsections (i) through (iv) above,
Parent shall have the right, exercisable at any time at least two business
days prior to the Closing, at Parent's sole discretion, to pay in cash for
any shares for which an Election (as defined below) was made and to
substitute on a pro rata basis a payment of cash in an amount equal to the
Average Trading Price multiplied by the Exchange Ratio for any or all
shares of Company Common Stock for which the Stock Election has been made
or which would otherwise be converted into Parent Common Stock pursuant to
Section 2.1(c)(iii)(C); provided, that prior to making such substitution,
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Parent shall first have paid in cash for all shares for which a Cash
Election has been made and which were not fully converted into the right to
receive the Cash Election Consideration.
SECTION 2.2 Election Procedure. Each holder of shares of Company
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Common Stock (other than Dissenting Shares) shall have the right, subject to the
limitations set forth in this Article II, to submit an Election (as defined
below) in accordance with the following procedures (as used in this Section 2.2,
"holder" shall mean "record holder"):
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(a) Each holder of shares of Company Common Stock may specify in a
request made in accordance with the provisions of this Section (herein called an
"Election") (A) the number of shares of Company Common Stock owned by such
holder with respect to which such holder desires to make a Stock Election and
(B) the number of shares of Company Common Stock owned by such holder with
respect to which such holder desires to make a Cash Election.
(b) Parent shall prepare a form reasonably acceptable to the Company
(the "Form of Election") which shall be mailed to the Company's stockholders
entitled to vote at the Company Stockholders Meeting so as to permit the
Company's stockholders to exercise their right to make an Election prior to the
Election Deadline (as defined in subsection (d)).
(c) Parent shall use all reasonable efforts to make the Form of
Election initially available to all stockholders of the Company at least twenty
business days prior to the Election Deadline and shall use all reasonable
efforts to make available as promptly as possible a Form of Election to any
stockholder of the Company who requests such Form of Election following the
initial mailing of the Forms of Election and prior to the Election Deadline.
(d) Any Election shall have been made properly only if the person
authorized to receive Elections and to act as exchange agent under this
Agreement, which person shall be designated by Parent (the "Exchange Agent"),
shall have received, by 5:00 p.m. local time in the city in which the principal
office of such Exchange Agent is located, on the date of the Election Deadline,
a Form of Election properly completed and signed and accompanied by certificates
of the shares of Company Common Stock (the "Company Stock Certificates") to
which such Form of Election relates or by an appropriate guarantee of delivery
of such certificates, as set forth in such Form of Election, from a member of
any registered national securities exchange or a commercial bank or trust
company in the United States; provided, that such certificates are in fact
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delivered to the Exchange Agent by the time required in such guarantee of
delivery. Failure to deliver shares of Company Common Stock covered by such a
guarantee of delivery within the time set forth on such guarantee shall be
deemed to invalidate any otherwise properly made Election. As used herein,
"Election Deadline" means the date on which the Effective Time occurs.
(e) Any Company stockholder may at any time prior to the Election
Deadline change his or her Election by written notice received by the Exchange
Agent prior to the Election Deadline accompanied by a properly completed and
signed, revised Form of Election.
(f) Any Company stockholder may, at any time prior to the Election
Deadline, revoke his or her Election by written notice received by the Exchange
Agent prior to the Election Deadline or by withdrawal prior to the Election
Deadline of his or her Company Stock Certificate, or of the guarantee of
delivery of such certificates, previously deposited with the Exchange Agent.
All Elections shall be revoked automatically if the Exchange Agent is
7
notified in writing by Parent or the Company that this Agreement has been
terminated in accordance with Article VII.
(g) If any portion of the Merger Consideration is to be paid to a
person other than the person in whose name a Company Stock Certificate so
surrendered is registered, it shall be a condition to such payment that such
Company Stock Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the person requesting such payment shall pay to the
Exchange Agent any transfer or other Taxes (as defined in Section 3.1(m))
required as a result of such payment to a person other than the registered
holder of such Company Stock Certificate, or establish to the satisfaction of
the Exchange Agent that such Tax has been paid or is not payable.
(h) After the Effective Time there shall be no further registration of
transfers of shares of Company Common Stock. If after the Effective Time,
Company Stock Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration in accordance with
the procedures set forth in this Article II.
(i) At any time following the first anniversary of the Effective Time,
the Surviving Corporation shall be entitled to require the Exchange Agent to
deliver to it any remaining portion of the Merger Consideration not distributed
to holders of shares of Company Common Stock that was deposited with the
Exchange Agent at the Effective Time (the "Exchange Fund") (including any
interest received with respect thereto and other income resulting from
investments by the Exchange Agent, as directed by Parent), and holders shall be
entitled to look only to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) with respect to the Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or other distributions with respect to Parent Common Stock payable
upon due surrender of their Company Stock Certificates, without any interest
thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor
the Exchange Agent shall be liable to any holder of a Company Stock Certificate
for Merger Consideration (or dividends or distributions with respect thereto) or
cash from the Exchange Fund in each case delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(j) In the event any Company Stock Certificates shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Stock Certificate(s) to be lost, stolen or destroyed and,
if required by Parent, the posting by such person of a bond in such sum as
Parent may reasonably direct as indemnity against any claim that may be made
against it or the Surviving Corporation with respect to such Company Stock
Certificate(s), the Exchange Agent will issue the Merger Consideration
deliverable in respect of the shares of Company Common Stock represented by such
lost, stolen or destroyed Company Stock Certificates.
(k) No dividends or other distributions with respect to Parent Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered
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Company Stock Certificate with respect to the shares of Parent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to subsection (l) below, and all such
dividends, other distributions and cash in lieu of fractional shares of Parent
Common Stock shall be paid by Parent to the Exchange Agent and shall be included
in the Exchange Fund, in each case until the surrender of such Company Stock
Certificate in accordance with subsection (l) below. Subject to the effect of
applicable abandoned property, escheat or similar laws, following surrender of
any such Company Stock Certificate there shall be paid to the holder of a
certificate for Parent Common Stock (a "Parent Stock Certificate") representing
whole shares of Parent Common Stock issued in exchange therefore, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to subsection (l), and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock. Parent shall make available to the Exchange Agent cash for these
purposes, if necessary.
(l) No Parent Stock Certificates representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of Company
Stock Certificates; no dividend or distribution by Parent shall relate to such
fractional share interests; and such fractional share interests will not entitle
the owner thereof to vote or to any rights as a shareholder of Parent. In lieu
of any such fractional shares, each holder of a Company Stock Certificate who
would otherwise have been entitled to receive a fractional share interest in
exchange for such Company Stock Certificate shall receive from the Exchange
Agent an amount in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such holder (after taking into account all
shares of Company Common Stock held by such holder at the Effective Time) would
otherwise be entitled by (B) the Average Trading Price. Parent shall provide
the Exchange Agent the aggregate amount of cash payable pursuant to this
subsection (l) promptly following the Effective Time.
(m) Parent shall have the right to make rules, not inconsistent with
the terms of this Agreement, governing (A) the validity of the Forms of
Election, (B) the manner and extent to which Elections are to be taken into
account in making the determinations prescribed by Section 2.1, (C) the issuance
and delivery of Parent Stock Certificates into which shares of Company Common
Stock are converted in the Merger and (D) the method of payment of cash for
shares of Company Common Stock converted into the right to receive the Cash
Election Consideration.
(n) Promptly after the Effective Time, Parent will deposit with the
Exchange Agent an amount of cash and shares of Parent Common Stock sufficient to
pay in a timely manner, and the Parent shall instruct the Exchange Agent to
timely pay, the aggregate Cash Election Consideration and cash in lieu of
fractional shares of Parent Common Stock and
9
the aggregate Additional Stock Consideration and Stock Election Consideration.
Upon surrender to the Exchange Agent of its Company Stock Certificate or Company
Stock Certificates, accompanied by a properly completed Form of Election, a
holder of Company Common Stock will be entitled to receive promptly after the
Election Deadline the Merger Consideration (elected or deemed elected by it,
subject to Sections 1.2 and 2.1) in respect of the shares of Company Common
Stock represented by its Company Stock Certificate. Until so surrendered, each
such Company Stock Certificate shall represent after the Effective Time, for all
purposes, only the right to receive the Merger Consideration.
SECTION 2.3 Certain Adjustments. If after the date hereof and on
-------------------
or prior to the Effective Time the outstanding shares of Parent Common Stock or
Company Common Stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization, combination or any similar
event shall occur (including an extraordinary dividend, the record date for
payment of which occurs during the Election Period) (any such action, an
"Adjustment Event"), the Exchange Ratio shall be adjusted accordingly to provide
to the holders of Company Common Stock whose shares of Company Common Stock have
been converted into the right to receive either Stock Election Consideration or
Additional Stock Consideration the same economic effect as contemplated by this
Agreement prior to such reclassification, recapitalization, combination or
similar event.
SECTION 2.4 Shares of Dissenting Stockholders. Notwithstanding
---------------------------------
anything in this Agreement to the contrary, any shares of Company Common Stock
that are issued and outstanding as of the Effective Time and that are held by a
stockholder who has properly exercised his appraisal rights under the DGCL (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration unless and until the holder shall have failed to perfect, or shall
have effectively withdrawn or lost, his right to dissent from the Merger under
the DGCL and to receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to and subject to the requirements of
the DGCL. If any such holder shall have so failed to perfect or have
effectively withdrawn or lost such right, each share of such holder's Company
Common Stock shall thereupon be deemed to have been converted into and to have
become, as of the Effective Time, the right to receive, without any interest
thereon, the Stock Election Consideration or the Cash Election Consideration or
a combination thereof as determined by Parent in its sole discretion. The
Company shall give Parent (i) prompt notice of any notice or demands for
appraisal or payment for shares of Company Common Stock received by the Company
and (ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands or notices. The Company shall not,
without the prior written consent of Parent, make any payment with respect to,
or settle, offer to settle or otherwise negotiate, any such demands.
10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.
---------------------------------------------
Except as set forth on the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") and making reference to the particular subsection of this Agreement
to which exception is being taken (regardless of whether such subsection refers
to the Company Disclosure Schedule), the Company represents and warrants to
Parent as follows:
(a) Organization, Standing and Corporate Power.
------------------------------------------
(i) Each of the Company and its subsidiaries (as defined in
Section 8.3) is a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may
be, and authority to carry on its business as now being conducted. Each of
the Company and its subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate would not reasonably be
expected to have a material adverse effect on the Company or the applicable
subsidiary.
(ii) The Company has delivered or provided to Parent prior
to the execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as amended to date.
(iii) In all material respects, the minute books of the
Company contain accurate records of all meetings and accurately reflect all
other actions taken by the stockholders, the Board of Directors and all
committees of the Board of Directors of the Company since January 1, 1997.
(b) Subsidiaries. Section 3.1(b) of the Company Disclosure
------------
Schedule lists all the subsidiaries of the Company, whether consolidated or
unconsolidated as of the end of the most recently completed fiscal year. All
outstanding shares of capital stock of, or other equity interests in, each such
subsidiary (i) have been validly issued and are fully paid and nonassessable;
(ii) are owned directly or indirectly by the Company, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens"); and (iii) are free of any other
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests) that
11
would prevent the operation by the Surviving Corporation of such subsidiary's
business as currently conducted.
(c) Capital Structure. The authorized capital stock of the Company
-----------------
consists of 100,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share, of the Company ("Company Authorized
Preferred Stock"), of which 1,000,000 shares have been designated as Company
Series A Junior Participating Preferred Stock ("Company Preferred Stock") and no
other shares of Company Authorized Preferred Stock have been designated. At the
close of business on October 29, 2000: (i) 42,382,655 shares of Company Common
Stock were issued and outstanding; (ii) 10,376,039 shares of Company Common
Stock were held by the Company in its treasury (such shares, "Company Treasury
Stock") and no shares of Company Common Stock were held by subsidiaries of the
Company; (iii) no shares of Company Preferred Stock were issued and outstanding
and 1,000,000 shares of Company Preferred Stock were reserved for issuance
pursuant to the Rights Agreement; (iv) no shares of Company Preferred Stock were
held by the Company in its treasury or were held by any subsidiary of the
Company; and (v) 5,987,587 shares of Company Common Stock were reserved for
issuance pursuant to the Company's 1992 Warrant Plan, Vacation Break U.S.A.,
Inc. 1995 Stock Option Plan, 1997 Stock Option Plan, 2000 Incentive Stock Plan,
Vacation Break U.S.A. Inc. Directors' Plan, as amended, Warrant Agreements dated
December 27, 1995, Warrant Agreements dated May 22, 1997 and Employee Stock
Purchase Plan (the "Company Stock Plans"), of which 3,628,956 shares are subject
to outstanding employee and non-employee director stock options (the "Company
Stock Options"), 1,745,510 shares are subject to employee warrants (the "Company
Warrants"), 230,322 shares are subject to awards of restricted Company Common
Stock (collectively with Company Stock Options, Company Warrants and the awards
described in Section 5.6(b), the "Company Awards"). All outstanding shares of
capital stock of the Company are, and all shares thereof which may be issued
prior to the Closing will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except as
set forth in this Section 3.1(c) and except for changes since October 31, 2000
resulting from the issuance of shares of Company Common Stock pursuant to and in
accordance with Company Awards and other rights referred to above in this
Section 3.1(c), outstanding prior to October 31, 2000 (x) there are not issued,
reserved for issuance or outstanding (A) any shares of capital stock or voting
securities or other ownership interests of the Company, (B) any securities of
the Company or any Company subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities or other ownership
interests of the Company, or (C) any warrants, calls, options or other rights to
acquire from the Company or any Company subsidiary, or any obligation of the
Company or any of its subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or securities convertible into or
exchangeable or exercisable for, capital stock or voting securities or other
ownership interests of the Company, and (y) there are no outstanding obligations
of the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. There are no outstanding (A) securities
of the Company or any of its subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock or voting securities or other ownership
12
interests in any subsidiary of the Company, (B) warrants, calls, options or
other rights to acquire from the Company or any of its subsidiaries, or any
obligation of the Company or any of its subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for, any capital stock, voting
securities or other ownership interests in, any subsidiary of the Company or (C)
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any such outstanding securities of subsidiaries of the Company
or to issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. To the Company's knowledge, neither the Company nor any of its
subsidiaries is a party to any agreement restricting the transfer of, relating
to the voting of, requiring registration of, or granting any preemptive or
antidilutive rights with respect to any of the securities of the Company or any
of its subsidiaries. To the knowledge of the Company, there are no voting
trusts or other agreements or understandings to which the Company or any of its
subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of the subsidiaries.
(d) Authority; Noncontravention. The Company has all requisite
---------------------------
corporate power and authority to enter into this Agreement, the Stock Option
Agreement and, subject, in the case of the Merger, to the Company Stockholder
Approval (as defined in Section 3.1(v)) to consummate the transactions
contemplated hereby and thereby, including with respect to the "spin-off" of
DevCo., the requisite corporate power to declare the DevCo. Distribution as
presently described in Exhibit A. The execution and delivery of this Agreement
and the Stock Option Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (other than the
DevCo. Distribution) have been duly authorized by all necessary corporate action
on the part of the Company, subject, in the case of the Merger, to the Company
Stockholder Approval. This Agreement and the Stock Option Agreement have been
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Merger Sub, constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) such enforceability may be subject to
applicable bankruptcy, insolvency or other similar laws now or hereafter in
effect affecting creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunction or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought. The execution
and delivery of this Agreement and the Stock Option Agreement do not, and the
consummation of the transactions contemplated hereby and thereby (other than the
DevCo. Distribution) and compliance with the provisions of this Agreement and
the Stock Option Agreement will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company or any of its subsidiaries under, (i)
the certificate of incorporation or by-laws of the Company, (ii) the certificate
of incorporation or by-laws or the comparable organizational documents of any of
its subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license or similar authorization applicable
13
to the Company or any of its subsidiaries or their respective properties or
assets or (iv) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (iii) and
(iv), any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not reasonably be expected to have a
material business impact on the Company or that relate to or arise as a result
of the DevCo. Distribution, provided, however, that the failure to list on
-------- -------
Section 3.1(d) of the Company Disclosure Schedule a conflict, violation,
default, right, loss or Lien with respect to an agreement, instrument, permit,
concession, franchise, license or similar authorization specified in clause
(iii) that is cured by the time of the Closing by obtaining the consent of the
other party to such agreement, instrument, permit, concession, franchise,
license or similar authorization shall not be considered a violation of the
representation in Section 3.1(d)(iii). No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental self-regulatory agency, commission or authority (a
"Governmental Entity") is required by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of this Agreement
and the Stock Option Agreement by the Company or the consummation by the Company
of the transactions contemplated hereby, except for (1) the filing of a pre-
merger notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (2) the filings
with the Securities and Exchange Commission (the "SEC") of (A) a proxy statement
relating to the Company Stockholders Meeting (such proxy statement, as amended
or supplemented from time to time, the "Proxy Statement") and a registration
statement on Form S-4 to be prepared and filed in connection with the issuance
of Parent Common Stock in the Merger (the "Form S-4"), and (B) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement; (3) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of the laws of
states in which the Company and its subsidiaries are qualified or licensed to do
business or state securities or "blue sky" laws; (4) such registrations and
amendments thereto set forth on Section 3.1(d) of the Company Disclosure
Schedule and the related consents, approvals or exemptions under state timeshare
registration laws or, in states that do not have specific timeshare laws,
related real estate or securities registration laws (the "VOI Registrations");
and (5) such other filings and consents as may be required to effect the DevCo.
Distribution.
(e) Company Documents; Undisclosed Liabilities.
------------------------------------------
(i) Since January 1, 1997, the Company and its subsidiaries
have filed all required reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated
therein) with the SEC (the "Company SEC Documents"). As of their respective
filing dates, (i) the Company SEC Documents complied in all material
respects with the require-
14
ments of the Securities Act of 1933, as amended (the "Securities Act"), or
the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Company SEC Documents, and
(ii) no Company SEC Document when filed (or when amended and restated or as
supplemented by a subsequently filed Company SEC Document) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company and its subsidiaries
included in Company SEC Documents complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles in the United States ("GAAP")
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of the Company and
its subsidiaries, as the case may be, as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments and to other adjustments described in the notes to
such unaudited statements). Except (A) as reflected in the Company's
unaudited balance sheet as of June 30, 2000, (B) for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby,
(C) for liabilities incurred in the ordinary course of business consistent
with past practice since June 30, 2000 or (D) for liabilities incurred
after the date hereof that would not reasonably be expected to have a
material adverse effect on the Company, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature other than
liabilities or obligations that are immaterial and that were incurred in
the ordinary course of business consistent with past practice.
(ii) Neither the Company nor any of its subsidiaries has any
continuing obligations (other than obligations of confidentiality under the
Letter Agreement dated December 21, 1999, between the Company and Carnival
Corporation ("Carnival")) incurred in connection with the Letter of Intent,
dated as of January 23, 2000, between the Company and Carnival or the
transactions contemplated thereby or pursuant to any other agreements with
Carnival.
(iii) The Company has provided or made available to Parent true
and complete copies of the audited financial statements for the years ended
December 31, 1998 and 1999 and the unaudited financial statements for the
quarter ended June 30, 2000 for Fairfield Receivable Corporation and
Fairfield Funding Corporation, II (the "Company Unconsolidated
Subsidiaries") (collec-
15
tively, the "Unconsolidated Subsidiaries Statements"). The Unconsolidated
Subsidiaries Statements were prepared in conformity with GAAP for the
periods covered thereby, except as may be noted therein, and present in all
material respects the financial position of the Company Unconsolidated
Subsidiaries as at the respective dates thereof and the results of
operations of such subsidiaries for the respective periods then ended. The
Company Unconsolidated Subsidiaries are not required to be consolidated
with the Company's financial statements under GAAP.
(iv) The Company has provided to Parent true and complete
copies of the audited financial statements for the years ended December 31,
1998 and 1999 for The FairShare Vacation Plan Use Management Trust (the
"Trust") (the "Trust Financial Statements"). The Trust Financial Statements
were prepared in conformity with GAAP for the periods covered thereby and
present in all material respects the financial position of the Trust as at
the respective dates thereof and the results of operations of the Trust for
the respective periods then ended.
(f) Certain Contracts.
-----------------
(i) Neither the Company nor any of its subsidiaries is a
party to or bound by (i) any agreement relating to the incurring of
indebtedness, (ii) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC), (iii) any non-competition
agreement or any other agreement or obligation which purports to limit in
any material respect the manner in which, or the localities in which, all
or any substantial portion of the business of the Company and its
subsidiaries, taken as a whole, is or would be conducted, (iv) any
agreement providing for the indemnification by the Company or a subsidiary
of the Company of any person, except an agreement entered into in the
ordinary course of business, (v) any joint venture, partnership or similar
document or agreement, (vi) any agreement that limits or purports to limit
the ability of the Company or any of its subsidiaries to own, operate,
sell, transfer, pledge or otherwise dispose of any assets having an
aggregate value in excess of $1,000,000 (other than in connection with
securitization or financing transactions), (vii) any contract or agreement
providing for future payments that are conditioned, in whole or in part, on
a change of control of the Company or any of its subsidiaries, (viii) any
collective bargaining agreement, (ix) employment agreement or any agreement
or arrangement that contains any severance pay or post-employment
liabilities or obligations to a Key Employee (as defined herein), other
than as required under law, (x) any resort affiliation agreement, (xi) any
agreement that contains a "most favored nation" clause, (xii) any
management agreement between the Company and each Association (as defined
in Section 3.1(i) herein), (xiii) any marketing alliance agreement
involving a strategic corporate relation-
16
ship that requires payment of at least $1,000,000 thereunder by the Company
or any of its subsidiaries or which is not cancellable by either party
thereto on 30 days' notice or (xiv) any contract or other agreement not
made in the ordinary course of business which is material to the Company
and its subsidiaries taken as a whole or which would prohibit or delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement and the Stock Option Agreement (the agreements, contracts and
obligations of the type described in clauses (i) through (xiii) being
referred to herein as "Company Material Contracts"). Each Company Material
Contract is valid and binding on the Company (or, to the extent a
subsidiary of the Company is a party, such subsidiary) and is in full force
and effect. Neither the Company nor any of its subsidiaries is in a
material breach or default under any Company Material Contract. Neither the
Company nor any subsidiary of the Company knows of, or has received notice
of, any material violation or default under (nor, to the knowledge of the
Company, does there exist any condition which with the passage of time or
the giving of notice or both would result in such a violation or default
under) any Company Material Contract by the other party thereto.
(ii) There is no agreement (noncompete or otherwise),
commitment, judgment, injunction, order or decree to which the Company or
any of its subsidiaries or affiliates is a party or which is otherwise
binding upon the Company or any of its subsidiaries or affiliates which has
or reasonably would be expected to have the effect of prohibiting or
impairing any business practice of the Company or any of its subsidiaries
or affiliates, any acquisition of property (tangible or intangible) by the
Company or any of its subsidiaries.
(g) VOIs.
----
(i) Accounts Receivable.
-------------------
(A) The VOI Receivables (as defined below) owned by
each of the Company and its subsidiaries reflected in the unaudited
financial statements of the Company for the quarter ended June 30,
2000 included in the Company SEC Documents and in the Unconsolidated
Subsidiaries Statements, are (except to the extent reserved against in
such financial statements, which reserves have been determined based
upon actual prior and current experience and are consistent with prior
practices) valid, genuine and subsisting, arise out of bona fide sales
of VOIs, goods, performance of services or other business transactions
relating to the sale of VOIs and are not subject to defenses, setoffs,
counterclaims or rights of rescission that would reasonably be
expected to have a material business impact on the Company. All VOI
Receivables owned by the Company and its subsidiaries are owned free
and clear of all Liens for funded indebtedness. "VOI Receivables"
shall mean, with respect to the Company and its subsidiaries,
17
any contracts for deed, deeds of trust, promissory notes, installment
notes, mortgages or similar security instruments and all related
documents and instruments (including, without limitation, any security
agreements entered into in connection with or a part of any purchase
agreement or any installment sales contract relating to the sale of a
VOI) creating a first and prior lien on a VOI and securing a purchase
money loan to acquire a VOI (collectively, the "Mortgages") or any
installment sales contract creating a purchaser's beneficial or
equitable interest in a VOI (collectively with the Mortgages, the
"Debt Instruments"). For purposes of this Agreement, "VOI" shall mean
a fee simple or leasehold ownership interest in a condominium unit or
an entire timeshare resort developed or acquired by the Company or a
subsidiary of the Company, coupled with the right to use and occupy
one or more residential accommodations at such timeshare resort in
accordance with the terms, provisions, and conditions of the
applicable declaration of condominium, master deed and all other
documents and instruments that govern the use and occupancy of such
resort's accommodations and facilities. The term "VOI" shall further
include all rights, benefits, privileges, obligations and liabilities
granted to or imposed upon the owner of a VOI with respect to the
Company's FairShare Plus Program (the "Program"), pursuant to the
Amended and Restated FairShare Vacation Plan Use Management Trust
Agreement dated as of January 1, 1996, as amended (the "Trust
Agreement") or under applicable VOI Laws.
(B) Section 3.1(g) of the Company Disclosure Schedule
sets forth certain reports (the "Reports") routinely prepared by the
Company or any of its subsidiaries that identify, as of the date
indicated in the Reports, (i) the aggregate amount of VOI Receivables
owned or pledged as security by each of the Company or its
subsidiaries identified in the Reports and (ii) the weighted average
maturity of such VOI Receivables. The Reports are true, accurate and
complete in all material respects.
(ii) Registrations. Set forth on Section 3.1(g) of the
-------------
Company Disclosure Schedule are all the resorts where each of the Company
or any of its subsidiaries owns VOIs and each jurisdiction in which each of
those resorts is registered, other than an inadvertent omission of a
jurisdiction, for (i) the ownership of any VOI or real estate or (ii) the
advertising, marketing or selling of VOIs by the Company or its
subsidiaries or the soliciting of consumers to visit a resort or a sales
office by the Company or its subsidiaries.
(iii) Debt Instruments.
----------------
(A) Each form that is underlying or related to a Debt
Instrument securing or creating an equitable interest in a VOI
Receivable reflected in the financial statements described in
subsection (i)(A) above and that is
18
routinely used by the Company and its subsidiaries or is permitted by
the Company or its subsidiaries to be used by others in connection
with the sale of VOIs, meets all material requirements of applicable
VOI Laws.
(B) The Debt Instruments contain customary and
enforceable provisions such as to render the rights and remedies of
the holders thereof adequate for the practical realization against the
related property of the principal benefits of the security or property
interest intended to be provided thereby.
(C) Each Mortgage which requires recordation to perfect
the related VOI interest has been properly recorded or is in the
process of being recorded in the appropriate jurisdiction and is in
material compliance with all applicable laws of the jurisdiction in
which the related VOI is located, and all costs, fees, and expenses,
including where applicable, recording fees, documentary stamps and
intangible taxes, due in connection with the filing of each Mortgage
that has been filed have been paid, except for any failures to pay
costs, fees and expenses that would not reasonably be expected to have
a material business impact on the Company.
(h) Resorts.
-------
(i) Section 3.1(h) of the Company Disclosure Schedule
contains a list of each resort where (A) the VOIs owned or otherwise
controlled by the Company or its subsidiaries consist of more than 5%
of the total VOI inventory at such resort and (B) the Company or any
of its subsidiaries owns, has an option or contract for or otherwise
controls the real estate that is intended to accommodate the
development of VOIs in the future (the "Resorts"), indicating whether
each Resort is owned, under option or contract or otherwise controlled
by the Company or any of its subsidiaries.
(ii) The Company or one of its subsidiaries, as the case may
be, has good and marketable title in fee simple or a leasehold
interest to all VOIs and other real estate owned by the Company free
and clear of all Liens, except for Permitted Encumbrances. As used in
this Agreement, "Permitted Encumbrances" means (i) Liens imposed by
law for Taxes, assessments or charges of any Governmental Entity that
are not yet due and payable or are being contested in good faith by
proper proceedings (and in each case as to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP); (ii) carriers', warehousemen's, mechanics, landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business in respect of obligations that are not yet due or
that are bonded or that are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
main-
19
tained in accordance with GAAP; (iii) Liens incurred in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security benefits or
to secure the performance of tenders, bids, leases, contracts,
statutory obligations and other similar obligations; (iv) easements
(including, without limitation, reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges,
or encumbrances (whether or not recorded) which do not interfere
materially with the ordinary conduct of the business of the Company
and which do not detract materially from the property to which they
attach or impair materially the use thereof by the Company; (v) the
encumbrances set forth on title policies or title commitments provided
to or made available to Parent; and (vi) extensions, renewals or
replacements of any Lien referred to in clauses (i) through (v) above.
(iii) The current use of the Resorts by the Company and its
subsidiaries does not violate any instrument or agreement of record
affecting the Resorts or any applicable local zoning or similar land
use laws, except for violations that would not have a material
business impact on the Company. To the knowledge of the Company, none
of the occupiable structures on the Resorts encroaches upon real
property of another person and no occupiable structure of any other
person encroaches upon any part of a Resort, except for encroachments
that would not have a material business impact on the Company.
(iv) To the knowledge of the Company, each Resort has
sufficient vehicular access for its purposes.
(v) There are no leases, subleases, licenses, concessions
or other agreements between the Company or any of its subsidiaries to
a third party that grants the right of use or occupancy of any
material portion of the real estate, accommodations or facilities
owned by the Company or any of its subsidiaries at the Resorts and
there are no outstanding options or rights of first refusal to
purchase any material portion of the real estate, accommodations or
facilities owned by the Company or any of its subsidiaries at the
Resorts other than rights held by the related property owners
associations at the Resorts, and except for agreements with VOI owners
or for such leases, subleases, licenses, concessions or other
agreements entered into by the Company or any of its subsidiaries in
the ordinary course of business.
(vi) Each timeshare plan related to a Resort that is
required to be filed in the real estate records of the county in which
the Resort is located has been properly filed and recorded with the
appropriate county office in which the respective Resort is located,
except for a failure to file or record a timeshare plan that would not
have a material business impact on the Company.
20
(vii) Each of the Company and its subsidiaries has
delivered or made available to Parent complete and correct copies of
all surveys, engineering reports, appraisals, certificates of
occupancy and recorded plats relating to a Resort in the possession of
the Company and its subsidiaries. The Company has delivered or made
available to Parent complete and correct copies of the title insurance
policies that are in the possession of the Company and its
subsidiaries which insure the Company or a subsidiary of the Company
of good and marketable title, or as otherwise described therein, at
the time of the acquisition of the properties described therein.
(i) Condominium Associations.
------------------------
(i) Each condominium, timeshare or other form of owner's
association organized by the Company or any of its subsidiaries has
been duly organized. Each condominium, timeshare or other form of
owner's association managed by the Company or any of its subsidiaries
in existence with respect to a Resort (each, an "Association"), is
duly organized, legally existing, and in good standing under the laws
of the state of its incorporation, except where the failure to be so
qualified would not have a material adverse effect on an Association.
The books and records of each Association are correct and complete in
all material respects and all funds collected from VOI owners and
others on behalf of the Associations have been properly accounted for
in all material respects and expended in all material respects for
such purposes as are authorized under the articles of incorporation or
by-laws of the applicable Association. For purposes of this Agreement,
an Association is managed by the Company or any of its subsidiaries if
(i) it has the statutory right to elect or appoint a majority of the
members of the Association's board of directors or other governing
body and (ii) it is party to a management contract with the
Association.
(ii) Correct and complete copies of the most recent
audited financial statements and interim unaudited financial
statements of each Association have been delivered or made available
to Parent. Such financial statements adequately reflect in all
material respects the financial condition of each Association as of
the dates indicated, and there have been no changes to the
Association's financial conditions since the date of its most recent
financial statements which would have a material adverse effect on the
Association.
(iii) Each Association maintains adequate reserves for
deferred maintenance and capital improvements as set forth in the
budget approved by such Association, in accordance with the articles
of incorporation or by-laws of each Association and applicable VOI
Laws.
21
(iv) The Tax Returns of each Association have been timely
filed (giving effect to all extensions) and are true, correct and
complete in all material respects, and copies of such Tax Returns for
the most recent tax year have been delivered or will be delivered, as
promptly as practicable following the date hereof to Parent.
(j) FairShare Plus Program.
----------------------
(i) The Trust is in compliance in all material respects
with all applicable VOI Laws. The Program, the Program Manager (as
defined in the Trust Agreement) and FairShare Vacation Owners
Association, Inc. (the "Trustee") are in compliance in all material
respects with all applicable VOI Laws.
(ii) The Trustee is a nonprofit corporation duly
organized, validly existing and in good standing under the laws of the
State of Arkansas. The Trustee is duly qualified as a foreign
corporation in each jurisdiction in which its assets or the conduct of
its business require such qualification, except where the failure to
qualify would not reasonably be expected to have a material adverse
effect on the Trustee. The Trustee has the full power and authority to
perform all duties and obligations imposed upon it by the Trust
Agreement and, to the Company's knowledge, has acted in good faith and
used commercially reasonable efforts with respect to the performance
of such duties and obligations. The fees paid and payable to the
Trustee and to the Program Manager for services rendered during the
fiscal year ended December 31, 1999 and the eight month period ended
August 31, 2000 in connection with the Program are set forth on
Section 3.1(j) of the Company Disclosure Schedule.
(iii) The consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit (i) of the Trustee under the
certificate of incorporation or by-laws of the Trustee and (ii) of the
Trustee or the Trust under any material contracts or agreements to
which either the Trustee or the Trust is a party, as applicable, other
than any conflict, violation, default or termination, cancellation or
acceleration that would not reasonably be expected to have a material
adverse effect on the Trust or the Trustee. All contracts or
agreements material to the operation of the Trust to which either the
Trustee or the Trust is a party have been delivered or made available
to Parent.
22
(iv) All VOIs and the use and occupancy rights that
correspond to the VOIs that have been subjected to the terms,
provisions, and conditions of the Trust Agreement have been so
subjected in compliance in all material respects with the requirements
of the Trust Agreement and all applicable VOI Laws.
(v) All of the Accommodations (as such term is defined in
the Trust Agreement) are substantially furnished and ready for
occupancy, and all furnishings are substantially paid for. None of
the VOIs subjected to the Program (and/or beneficial use rights
appertaining thereto) consist of a limited duration contractual right,
lease, license or right-to-use timeshare interest in a Program Resort
(as defined in the Trust Agreement).
(vi) The Trust conducts and operates its business in
material compliance with Section 4.02 of the Trust Agreement and all
applicable VOI Laws.
(vii) The marketing and sales by the Company and its
subsidiaries of VOIs in the Program have been conducted in material
compliance with all applicable VOI Laws.
(viii) The Program's reservation system is fully
operational for its intended purpose subject to normal maintenance.
Such reservation system, including all related computer hardware and
software, is owned, leased or licensed by the Company, free and clear
of any Liens, except for Liens arising in the ordinary course of
business of the Trust or the acquisition of such hardware and
software.
(ix) The Company has delivered or made available to Parent
complete and correct copies of (A) the Trust Agreement, including all
exhibits, attachments or amendments thereto and (B) the forms of (1)
the FairShare Plus Program Summary and Acknowledgment of Receipt; (2)
the Ernst & Young Report dated May 30, 2000 and (3) the Destinations
FairShare Plus Exchange Program Summary used in connection with the
sale of VOIs, together with such other documents executed ancillary
thereto and all such documents meet in all material respects the
requirements of applicable VOI Laws.
(x) The Trust Agreement does not violate Arkansas' Rule
Against Perpetuities.
(k) Absence of Certain Changes or Events. Except for
------------------------------------
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, since January 1, 2000, the Company and its subsidiaries
have conducted their respective businesses only in the ordinary course, and
there has not been (i) the occurrence of an event that could
23
reasonably be expected to result in any material adverse effect on the Company,
except for an effect due to changes affecting the economy or financial markets
generally other than such changes which affect the Company in a manner which is
not proportionate with the effect of such changes on similarly situated
companies, (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock, (iii) any split, combination or reclassification of
any of the Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of the Company's capital stock, except for issuances of Company
Common Stock upon the exercise of Company Stock Options or Company Warrants, in
each case awarded prior to the date hereof in accordance with their present
terms, (iv) prior to the date hereof (A) any granting by the Company or any of
its subsidiaries to any current or former director, executive officer or other
Key Employee of the Company or its subsidiaries of any increase in compensation,
bonus or other benefits, except for increases in the ordinary course of
business, (B) any granting by the Company or any of its subsidiaries to any such
current or former director, executive officer or Key Employee of any increase in
severance or termination pay, or (C) any entry by the Company or any of its
subsidiaries into, or any amendment of, any employment, deferred compensation,
consulting, severance, termination or indemnification agreement with any such
current or former director, executive officer or Key Employee, (v) except
insofar as may have been disclosed in Company SEC Documents or required by a
change in GAAP, any material change in accounting methods (or underlying
assumptions), principles or practices by the Company affecting its assets,
liabilities or business, including, without limitation, any reserving, renewal
or residual method, or estimate of practice or policy, (vi) any tax election by
the Company or its subsidiaries or any settlement or compromise of any income
tax liability by the Company or its subsidiaries, except as would not be
required to be disclosed in the Company SEC Documents, (vii) any material
insurance transaction other than in the ordinary course of business consistent
with past practice, (viii) any transaction or commitment, or series of related
transactions or commitments, to acquire real estate for VOI development in
excess of $1,000,000 (ix) any material labor trouble or claim of wrongful
discharge or other unlawful labor practice or action, (x) any improper
subjection of VOI inventory by the Company to the FairShare Program or (xi) any
agreement or commitment (contingent or otherwise) to do any of the foregoing.
(l) Compliance with Applicable Laws; Litigation.
-------------------------------------------
(i) The Company, its subsidiaries and employees hold all
permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation
of the businesses of the Company and its subsidiaries (the "Company
Permits") as presently conducted, except for any failure that would not
reasonably be expected to result in a material business impact on the
Company. The Company and its subsidiaries are in compliance in all respects
with the terms of the Company Permits and all applicable statutes, laws,
ordinances, rules and regulations (including the VOI Laws (as defined in
Section 8.3)), except for a failure to comply that does not
24
have individually or in the aggregate a material business impact on the
Company. Except as set forth in Section 3.1(l) of the Company Disclosure
Schedule, which contains a true, complete and current description of any
pending and, to the Company's knowledge, threatened litigation, action,
suit, proceeding or investigation, the forum, the parties thereto, the
subject matter thereof and the amount of damages claimed or other remedies
requested as of September 30, 2000, no action, demand, charge, requirement
or investigation by any Governmental Entity and no litigation, suit,
action, proceeding or arbitration by any person or Governmental Entity, in
each case with respect to the Company or any of its subsidiaries or any of
their respective properties, is pending or, to the knowledge of the
Company, threatened, except for any litigation, suit, action, demand,
charge, requirement, investigation, proceeding or arbitration that would
not reasonably be expected to have a material business impact on the
Company.
(ii) No Company Permit issued in connection with any
construction of any accommodations and facilities, other improvements and
the purchase of any fixtures or equipment, inventory, furnishings or other
personalty located in, at, or on accommodations or facilities developed by
the Company and its subsidiaries has been suspended or canceled (or is
threatened to be canceled, suspended or materially modified) or has
expired, except where the failure to hold such Company Permit would not
individually or in the aggregate, reasonably be expected to have a material
business impact on the Company, and, with respect to any such Company
Permit expiring prior to March 31, 2001, the Company has no reason to
believe that such Company Permits will not be renewed or extended.
(m) Taxes.
-----
(i) Each of the Company and its subsidiaries has (A) duly
filed (or there have been filed on its behalf) with the appropriate
Governmental Entities all material Tax Returns (as defined below) required
to be filed by it (giving effect to all extensions) and such Tax Returns
are true, correct and complete in all material respects; (B) duly paid in
full (or there has been paid on its behalf) all material Taxes required to
be paid by it; and (C) made provision in accordance with GAAP (or provision
has been made on its behalf) for all accrued Taxes not yet due; and
(ii) There are no material Liens for Taxes upon any
property or assets of the Company or any subsidiary of the Company, except
for Liens for Taxes not yet due or for Taxes which are being contested in
good faith, which are set forth in Section 3.1(m) of the Company Disclosure
Schedule.
(iii) Each of the Company and its subsidiaries has complied
in all material respects with all applicable laws, rules and regulations
25
relating to the payment and withholding of Taxes (or similar provisions
under any foreign laws) and has, within the time and the manner prescribed
by law, withheld and paid over to the proper Governmental Entities all
material amounts required to be so withheld and paid over under applicable
laws.
(iv) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or any of its
subsidiaries, and neither the Company nor any subsidiary of the Company has
received a written notice of any pending audits or proceedings.
(v) Neither the Company nor any of its subsidiaries has
granted in writing any power of attorney which is currently in force with
respect to any Taxes or Tax Returns.
(vi) Neither the Company nor any of its subsidiaries has
requested an extension of time within which to file any Tax Return in
respect of a taxable year which has not since been filed and no outstanding
waivers or comparable consents regarding the application of the statute of
limitations with respect to Taxes or Tax Returns has been given by or on
behalf of the Company or any of its subsidiaries.
(vii) Neither the Company nor any of its subsidiaries is a
party to any agreement providing for the allocation or sharing of Taxes.
(viii) The federal income Tax Returns of the Company and of
its subsidiaries have been examined by the applicable taxing authorities
(or the applicable statutes of limitation for the assessment of Taxes for
such periods have expired) for all periods through and including 1996, and
no material deficiencies were asserted as a result of such examinations
which have not been resolved and fully paid.
(ix) Neither the Company nor any of its subsidiaries has
been included in any "consolidated," "unitary" or "combined" Tax Return
(other than Tax Returns which include only the Company and any of its
subsidiaries) provided for under the laws of the United States, any foreign
jurisdiction or any state or locality with respect to Taxes.
(x) No election under Section 341(f) of the Code has been
made to treat the Company or any of its subsidiaries as a consenting
corporation, as defined in Section 341 of the Code.
26
(xi) To the knowledge of the Company, no claim has been
made by any Governmental Entities in a jurisdiction where the Company or
any of its subsidiaries does not file Tax Returns that any such entity is,
or may be, subject to taxation by that jurisdiction.
(xii) Each of the Company and its subsidiaries have made
available to Parent correct and complete copies of (i) all of their Tax
Returns, (ii) all audit reports, letter rulings, technical advice memoranda
and similar documents issued by a governmental authority relating to the
United States federal, state, local or foreign Taxes due from or with
respect to the Company and each of its subsidiaries, and (iii) any closing
agreements entered into by the Company and each of its subsidiaries with
any Governmental Entities with respect to Taxes, in each case from 1995.
(xiii) For purposes of this Agreement (A) "Taxes" shall mean
any and all taxes, charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, excise, real or personal
property, sales, withholding, social security, occupation, use, service,
service use, license, net worth, payroll, franchise, transfer and recording
taxes, fees and charges, imposed by the IRS or any taxing authority
(whether domestic or foreign including, without limitation, any state,
county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such amounts, and
(B) "Tax Return" shall mean any report, return, document, declaration or
other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including,
without limitation, information returns, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
(n) Employee Benefit Plans.
----------------------
(i) Section 3.1(n) of the Company Disclosure Schedule
contains a true and complete list of each deferred compensation and each
bonus or other incentive compensation, stock purchase, stock option and
other equity compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization, life
insurance and other "welfare" plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); each profit-sharing, stock bonus or other "pension"
plan, fund or program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement or arrangement with any
director or executive officer and any other employee whose base salary is
$100,000 or more, excluding site sales vice
27
presidents (the "Key Employees"); and each other employee benefit plan,
fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated, that
together with the Company would be deemed a "single employer" within the
meaning of Section 4001(b) of ERISA (an "ERISA Affiliate"), or to which the
Company or an ERISA Affiliate is party, whether written or oral, for the
benefit of any director, employee or former employee of the Company or any
of its subsidiaries (the "Plans"). Section 3.1(n) of the Company Disclosure
Schedule identifies each of the Plans that is subject to Section 302 or
Title IV of ERISA or Section 412 of the Code (the "Title IV Plans").
Neither the Company, any subsidiary of the Company nor any ERISA Affiliate
has any commitment or formal plan, whether legally binding or not, to
create any additional employee benefit plan or modify or change any
existing Plan other than as may be required by the terms of such Plan.
(ii) With respect to each Plan, the Company has heretofore
delivered or made available to Parent true and complete copies of each of
the following documents:
(A) a copy of the Plan and any amendments thereto (or
if the Plan is not a written Plan, a description thereof);
(B) a copy of the two most recent annual reports and
actuarial reports, if required under ERISA, and the most recent report
prepared with respect thereto in accordance with Statement of
Financial Accounting Standards No. 87;
(C) a copy of the most recent Summary Plan
Description required under ERISA with respect thereto;
(D) if the Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding
agreement and the latest financial statements thereof; and
(E) the most recent determination letter received
from the Internal Revenue Service with respect to each Plan intended
to qualify under section 401 of the Code.
(iii) No liability under Title IV or Section 302 of ERISA
has been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full or accrued on the Company's financial statements in
accordance with GAAP, and no condition exists that presents a material risk
to the Company or any ERISA Affiliate of incurring any such liability,
other than liability for
28
premiums due the Pension Benefit Guaranty Corporation ("PBGC") (which
premiums have been paid when due). Insofar as the representation made in
this Section 3.1(n) applies to Sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which the Company
or any ERISA Affiliate made, or was required to make, contributions during
the five (5)-year period ending on the last day of the most recent plan
year ended prior to the Closing Date.
(iv) The PBGC has not instituted proceedings to terminate
any Title IV Plan and no condition exists that presents a material risk
that such proceedings will be instituted.
(v) No Plan is, or ever has been, a Title IV Plan.
(vi) No Title IV Plan or any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, as of the
last day of the most recent fiscal year of each Title IV Plan ended prior
to the Closing Date.
(vii) All contributions required to be made with respect to
any Plan on or prior to the Closing Date have been timely made or are
reflected on the balance sheet of the Company filed with the Company SEC
Documents. There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any affiliate or
the Company or any subsidiary of the Company relating to, or change in
employee participation or coverage under, any Plan that would increase
materially the expense of maintaining such Plan above the level or expense
incurred in respect thereof for the most recent fiscal year ended prior to
the date hereof.
(viii) Neither the Company nor any ERISA Affiliate
contributes to, or is obligated, or has ever been obligated, to contribute
to a "multiemployer pension plan," as defined in Section 3(37) of ERISA,
nor is any Title IV Plan a plan described in Section 4063(a) of ERISA.
(ix) Neither the Company or any subsidiary of the Company,
any Plan, any trust created thereunder, nor, to the knowledge of the
Company, any trustee or administrator thereof has engaged in a transaction
in connection with which the Company or any subsidiary of the Company, any
Plan, any such trust, or any trustee or administrator thereof, or any party
dealing with any Plan or any such trust could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code.
29
(x) Each Plan has been operated and administered in
accordance with its terms and applicable law in all material respects,
including but not limited to ERISA and the Code.
(xi) Each Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code. Each Plan intended to satisfy the requirements of Section 501(c)(9)
of the Code has satisfied such requirements in all material respects.
(xii) No Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of the Company or any subsidiary of the Company for periods
extending beyond their retirement or other termination of service, other
than (i) coverage mandated by applicable law, (ii) death benefits under any
"pension plan," or (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
(xiii) No amounts payable under the Plans will fail to be
deductible for federal income tax purposes by virtue of Section 162(m) of
the Code.
(xiv) No condition exists that would prevent the Company or
any subsidiaries of the Company from amending or terminating any Plan
providing health or medical benefits in respect of any active employee of
the Company or any subsidiary of the Company without material liability.
(xv) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee or officer of the Company or any
ERISA Affiliate to severance pay, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
(xvi) There has been no material failure of a Plan that is
a group health plan (as defined in Section 5000(b)(1) of the Code) to meet
the requirements of Section 4980B(f) of the Code with respect to a
qualified beneficiary (as defined in Section 4980B(g) of the Code). Neither
the Company nor any subsidiary of the Company has contributed to a
nonconforming group health plan (as defined in Section 5000(a) of the Code)
and no ERISA Affiliate of the Company or any subsidiary of the Company has
incurred a tax under Section
30
5000(a) of the Code which is or could become a material liability of the
Company or a subsidiary of the Company.
(xvii) None of the Company or any subsidiary of the Company is
a party to any employment, consulting, non-competition, severance, or
indemnification agreement still in effect with any current or former Key
Employee or director of the Company or any subsidiary of the Company.
(xviii) There are no pending or, to the knowledge of the
Company, threatened or anticipated claims by or on behalf of any Plan by
any employee or beneficiary covered under any such Plan, or otherwise
involving any such Plan (other than routine claims for benefits).
(xix) Neither the Company nor any of its subsidiaries is a
party to any agreement, contract or arrangement that could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(o) Labor Matters. There are no labor or collective bargaining
-------------
agreements to which the Company or any subsidiary of the Company is a party.
There is no union organizing effort pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary of the Company. There is no
labor strike, labor dispute (other than routine employee grievances that are not
related to union employees), work slowdown, stoppage or lockout pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
subsidiary of the Company. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened
against the Company or any subsidiary of the Company (other than routine
employee grievances). The Company and its subsidiaries are in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice.
(p) Environmental Liability.
-----------------------
(i) Each of the Company and its subsidiaries is in compliance
with all applicable Environmental Laws (as defined below), which compliance
includes the possession by the Company and its subsidiaries of all Permits
and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof,
except for such noncompliance that would not reasonably be expected to
have, individually or in the aggregate, a material business impact on the
Company. Neither the Company nor any of its subsidiaries has received any
communication or written notice, whether from a Governmental Entity,
citizens group, employee or otherwise, that alleges that the Company or any
of its subsidiaries is not in compliance
31
in all material respects. All Permits and other governmental authorizations
currently held by the Company or any of its subsidiaries pursuant to the
Environmental Laws that are material to the business of the Company are
identified in Section 3.1(p) of the Company Disclosure Schedule.
(ii) There are no Environmental Claims (as defined below)
pending or, to the knowledge of the Company, threatened against the Company
or any of its subsidiaries or against any person or entity whose liability
for any Environmental Claim has or may have retained or assumed either
contractually or by operation of law.
(iii) There are no present or past actions, activities,
circumstances, conditions, events or incidents taken or caused by the
Company or, to the knowledge of the Company, there are no present or past
actions, activities, circumstances, conditions, events or incidents taken
or caused by a third party, including the Release (as defined below) of any
Hazardous Materials (as defined below) that could reasonably be expected to
form the basis of any Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has or may have
retained or assumed either contractually or by operation of law that would
reasonably be expected to result in a material adverse effect on the
Company.
(iv) Without in any way limiting the generality of the
foregoing, (i) all on-site and, to the knowledge of the Company, off-site
locations, where the Company or any of its subsidiaries has stored,
disposed or arranged for the disposal of Hazardous Materials, are in
accordance with applicable Environmental Laws, (ii) all underground storage
tanks, and the capacity and contents of such tanks, located on property
owned, operated, or leased by the Company or any of its subsidiaries are
identified in Section 3.1(p) of the Company Disclosure Schedule, (iii)
there is no asbestos contained in or forming part of any building, building
component, structure or office space owned or leased by the Company or any
of its subsidiaries, (iv) no polychlorinated biphenyls (PCB's) are used or
stored at any property owned or leased by the Company or any of its
subsidiaries and (v) all underground storage tanks owned, operated, or
leased by the Company or any of its subsidiaries and which are subject to
regulation under the federal Resource Conservation and Recovery Act (or
equivalent state or local law regulating underground storage tanks) meet
the technical standards prescribed at Title 40 Code of Federal Regulations
Part 280 which became effective December 22, 1998 (or any applicable state
or local law requirements which are more stringent than such technical
standards or which became effective before such date).
32
(v) The Company has provided or made available to Parent
true and correct copies of all assessments, reports and investigations or
audits in the possession of the Company or its subsidiaries regarding
environmental matters pertaining to, or the environmental condition of, the
Company Real Properties (as defined below) and the businesses of the
Company and its subsidiaries, or the compliance (or noncompliance) by the
Company or any of its subsidiaries with any Environmental Laws.
(vi) For purposes of this Agreement:
(A) "Environmental Claim" means any claim, action,
cause of action, investigation or notice (written or oral) by any
person or entity alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release into the environment, of any Hazardous
Materials at any location, whether or not owned or operated by the
Company or any of its subsidiaries or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental
Law.
(B) "Environmental Laws" means all federal,
interstate, state, local and foreign laws and regulations relating to
pollution or protection of human health (excluding the federal
Occupational Safety and Health Act and similar laws affecting workers
safety) or the environment (including ambient air, surface water,
ground water, land surface or subsurface strata) and all laws and
regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(C) "Hazardous Materials" means (1) those materials,
pollutants and/or substances defined in or regulated under the
following federal statutes and their state counterparts, as each may
be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act of 1980, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the
Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Toxic Substances
Control Act and the Clean Air Act; (2) petroleum and petroleum
products including crude oil and any fractions thereof; (3) natural
gas, synthetic gas and any mixtures thereof; (4) radon; (5) any other
contaminant; and (6) any materials, pollutants
33
and/or substance with respect to which any Governmental Entity
requires environmental investigation, monitoring, reporting or
remediation.
(D) "Release" shall mean releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, escaping,
leaching, disposing or dumping.
(q) Intellectual Property.
---------------------
(i) The Company and its subsidiaries own or have a valid
and enforceable license to use all trademarks, service marks, trade names,
patents, Internet domains and copyrights (including any registrations or
applications for registration of any of the foregoing) (collectively,
"Company Intellectual Property"), in each case, free and clear of any
material Liens or other material limitations or restrictions (including any
settlements, agreements, consents or judgments), necessary to carry on its
business substantially as currently conducted, and the consummation of the
Merger and the other transactions contemplated hereby will not result in
the loss of any such rights (or require the payment of any material
additional fees or royalties in order to maintain such rights). Section
3.1(q) of the Company Disclosure Schedule sets forth a true and correct
list of all of the material Company Intellectual Property and indicates
those items which the Company owns (distinguishing between exclusive and
non-exclusive ownership and indicating any licenses granted to other
persons) or has the exclusive right to use or license. Neither the Company
nor any of its subsidiaries has received any notice of infringement of or
conflict with and, to the knowledge of the Company, there are no
infringements of or conflicts with the rights of others with respect to the
use of, or the rights by others with respect to, any Company Intellectual
Property. To the knowledge of the Company, no third party is infringing or
otherwise violating any Intellectual Property owned by the Company or by
any of its subsidiaries.
(ii) The Company and its subsidiaries own or have a valid
and enforceable license to use all computer and telecommunication software
including source and object code and documentation and any other media
(including, without limitation, manuals, journals and reference books) (in
each case, free and clear of any material Liens or other material
limitations or restrictions) (collectively, "Company Software") necessary
to carry on its business substantially as currently conducted and the other
transactions contemplated hereby will not result in the loss of any such
rights (or require the payment of any material additional fees or royalties
in order to maintain such rights). Neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with
and, to the Company's knowledge, there are no infringements of or
34
conflicts with the rights of others with respect to the use of, or the
rights by others with respect to, any Company Software.
(r) Insurance Matters. Section 3.1(r) of the Company Disclosure
-----------------
Schedule describes all material primary, excess and umbrella policies of general
liability, fire, workers' compensation, products liability, completed
operations, employers, liability, health, bonds and other forms of insurance
providing insurance coverage to the Company or any of its subsidiaries. The
Company has heretofore made available to Parent true, complete and correct
copies of all such policies. All such policies are sufficient for compliance in
all material respects with all requirements of law and of all contracts or
leases to which the Company is a party. The Company has not failed to give any
notice or to present any material claim under any such policy in a due and
timely fashion. There are no outstanding unpaid claims under any such policies
or binders for which adequate reserves have not been established. Such policies
provide insurance coverage that is customary in amount and scope for other
companies in the industry in which the Company operates, are in full force and
effect on the date hereof and shall be kept in full force and effect by the
Company through the Effective Time. With respect to all such policies, all
premiums currently payable or previously due and payable with respect to all
periods up to and including the Effective Time have been paid and no notice of
cancellation or termination has been received with respect to such policy.
(s) Information Supplied. The Form S-4, the Proxy Statement and
--------------------
a registration statement on Form 10, under the Exchange Act, relating to the
equity securities of DevCo. (the "Form 10") to be filed with the SEC will not,
at the time the Form S-4 becomes effective under the Securities Act, at the date
the Proxy Statement is first mailed to the Company's stockholders or at the time
of the Company Stockholders Meeting, and at the time the Form 10 becomes
effective under the Securities Act, respectively, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
--------
however, that no representation is made by the Company with respect to
-------
statements made therein based on information concerning, supplied or
incorporated by reference by Parent or Merger Sub for inclusion in the Form S-4,
the Proxy Statement and the Form 10. None of the information supplied by the
Company for inclusion or incorporation by reference in the Form S-4 will, at the
date it becomes effective and at the time of the Company Stockholders Meeting,
contain an 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 not misleading. Subject to the provisions set forth in the second
preceding sentence, the Form S-4, the Proxy Statement and the Form 10 will
comply as to form in all material respects with the requirements of the Exchange
Act and the Securities Act, as appropriate, and the rules and regulations
thereunder.
(t) Rights Agreement. As of the date of this Agreement, the
----------------
Company or the Board of Directors of the Company, as the case may be, (i) has
taken all necessary actions so that the execution and delivery of this
Agreement, the Stock Option Agreement and the consummation of the transactions
contemplated hereby and thereby will not result in a "Distribu-
35
tion Date" (as defined in the Rights Agreement) and (ii) has amended the Rights
Agreement to render it inapplicable to this Agreement, the Stock Option
Agreement and the Voting Agreement and the transactions contemplated hereby and
thereby.
(u) Transactions with Affiliates. As of the date hereof, (i)
----------------------------
there are no outstanding amounts payable to or receivable from, or advances by
the Company or any of its subsidiaries to, and neither the Company nor any of
its subsidiaries is otherwise a creditor or debtor to, any stockholder, officer,
director, employee or affiliate of the Company or any of its subsidiaries, other
than as part of the normal and customary terms of such persons' employment with
the Company or any of its subsidiaries, and (ii) neither the Company nor any
subsidiary of the Company whose board is controlled by the Company is a party to
any transaction agreement, arrangement or understanding with any stockholder,
officer, director or employee of the Company or any of its subsidiaries.
(v) Voting Requirements. The affirmative vote at the Company
-------------------
Stockholders Meeting (the "Company Stockholder Approval") of a majority of the
number of outstanding shares of Company Common Stock to approve and adopt this
Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve and adopt this Agreement and the
transactions contemplated hereby, including the Merger.
(w) Opinions of Financial Advisor. The Company has received the
-----------------------------
opinion of ▇▇▇▇▇▇▇▇ Inc. and Bear, ▇▇▇▇▇▇▇ & Co. Inc., dated the date hereof, to
the effect that, as of such dates, the Merger Consideration is fair from a
financial point of view to the stockholders of the Company.
(x) State Takeover Statutes. To the knowledge of the Company, no
-----------------------
state takeover statute is applicable to the Merger or the other transactions
contemplated hereby.
(y) Brokers. Except for ▇▇▇▇▇▇▇▇ Inc. and Bear, ▇▇▇▇▇▇▇ & Co.
-------
Inc., no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
delivered to Parent complete and correct copies of such arrangements which are
set forth as part of the Company Disclosure Schedule.
(z) Takeover Laws. The approval of this Agreement and the Merger
-------------
and the Stock Option Agreement by the Board of Directors of the Company
constitutes approval of this Agreement and the Merger and the Stock Option
Agreement and the transactions contemplated hereby and thereby for purposes of
Section 203 of the DGCL. Except for Section 203 of the DGCL (which has been
rendered inapplicable), no "moratorium", "control share", "fair price" or other
antitakeover laws and regulations of any state are applicable to the Merger or
other transactions contemplated by this Agreement and the Stock Option
Agreement.
36
(aa) No Other Agreement. Except as contemplated hereby, the
------------------
Company has no legal obligation, absolute or contingent, as the date hereof, to
any other person or entity to sell any material portion of the assets of the
Company, to sell the capital stock of the Company, to effect any merger,
consolidation or reorganization of the Company, or to enter into any agreement
with respect thereto.
SECTION 3.2 Representations and Warranties of Parent. Except as
----------------------------------------
set forth on the Disclosure Schedule delivered by Parent to the Company prior to
the execution of this Agreement (the "Parent Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken (regardless of whether such subsection refers to the Parent
Disclosure Schedule), Parent represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power.
------------------------------------------
(i) Each of Parent, its subsidiaries (as defined in
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act by
the SEC ("significant subsidiaries")) and Merger Sub is a corporation or
other legal entity duly organized, validly existing and in good standing
(with respect to jurisdictions which recognize such concept) under the laws
of the jurisdiction in which it is organized and has the requisite
corporate or other power, as the case may be, and authority to carry on its
business as now being conducted. Each of Parent and its subsidiaries is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing
or operation of its properties makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing, individually or in the
aggregate, would not have a material adverse effect on Parent.
(ii) Parent has delivered or provided to the Company
prior to the execution of this Agreement complete and correct copies of the
certificate of incorporation and by-laws of Parent and Merger Sub, each as
amended to date.
(iii) Merger Sub is a newly formed corporation with no
assets or liabilities, except for liabilities arising under this Agreement.
Merger Sub will not conduct any business or activities other than the
issuance of its stock to Parent prior to the Merger.
(b) Capital Structure. As of September 30, 2000, the
-----------------
authorized capital stock of Parent consists of 2,500,000,000 shares of common
stock, par value $0.01 per share, of which 2,000,000,000 shares are Parent
Common Stock and 500,000,000 shares are designated as ▇▇▇▇.▇▇▇ common stock
("▇▇▇▇.▇▇▇ Common Stock"), 10,000,000 shares of
37
preferred stock, par value $.01 per share, of Parent ("Parent Authorized
Preferred Stock"). At the close of business on September 30, 2000: (i)
728,703,667 shares of Parent common stock and 3,742,286 shares of ▇▇▇▇.▇▇▇
Common Stock were issued and outstanding; (ii) 179,003,833 shares of Parent
Common Stock were held by Parent in its treasury; (iii) no shares of Parent
Authorized Preferred Stock were issued and outstanding; (iv) 238,428,979 shares
of Parent Common Stock and 10,993,642 shares of ▇▇▇▇.▇▇▇ Common Stock were
reserved for issuance pursuant to the stock-based plans identified in Section
3.2(b) of the Parent Disclosure Schedule (such plans, collectively, the "Parent
Stock Plans"), of which approximately 188,175,715 shares of Parent Common Stock
and 6,282,196 shares of ▇▇▇▇.▇▇▇ Common Stock are subject to outstanding
employee stock options or other rights to purchase or receive Parent Common
Stock granted under the Parent Stock Plans (collectively, "Parent Employee Stock
Options"); and (vi) 30,997,000 shares of Parent Common Stock and 1,586,000
shares of ▇▇▇▇.▇▇▇ Common Stock are subject to warrants (collectively, "Parent
Warrants"). All outstanding shares of capital stock of Parent are, and all
shares thereof which may be issued pursuant to this Agreement or otherwise will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except (i) as set forth in this Section
3.2(b), (ii) for the 3% Convertible Subordinated Notes, (iii) for the 34,000,000
PRIDES, of which 32,000,000 have been designated as Income PRIDES and 2,000,000
have been designated as Growth PRIDES, and (iv) for changes since September 30,
2000 resulting from the issuance of shares of Parent Common Stock pursuant to
the Parent Stock Plans or Parent Employee Stock Options or Parent Warrants and
other rights referred to in this Section 3.2(b), as of the date hereof, (x)
there are not issued, reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of Parent, (B) any securities of Parent
or any Parent subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of Parent, (C) any warrants, calls,
options or other rights to acquire from Parent or any Parent subsidiary, and any
obligation of Parent or any Parent subsidiary to issue, any capital stock,
voting securities or securities convertible into or exchangeable or exercisable
for capital stock or voting securities of Parent or other ownership interests of
Parent, and (y) there are no outstanding obligations of Parent or any Parent
subsidiary to repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. As of the date hereof, there are no outstanding (A) securities of
Parent or any Parent subsidiary convertible into or exchangeable or exercisable
for shares of capital stock or other voting securities or other ownership
interests in any Parent subsidiary, (B) warrants, calls, options or other rights
to acquire from Parent or any Parent subsidiary, and any obligation of Parent or
any Parent subsidiary to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or ownership interests in,
any Parent subsidiary or (C) obligations of Parent or any Parent subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Parent subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. To Parent's knowledge, neither Parent
nor any Parent subsidiary is a party to any agreement restricting the transfer
of, relating to the voting of, requiring registration of, or granting any
preemptive or, except as provided by the terms of Parent Stock Plans,
antidilutive rights with respect to, any securities of the type referred to in
the two preceding sentences.
38
(c) Authority; Noncontravention. Each of Parent and Merger
---------------------------
Sub has all requisite corporate power and authority to enter into this
Agreement, the Stock Option Agreement (to which is a party) and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate and shareholder action on the part of
Parent and Merger Sub, respectively. This Agreement and the Stock Option
Agreement have been duly executed and delivered by each of Parent and Merger
Sub, and, assuming the due authorization, execution and delivery by the Company,
constitutes the legal, valid and binding obligations of Parent and Merger Sub,
respectively, enforceable against Parent and Merger Sub, respectively, in
accordance with their terms except that (i) such enforceability may be subject
to applicable bankruptcy, insolvency or other similar laws now or hereafter in
effect affecting creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunction or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the courts for which any proceeding therefor may be brought. The execution and
delivery of this Agreement and the Stock Option Agreement do not, and the
consummation of the transactions contemplated hereby and thereby (other than the
DevCo. Distribution) and compliance with the provisions of this Agreement and
the Stock Option Agreement will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent, (ii) the certificate of
incorporation or by-laws of the comparable organizational documents of any of
its significant subsidiaries or Merger Sub, (iii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to Parent or
any of its subsidiaries or their respective properties or assets or (iv) subject
to the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii), (iii) and (iv),
any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not (x) have a material adverse effect on
Parent or (y) reasonably be expected to impair or delay the ability of Parent or
Merger Sub to perform its obligations under this Agreement. To the knowledge of
Parent, no consent, approval, order or authorization of, action by, or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required by or with respect to Parent or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Parent and
Merger Sub or the consummation by Parent and Merger Sub of the transactions
contemplated by this Agreement, except for (1) the filing of a pre-merger
notification and report form by Parent under the HSR Act; (2) the filing with
the SEC of (A) the Form S-4 and the Proxy Statement and (B) such reports under
the Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby; (3) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and such filings with
Governmental Entities to satisfy the
39
applicable requirements of the laws of states in which Parent and its
subsidiaries are qualified or licensed to do business or state securities or
"blue sky" laws; (4) such VOI Registrations; (5) such filings with and approvals
of the NYSE to permit the shares of Parent Common Stock to be issued in the
Merger and under the Company Stock Plan to be listed on the NYSE; and (6) such
other filings and consents as may be required to effect the DevCo. Distribution.
(d) Parent Documents. Since January 1, 2000, Parent has filed
----------------
all required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein) with the SEC
(the "Parent SEC Documents"). As of their respective filing dates, (i) the
Parent SEC Documents complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and (ii) none of the Parent SEC Documents when filed (or when amended
and restated and as supplemented by subsequently filed Parent SEC Document)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of Parent
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments and to
other adjustments described in the notes to such unaudited statements).
(e) Information Supplied. The Form S-4, the Proxy Statement and
--------------------
the Form 10 to be filed with the SEC will not, at the time the Form S-4 becomes
effective under the Securities Act, at the date the Proxy Statement is first
mailed to the Company's stockholders or at the time of the Company Stockholders
Meeting, and at the time the Form 10 becomes effective under the Securities Act,
respectively, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that no representation is
-------- -------
made by Parent with respect to statements made therein based on information
supplied or incorporated by reference by the Company for inclusion in the
Form S-4, the Proxy Statement and the Form 10. None of the information supplied
by Parent for inclusion or incorporation by reference in the Proxy Statement and
Form 10 will, at the date mailed to the Company's stockholders and at the time
of the Company Stockholders Meeting, and at the date it becomes effective,
respectively, 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 statement therein not misleading. Subject to the provisions set forth in the
second preceding sentence, the Form S-4 will comply as to form in all material
40
respects with the requirements of the Exchange Act and the Securities Act, as
appropriate, and the rules and regulations thereunder.
(f) Brokers. Except for Banc of America Securities, no broker,
-------
investment broker, financial advisor or other person is entitled to a broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by the Company. Except as consented to by
----------------------------------
Parent in writing, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, the Company shall and shall cause its subsidiaries to carry on
their respective business in the usual, regular and ordinary course consistent
with past practice and in compliance in all material respects with all
applicable laws and regulations and to pay its debts and Taxes when due, to pay
or perform other obligations when due, and, to use best reasonable efforts to
preserve intact their current business organizations, to keep available the
services of their current officers and employees and preserve their
relationships with those persons having business dealings with them, all with
the goal of preserving unimpaired its goodwill and ongoing businesses at the
Effective Time. Without limiting the generality of the foregoing, senior
officers of Parent and the Company shall meet on a regular basis to review the
financial and operational affairs of the Company and its subsidiaries, in
accordance with applicable law, and the Company shall promptly notify Parent of
any event or occurrence or emergency not in the ordinary course of its business,
and any material event involving or adversely affecting the Company or its
business. Except as expressly contemplated by this Agreement, the Company shall
not, and shall not permit any of its subsidiaries to:
(i) other than between subsidiaries or as between the
Company and any wholly owned subsidiary, declare, set aside or pay any
dividends on, make any other distributions in respect of, or enter into any
agreement with respect to its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of, or in substitution for,
shares of its capital stock, except upon the exercise of Company Stock
Options or Company Warrants that are, in each case, outstanding as of the
date hereof in accordance with their present terms, or which are issued
prior to the Effective Time in the ordinary course, pursuant to the
Company's Second Amended and Restated Employee Stock Purchase Plan ("ESPP")
or (z) purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its subsidiaries, other securities thereof or any
rights, warrants or options to acquire any such shares or other securities
(other than the issuance of Company Common Stock upon the exercise of
Company Stock Options and Company
41
Warrants that are, in each case, outstanding as of the date hereof in
accordance with their present terms);
(ii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities (other than the issuance of Company Common Stock upon the
exercise of Company Stock Options and Company Warrants that are, in each
case, outstanding as of the date hereof in accordance with their present
terms or which are issued in the ordinary course prior to the Effective
Time, pursuant to the ESPP, or in connection with financing arrangements
permitted under Section 4.1(vi));
(iii) amend its certificate of incorporation, by-laws or
other comparable organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or any equity securities
of, or by any other manner, any business or any person, or otherwise
acquire or agree to acquire any assets for consideration in excess of
$500,000 (other than financing transactions involving transfers of assets
solely among subsidiaries and other than for construction in the ordinary
course of business, consistent with past practice);
(v) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or
assets other than in the ordinary course of business and consistent with
past practices, including but not limited to the performance of obligations
under contractual arrangements listed on the Company Disclosure Schedule
existing as of the date hereof, or create any security interest in such
assets or properties;
(vi) except for borrowings under existing credit facilities
or lines of credit or refinancing of indebtedness outstanding on the date
hereof, incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible
for the obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any person other than its wholly owned
subsidiaries and as a result of ordinary advances and reimbursements to
employees and endorsements of banking instruments;
(vii) change its accounting methods (or underlying
assumptions), principles or practices affecting its assets, liabilities or
business, including without limitation, any reserving, renewal or residual
method, practice or policy, in each case, in effect at December 31, 1999,
except as required by
42
changes in GAAP, or change any of its methods of reporting income and
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns of the Company for the
taxable year ending December 31, 1999, except as required by material
changes in law or regulation;
(viii) make any tax elections, or settle or compromise any
liability with respect to Taxes or agree to any adjustment of any Tax
attribute, unless required by applicable law or made in the ordinary course
of business consistent with past practices;
(ix) enter into any agreement, commitment or transaction
to acquire or sell real estate for VOI development in excess of $200,000
(other than pursuant to previously existing agreements set forth in the
Company Disclosure Schedule);
(x) other than in accordance with the Company's operating
budget for fiscal year 2000 which is attached to the Company Disclosure
Schedule, enter into any agreement obligating the Company to spend more
than $250,000 or any commitment or transaction of the type described in
Section 3.1(f) of the Company Disclosure Schedule hereof not in the
ordinary course of business;
(xi) other than as set forth in the Company's operating
budget for fiscal year 2000, amend or otherwise modify, except in the
ordinary course of business, or violate the terms of, any of the material
agreements or contracts or other binding obligations of the Company or its
subsidiaries;
(xii) alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or
business entity in which the Company directly or indirectly holds any
interest on the date hereof;
(xiii) (A) grant to any current or former director,
executive officer or other Key Employee of the Company or its subsidiaries
any increase in compensation, bonus or other benefits, except for (i)
salary, wage or benefit increases in the ordinary course of business and
(ii) bonuses under the arrangements specifically set forth on Exhibit B
hereto, and payable to the persons and in the amounts specifically set
forth on such Exhibit B hereto; (B) grant to any such current or former
director, executive officer or other Key Employee of the Company any
increase in severance or termination pay, (C) enter into, or amend, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director,
executive officer or Key Employee or (D) modify any existing equity-based
compensation agreement or arrangement with any director, employee,
consultant or independent contractor to provide for acceleration of the
vesting or payments of benefits thereunder;
43
(xiv) except pursuant to agreements or arrangements in
effect on the date hereof and disclosed in writing and provided or made
available to Parent, pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any of its
officers or directors or any affiliate or the immediate family members or
associates of any of its officers or directors other than compensation in
the ordinary course of business consistent with past practice;
(xv) agree or consent to any material agreements or
material modifications of existing agreements with any Governmental Entity
in respect of the operations of its business, except (i) as required by law
to renew Permits or agreements in the ordinary course consistent with past
practice, or (ii) to effect the consummation of the transactions
contemplated hereby;
(xvi) pay, discharge, settle, compromise or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), including taking any action to settle
or compromise any litigation; other than any such payment, discharge,
settlement, compromise or satisfaction in the ordinary course of business
in an amount not to exceed $20,000 or any reserve established in respect of
a claim as set forth in the Company's unaudited balance sheet dated June
30, 2000;
(xvii) amend the Rights Agreement or redeem the Rights (as
defined in the Rights Agreement);
(xviii) cancel, materially amend or renew any insurance
policy other than in the ordinary course of business;
(xix) authorize, or commit or agree to take, any of the
foregoing actions or any other action that would prevent the Company from
performing or cause the Company not to perform its covenants hereunder;
(xx) issue any communication of a general nature to the
employees of the Company without the prior written approval of Parent
(which will not be unreasonably delayed or withheld), except for
communications in the ordinary course of business that do not relate to the
Merger or other transactions contemplated hereby; or
(xxi) take any action or fail to take any action which
would result in any of the representations and warranties set forth in
Section 3.1 failing to be true and correct.
SECTION 4.2 Advice of Changes. Except to the extent prohibited by
-----------------
applicable law or regulation, the Company, Parent and Merger Sub shall promptly
advise the other party orally and in writing to the extent it has knowledge of
(i) any representation or warranty made by
44
it contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect, (ii)
the failure by it to comply in any material respect with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement and (iii) any change or event having, or
which, insofar as can reasonably be foreseen, could reasonably be expected to
have a material adverse effect on such party or on the truth of their respective
representations and warranties or the ability of the conditions set forth in
Article VI to be satisfied; provided, however, that no such notification shall
-------- -------
affect the representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement.
SECTION 4.3 No Solicitation by the Company. (a) Except as otherwise
------------------------------
provided in this Section 4.3, until the earlier of the Effective Time and the
date of termination of this Agreement, neither the Company, nor any of its
subsidiaries or any of the officers, directors, stockholders, agents,
representatives or affiliates of it or its subsidiaries (including any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) shall (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes a Company Takeover
Proposal (as defined below), (ii) participate in any discussions or negotiations
regarding any Company Takeover Proposal, (iii) enter into any agreement
regarding any Company Takeover Proposal or (iv) make or authorize any statement,
recommendation or solicitation in support of any Company Takeover Proposal. If
and only to the extent that (i) the Company Stockholders Meeting shall not have
occurred, (ii) the Board of Directors of the Company determines in good faith,
after consultation with outside counsel, that it is necessary to do so in order
to act in a manner consistent with its fiduciary duties to the Company's
stockholders under applicable law, (iii) the Company's Board of Directors
concludes in good faith that such Company Takeover Proposal constitutes a
Company Superior Proposal (as defined below), (iv) such Company Takeover
Proposal was not solicited by it and did not otherwise result from a breach of
this Section 4.3(a), and (v) the Company provides prior written notice to Parent
of its decision to take such action, the Company shall be permitted to (A)
furnish information with respect to the Company and any of its subsidiaries to
such person pursuant to a customary confidentiality agreement, (B) participate
in discussions and negotiations with such person, (C) subject to first complying
with the provisions of Section 5.8(b) hereof, enter into a Company Acquisition
Agreement and (D) effect a Change in the Company Recommendation (as defined
below); provided, that at least three business days prior to taking any actions
--------
set forth in clause (C) or (D) above, the Company's Board of Directors provides
Parent written notice advising Parent that the Company's Board of Directors is
prepared to conclude that such Company Takeover Proposal constitutes a Company
Superior Proposal and during such three business day period the Company and its
advisors shall have negotiated in good faith with Parent to make adjustments in
the terms and conditions of this Agreement such that such Company Takeover
Proposal would no longer constitute a Company Superior Proposal and the
Company's Board of Directors concludes in good faith that such Company Takeover
Proposal is reasonably likely to result in a Company Superior Proposal. The
Company, its subsidiaries and their representatives
45
immediately shall cease and cause to be terminated any existing activities,
discussions or negotiations with any parties with respect to any Company
Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of a business that constitutes 20% or more of the net
revenues, net income or assets of the Company and its subsidiaries, taken as a
whole, or 20% or more of any class of equity securities of the Company, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of any equity securities of the
Company, or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company (or any
subsidiary of the Company whose business constitutes 20% or more of the net
revenues, net income or assets of the Company and its subsidiaries, taken as a
whole), other than the transactions contemplated by this Agreement or any
securitization or financing transactions consistent with past practice. For
purposes of this Agreement, a "Company Superior Proposal" means any proposal
made by a third party (A) to acquire, directly or indirectly, including pursuant
to a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, sale, lease, exchange, transfer or other
disposition (including a contribution to a joint venture), dissolution or
similar transaction, for consideration consisting of cash and/or securities,
100% of the combined voting power of the shares of the Company's capital stock
then outstanding or 100% of the net revenues, net income or assets of the
Company and its subsidiaries, taken as a whole and (B) which is otherwise on
terms which the Board of Directors of the Company determines in its good faith
judgment (after consultation with (i) either ▇▇▇▇▇▇▇▇ Inc., Bear ▇▇▇▇▇▇▇ & Co.,
Inc. or another nationally recognized investment banking firm and (ii) outside
counsel), taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal,
that the proposal, (i) if consummated would result in a transaction that is more
favorable to the Company's stockholders from a financial point of view than the
Merger and the other transactions contemplated hereby and (ii) is reasonably
capable of being completed, including to the extent required, financing which is
then committed or which, in the good faith judgment of the Board of Directors of
the Company, is reasonably capable of being obtained by such third party.
(b) Except as expressly permitted by this Section 4.3, neither
the Board of Directors of the Company nor any committee thereof shall (i)
withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify,
in a manner adverse to Parent, the approval of the Agreement, the Merger or the
Company Recommendation (as defined in Section 5.1(d)) or take any action or make
any statement in connection with the Company Stockholders Meeting inconsistent
with such approval or Company Recommendation (collectively, a "Change in the
Company Recommendation"), (ii) approve or recommend, or propose publicly to
approve or recommend, any Company Takeover Proposal, or (iii) cause the Company
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Company Acquisition Agreement")
related to any Company Takeover Proposal. For purposes of this Agreement, a
Change in the Company Recommendation shall include any approval or
46
recommendation (or public proposal to approve or recommend), by the Company
Board of a Company Takeover Proposal, or any failure by the Company Board to
recommend against a Company Takeover Proposal. Notwithstanding the foregoing,
the Board of Directors of the Company, to the extent that it determines in good
faith, after consultation with outside counsel, that in light of a Company
Superior Proposal it is necessary to do so in order to act in a manner
consistent with its fiduciary duties to the Company's stockholders under
applicable law, may terminate this Agreement solely in order to concurrently
enter into a Company Acquisition Agreement with respect to any Company Superior
Proposal, but only at a time that is after the third business day following
Parent's receipt of written notice advising Parent that the Board of Directors
of the Company is prepared to accept a Company Superior Proposal, specifying the
material terms and conditions of such Company Superior Proposal and identifying
the person making such Company Superior Proposal, all of which information will
be kept confidential by Parent in accordance with the terms of the
Confidentiality Agreement (as defined in Section 5.4).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.3, the Company shall immediately advise
Parent orally and in writing of any request for information or of any Company
Takeover Proposal, the material terms and conditions of such request or Company
Takeover Proposal and the identity of the person making such request or Company
Takeover Proposal. The Company will keep Parent informed of the status and
details (including amendments or proposed amendments) of any such request or
Company Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure if, in the good faith judgment of the Board of Directors of the
Company, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable law; provided, however,
-------- -------
any such disclosure relating to a Company Takeover Proposal shall be deemed to
be a Change in the Company Recommendation unless the Board of Directors of the
Company reaffirms the Company Recommendation in such disclosure.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Form S-4, Proxy Statement and Form 10;
---------------------------------------------------------
Stockholders Meeting.
--------------------
(a) As promptly as practicable following the date of this
Agreement, Parent and the Company shall prepare and file with the SEC the
Form S-4, the Proxy Statement and the Form 10. Each of Parent and the Company
shall use all reasonable efforts to have the Form S-4, in which the Proxy
Statement shall be included, declared effective under the Securities Act and the
Form 10 declared effective under the Exchange Act as promptly as practicable
after
47
such filing. The Company shall use its reasonable best efforts to cause the
Proxy Statement to be mailed to its stockholders as promptly as practicable
after the Form S-4 is declared effective; provided, that the Company may elect
--------
to postpone the mailing of the Proxy Statement to a date that is no later than
at least 20 business days prior to the date Parent informs the Company that the
DevCo. Distribution is reasonably capable of being completed.
(b) Each of the Company and Parent covenants that none of the
information supplied or to be supplied by it for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the Proxy
Statement will, at the date it is first mailed to the stockholders of the
Company, or at the time of the Company Stockholders Meeting, 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 are made, not misleading. The Proxy Statement
and the Form S-4 will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act, as applicable.
Notwithstanding the foregoing, (i) no representation or covenant is made by the
Company with respect to statements made or incorporated by reference based on
information supplied in writing by Parent specifically for inclusion or
incorporation by reference in the Form S-4 or Proxy Statement and (ii) no
representation or covenant is made by Parent with respect to statements made or
incorporated by reference based on information supplied in writing by the
Company for inclusion or incorporation by reference in the Form S-4 or the Proxy
Statement. If at any time prior to the Effective Time there shall occur (i) any
event with respect to the Company or any of its subsidiaries, or with respect to
other information supplied by Company for inclusion in the Form S-4 or the Proxy
Statement or (ii) any event with respect to Parent, or with respect to
information supplied by Parent for inclusion in the Form S-4 or the Proxy
Statement, in either case, which event is required to be described in an
amendment of, or a supplement, to the Form S-4 or the Proxy Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
Company.
(c) Each of the Company and Parent shall promptly notify the
other of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its staff or
any other appropriate government official for amendments or supplements to any
of the filings with the SEC in connection with the Merger and other transactions
contemplated hereby or for additional information and shall supply the other
with copies of all correspondence between the Company or any of its
representatives, or Parent or any of its representatives, as the case may be, on
the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. The Company and Parent shall
use their respective reasonable efforts to respond to any comments of the SEC
with respect to the Form S-4 and the Proxy Statement as promptly as practicable.
The Company and Parent shall cooperate with each other and provide to each other
all information
48
necessary in order to prepare the Form S-4, the Proxy Statement and the Form 10,
and shall provide promptly to the other party any information such party may
obtain that could necessitate amending any such document.
(d) The Company shall, as promptly as practicable after the
Form S-4 is declared effective under the Securities Act, duly call, give notice
of, convene and hold the Company Stockholders Meeting in accordance with the
DGCL for the purpose of obtaining the Company Stockholder Approval; provided,
--------
that the Company may elect to postpone the Company Stockholders Meeting to a
date that is no later than 35 business days after the date of mailing of the
Proxy Statement in accordance with Section 5.1(a). Subject to Section 4.3, the
Board of Directors of the Company shall recommend to the Company's stockholders
the approval and adoption of this Agreement, the Merger and the other
transactions contemplated hereby (the "Company Recommendation"). Without
limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 5.1(d) shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal. Notwithstanding
any Change in the Company Recommendation, this Agreement and the Merger shall be
submitted to the stockholders of the Company at the Company Stockholders Meeting
for the purpose of approving the Agreement and the Merger and nothing contained
herein shall be deemed to relieve the Company of such obligation unless this
Agreement has been terminated.
(e) The Company shall coordinate and cooperate with Parent with
respect to the timing of the Company Stockholders Meeting.
SECTION 5.2 Letter of the Company's Accountants. The Company shall
-----------------------------------
cause to be delivered to Parent a letter from the Company's independent
accountants dated a date within two business days before the Closing Date
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
SECTION 5.3 Letter of Parent's Accountants. Parent shall cause to be
------------------------------
delivered to the Company a letter from Parent's independent accountants dated a
date within two business days before the Closing Date addressed to the Company,
in form and substance reasonably satisfactory to the Company and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
SECTION 5.4 Access to Information; Confidentiality.
--------------------------------------
(a) Subject to the Secrecy Agreement, dated as of August 11,
2000, as amended, between Parent and the Company (the "Confidentiality
Agreement"), and subject to the restrictions contained in confidentiality
agreements to which the Company is subject (which the
49
Company will use its reasonable best efforts to have waived) and applicable law,
the Company shall, and shall cause its subsidiaries to, afford Parent and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of Parent, reasonable access during normal business hours during
the period prior to the Effective Time to all its respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall, and shall cause each of its subsidiaries to, furnish promptly to
Parent (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as such other party may reasonably request. In
addition, the Company will deliver, or cause to be delivered, to Parent the
internal or external reports reasonably required by Parent promptly after such
reports are made available to the Company's personnel. No review pursuant to
this Section 5.4 shall affect any representation or warranty given by the
Company to Parent. Parent will hold, and will cause its officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
(b) As soon as practicable after the execution of this
Agreement, the Company shall permit Parent to electronically link the Company's
financial reporting system to Parent's financial reporting system ("Hyperion").
The link to Hyperion will be completed by Parent's financial reporting staff,
with assistance from the Company's accounting staff, at no incremental cost to
the Company and provided that such installment will not interfere with or
disrupt the normal operation of the Company's financial reporting system or
violate any applicable software licenses. Parent will provide the necessary
Hyperion software to be installed on a computer in the Company's accounting
department; provided, however, that the information retrieved from the Company's
-------- -------
financial reporting system will not be made available to persons who are
directly involved in pricing or any other competitive activity at Parent;
provided, further, that such persons shall not use such information other than
-------- -------
for purposes of assessing the financial condition of the Company for purposes of
the transactions contemplated by this Agreement, and shall not share, provide or
sell the information to any third party or use the information in any manner
that could reasonably be considered a restraint on competition or result in a
violation of any applicable laws. Any information provided under this Section
5.4(b) shall be subject to the terms of the Confidentiality Agreement.
SECTION 5.5 Reasonable Efforts. (a) Subject to the terms and
------------------
conditions set forth in this Agreement, each of the parties hereto shall use its
reasonable good faith efforts (subject to, and in accordance with, applicable
law) to take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings and the
taking of all steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Entity, including, without
limitation, the
50
VOI Registrations (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement, including
seeking to have any stay, temporary restraining order or injunctions entered by
any court or other Governmental Entity vacated or reversed and (iv) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement, subject to the limitations on divestiture set forth in subsection (c)
below.
(b) In connection with and without limiting the foregoing, the
Company and Parent shall (i) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable to
this Agreement, the Stock Option Agreement or the Merger or any of the other
transactions contemplated hereby and thereby, and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to this Agreement,
the Stock Option Agreement or the Merger or any other transaction contemplated
hereby and thereby, take all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement and the Stock Option Agreement
may be consummated as promptly as practicable on the terms contemplated hereby
and thereby and otherwise to minimize the effect of such statute or regulation
on the Merger, the DevCo. Distribution and the other transactions contemplated
hereby and thereby.
(c) Each party agrees to provide the other party with copies of
any documentation or written materials provided to or by Governmental Entities
with respect to the HSR approval process. Parent shall not be required to agree
to any divestiture by Parent or any of Parent's subsidiaries or affiliates of
shares of capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or of the Company, its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
(d) The Company shall use its reasonable good faith efforts to
assist Parent and certain of its subsidiaries that are subject to the reporting
requirements of the Exchange Act (the "Reporting Subs") in the preparation and
filing, on the earliest practicable date after the date of this Agreement, of
Current Reports on Form 8-K for each of Parent and the Reporting Subs containing
the information required by Item 512(a)(1)(ii) of Regulation S-K of the SEC,
including the historical financial statements of the Company required by Rule 3-
05 of Regulation S-X of the SEC and the pro forma financial information with
respect to the business combination contemplated by this Agreement required by
Article 11 of Regulation S-X of the SEC, and the Company shall take all other
action necessary to allow Parent and the Reporting Subs to issue and sell
securities on a continuous or delayed basis in one or more public offerings
registered under the Securities Act.
SECTION 5.6 Company Equity-Based Incentives. (a) As of the Effective
-------------------------------
Time, (i) each outstanding Company Stock Option and Company Warrant shall be
converted into an
51
option or warrant, as the case may be (as applicable, an "Adjusted Option" or
"Adjusted Warrant") to purchase the number of shares of Parent Common Stock
(rounded down to the nearest whole number of shares of Parent Common Stock)
equal to the number of shares of Company Common Stock subject to such Company
Stock Option or Company Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, at an exercise price per share (rounded up to
the nearest whole cent) equal to the exercise price for each such share of
Company Common Stock subject to such Company Stock Option or Company Warrant
divided by the Exchange Ratio, and all references in each such option or warrant
to the Company shall be deemed to refer to Parent, where appropriate; provided,
--------
however, Parent shall assume the obligations of the Company under the applicable
-------
Company Stock Plan and agreements under which the Adjusted Option or Adjusted
Warrant was originally granted, subject to the adjustments required by this
Section 5.6(a). The other terms of each such Adjusted Option and Adjusted
Warrant, and the plans under which they were issued, shall continue to apply in
accordance with their terms.
(b) As of the Effective Time, (i) each outstanding Company Award
other than Company Stock Options and Company Warrants (including restricted
stock, stock appreciation rights, performance shares, deferred stock, phantom
stock, stock equivalents and stock units) under the Company Stock Plans shall be
converted into the same instrument of Parent, in each case with such adjustments
(and no other adjustments) to the terms of such Company Awards as are necessary
to preserve the value inherent in such Company Awards with no detrimental or
beneficial effects on the holder thereof and (ii) Parent shall assume the
obligations of the Company under the Company Awards, subject to the adjustments
required by this Section 5.6(b). The other terms of each such Company Award, and
the plans or agreements under which they were issued, shall continue to apply in
accordance with their terms.
(c) The Company and Parent agree that the Company Stock Plans
and Parent equity-based incentive plans shall be amended, to the extent
necessary, to reflect the transactions contemplated by this Agreement,
including, but not limited to the conversion of shares of Company Common Stock
held or to be awarded or paid pursuant to such benefit plans, programs or
arrangements into shares of Parent Common Stock on a basis consistent with the
transactions contemplated by this Agreement. After the Effective Time, Parent
shall promptly issue new agreements reflecting each holder's Adjusted Options,
Adjusted Warrants or adjusted Company Awards.
(d) Parent shall (i) reserve for issuance the number of shares
of Parent Common Stock that will become subject to the benefit plans, programs
and arrangements referred to in this Section 5.6 and (ii) issue or cause to be
issued the appropriate number of shares of Parent Common Stock pursuant to
applicable plans, programs and arrangements, upon the exercise or maturation of
rights existing thereunder on the Effective Time or thereafter granted or
awarded. As soon as practicable following the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or other
appropriate form) registering a number of shares of Parent Common Stock
necessary to fulfill Parent's obligations under this Section 5.6.
52
Such registration statement shall be kept effective (and the current status of
the prospectus required thereby shall be maintained) for at least as long as
Adjusted Options, Adjusted Warrants or adjusted Company Awards remain
outstanding.
(e) Parent and the Company shall each approve the conversion of
the outstanding Company Stock Options, Company Warrants and Company Awards
pursuant to this Section 5.6 in a manner sufficient to comply with the
exemptions provided by Rule 16b-3 of the Exchange Act.
(f) The Company shall take all actions necessary to effect, as
of immediately prior to the Effective Time, the termination of the ESPP and of
any offering period then in effect under the ESPP, in a manner approved by
Parent.
SECTION 5.7 Indemnification, Exculpation and Insurance. (a) All rights
------------------------------------------
to indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the current
or former directors or officers of the Company and its subsidiaries as provided
in their respective certificates of incorporation or by-laws (or comparable
organizational documents) and any indemnification agreements or arrangements of
the Company and its subsidiaries shall survive the Merger and shall continue in
full force and effect in accordance with their terms, and shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of such
individuals.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation will assume the obligations thereof set forth in this Section 5.7.
(c) The provisions of this Section 5.7 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his or
her heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
(d) For six years after the Effective Time, the Surviving
Corporation shall maintain in effect the Company's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable to the Company's directors
and officers currently covered by such insurance than those of such policy in
effect on the date hereof; provided, that the Surviving Corporation may
--------
substitute therefor policies of Parent or its subsidiaries containing terms with
respect to coverage and amount no less favorable to such
53
directors or officers; provided, further, that in no event shall the Surviving
-------- -------
Corporation be required to pay aggregate premiums for insurance under this
Section 5.7(d) in excess of 200% of the aggregate premiums paid by the Company
in 2000 on an annualized basis for such purpose and, if the annual premiums of
such insurance coverage exceed such amount, the Surviving Corporation shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount. Notwithstanding the foregoing, the Company may obtain
directors' and officers' liability insurance covering all acts or omissions
prior to the Effective Time at a cost not to exceed 125% of the cost of the
current directors' and officers' liability insurance maintained by the Company.
(e) Parent shall cause the Surviving Corporation or any
successor thereto to comply with its obligations under this Section 5.7.
SECTION 5.8 Fees and Expenses. (a) Except as provided in this Section
-----------------
5.8, all fees and expenses incurred in connection with the Merger, this
Agreement, and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
(b) (i) In the event that this Agreement is terminated by
Parent pursuant to Section 7.1(c), then, upon such termination, the Company
shall pay Parent a fee equal to $32,000,000 by wire transfer of same day funds.
(ii) In the event that (A) a Pre-Termination Takeover
Proposal Event (as defined below) shall occur after the date of this
Agreement and thereafter this Agreement is terminated by either Parent or
the Company pursuant to Section 7.1(b)(i) and (B) prior to the date that is
12 months after the date of such termination the Company enters into a
Company Acquisition Agreement, then the Company shall promptly, but in no
event later than two business days after the date such Company Acquisition
Agreement is entered into, pay Parent a fee equal to $32,000,000 by wire
transfer of same day funds.
(iii) In the event that (A) a Pre-Termination Takeover
Proposal Event shall occur after the date of this Agreement, (B) this
Agreement is terminated by either Parent or the Company pursuant to Section
7.1(b)(ii), (C) the Average Trading Price shall not be below $6.00 per
share, and (D) prior to the date that is 12 months after the date of such
termination the Company enters into a Company Acquisition Agreement, then
the Company shall promptly, but in no event later than two business days
after the date such Company Acquisition Agreement is entered into, pay
Parent a fee equal to $32,000,000 by wire transfer of the same day funds.
(iv) In the event that this Agreement is terminated by the
Company pursuant to Section 7.1(d), then concurrently with such
termination, the
54
Company shall pay to Parent a fee equal to $32,000,000 by wire transfer of
same day funds.
(v) In the event that (A) a Pre-Termination Takeover
Proposal Event shall occur after the date of this Agreement, (B) the
Company Board of Directors has effected a Change in the Company
Recommendation, and (C) this Agreement is terminated by either Parent or
Company for any reason provided for under Section 7.1, then, promptly, but
in no event later than two business days after such termination, the
Company shall pay Parent a fee equal to $32,000,000 by wire transfer of
same day funds.
(vi) For purposes of this Section 5.8(b), a "Pre-
Termination Takeover Proposal Event" shall be deemed to occur if a Company
Takeover Proposal shall have been made known to the Company or any of its
subsidiaries or has been made directly to its stockholders generally or any
person shall have publicly announced an intention (whether or not
conditional) to make a Company Takeover Proposal. The Company acknowledges
that the agreements contained in this Section 5.8(b) are an integral part
of the transactions contemplated by this Agreement, and that, without these
agreements, Parent would not enter into this Agreement; accordingly, if the
Company fails promptly to pay the amount due pursuant to this Section
5.8(b), and, in order to obtain such payment, Parent commences a suit which
results in a judgment against the Company for the fee set forth in this
Section 5.8(b), the Company shall pay to Parent its costs and expenses
(including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the rate on six-month
U.S. Treasury obligations plus 300 basis points in effect on the date such
payment was required to be made.
(c) The Company shall in no event be required to pay more than
one fee pursuant to Section 5.8(b). In the event that an amount is payable by
the Company pursuant to this Section 5.8, then, not withstanding anything in
this Agreement or the Voting Agreement to the contrary, (i) such amount shall be
full compensation and liquidated damages for the loss suffered by Parent as a
result of the failure of the transactions contemplated by this Agreement and the
Voting Agreement to be consummated and to avoid the difficulty of determining
the damages under the circumstances and (ii) such amount shall be in lieu of any
other entitlement of Parent, and shall be the sole and exclusive liability of
the Company and the Company's stockholders, with respect to all matters arising
under or relating to this Agreement and the Voting Agreement, unless there has
been a willful or material breach of this Agreement or the Voting Agreement by
the Company or a stockholder of the Company, respectively.
SECTION 5.9 Public Announcements. Parent and the Company will consult
--------------------
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with and use reasonable efforts to agree on, any
press release or other public
55
statements and any internal communications with respect to the transactions
contemplated by this Agreement and the Stock Option Agreement, including the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as either party may determine is
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange. The parties agree that
the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties.
SECTION 5.10 Affiliates. To the extent practicable, concurrently with
----------
as practicable and in any event within 10 business days after the date hereof),
the Company shall deliver to Parent a written agreement substantially in the
form attached as Exhibit 5.10(a) hereto of all of the persons who are
"affiliates" of the Company for purposes of Rule 145 under the Securities Act;
all of such affiliates, who are affiliates as of the date of this Agreement, are
identified in Section 5.10 of the Company Disclosure Schedule. Section 5.10 of
the Company Disclosure Schedule shall be updated by the Company as necessary to
reflect changes from the date hereof and the Company shall use reasonable best
efforts to cause each person added to such schedule after the date hereof to
deliver a similar agreement.
SECTION 5.11 Stock Exchange Listing. Parent shall use best upon efforts
----------------------
to cause the Parent Common Stock issuable (i) under Article II or (ii) upon
exercise of the Adjusted Options pursuant to Section 5.6 to be approved for
issuance on the NYSE, in each case subject to official notice of issuance, as
promptly as practicable after the date hereof, and in any event prior to the
Closing Date.
SECTION 5.12 Stockholder Litigation. Each of the Company and Parent
----------------------
shall give the other the reasonable opportunity to participate in the defense of
any stockholder litigation against the Company or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
SECTION 5.13 DevCo. Distribution.
-------------------
(a) Unless Parent shall determine that the Company shall not
effect the DevCo. Distribution, it shall prepare and deliver to the Company the
proposed terms of the DevCo. Distribution and forms of the agreements proposed
to be entered into by the Company and DevCo. in connection with the DevCo.
Distribution on or prior to December 7, 2000.
(b) Prior to the Closing, the Company shall use its reasonable
efforts to complete the actions specified in Exhibit A as long as those actions
do not adversely affect the business of the Company and its wholly owned
subsidiaries before the DevCo. Distribution; provided, however, that the
-------- -------
completion of actions under this Section 5.13 shall not be a condition to the
Merger. The Company shall take all necessary action to create DevCo. and
transfer to DevCo. such assets and liabilities from the Company and its
subsidiaries and execute all
56
necessary agreements that shall govern the relationships between the Surviving
Corporation and DevCo. following the DevCo. Distribution, all in accordance with
Parent's instructions set forth on Exhibit A. The DevCo. Distribution must occur
immediately before the Effective Time unless otherwise agreed to by the Company.
(c) The Company shall not take, or cause to be taken, any action
that would or might reasonably be expected to prevent or materially delay
Parent, the Company or DevCo. from consummating the transactions contemplated in
Exhibit A, including any action which may materially limit the ability of
Parent, the Company or DevCo. to consummate the transactions contemplated
thereby as a result of any regulatory concerns.
(d) As promptly as practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the Form 10. The
Company shall use its best reasonable efforts to have the Form 10 declared
effective under the Exchange Act as promptly as practicable after such filing
and to cause the Form 10 to be mailed to its stockholders as promptly as
practicable after the Form 10 is declared effective.
(e) The Company shall pay all expenses arising from or
incidental to the DevCo. Distribution (the "DevCo. Expenses"); provided,
--------
however, that Parent shall pay the DevCo. Expenses if this Agreement is
-------
terminated by Parent and the Company pursuant to Section 7.1(a) or by either
Parent or the Company pursuant to Section 7.1(b).
SECTION 5.14 Rights Agreement. The Company shall enter into an amendment
----------------
to the Rights Agreement, which will provide, among other things, for purposes:
(i) of the definitions of "Acquiring Person" and "Beneficial Owner" and (ii) of
the definitions of "Affiliate" of an "Acquiring Person":
(i) as a result of entering into this Agreement and the
Voting Agreement, that Parent, its subsidiaries (including Merger Sub) and
its affiliates shall not be deemed to be an "Affiliate" under the Rights
Agreement;
(ii) as a result of entering into this Agreement and the
Voting Agreement, that Parent and Merger Sub shall not be deemed to be
"Beneficial Owners" (as such term is used in the Rights Agreement) of
shares of Company Common Stock owned by Parent, its subsidiaries and its
affiliates; and
(iii) as a result of entering into this Agreement and the
Voting Agreement, that Parent and Merger Sub shall not be deemed to be an
"Acquiring Person" (as such term is used in the Rights Agreement).
Such amendment shall provide that such amended provisions of the
Rights Agreement cannot be further amended and the Rights cannot be redeemed
without the prior written consent of Parent.
57
SECTION 5.15 Standstill Agreements; Confidentiality Agreements. During
-------------------------------------------------
the period from the date of this Agreement through the Effective Time, the
Company shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
subsidiaries is a party. During such period, the Company shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having jurisdiction.
SECTION 5.16 Conveyance Taxes. Parent and the Company shall cooperate
----------------
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes which become payable
in connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. The Company
shall pay on behalf of its stockholders, without deduction or withholding from
any amount payable to the holders of Company Common Stock, any such taxes or
fees imposed by any Governmental Entity which become payable in connection with
the transactions contemplated by this Agreement for which such stockholders are
primarily liable and in no event shall Parent pay such amounts.
SECTION 5.17 Employee Benefits.
-----------------
(a) Parent shall, or shall cause the Surviving Corporation and
its subsidiaries to, give those employees who are, as of the Closing, employed
by the Company and its subsidiaries (the "Continuing Employees") full credit for
purposes of eligibility and vesting under any employee benefit plans or
arrangements maintained by Parent, the Surviving Corporation or any subsidiary
of Parent or the Surviving Corporation for such Continuing Employees' service
with the Company or any subsidiary of the Company to the same extent recognized
by the Company for similar purposes immediately prior to the Effective Time.
Parent shall, or shall cause the Surviving Corporation and its subsidiaries to,
waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Continuing Employees under any welfare plan that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Continuing Employees immediately prior to the Effective Time,
and provide credit under any such welfare plan for any copayments, deductibles
and out-of-pocket expenditures for the remainder of the coverage period during
which any transfer of coverage occurs.
(b) From and after the Effective Time, Parent shall, and shall
cause the Surviving Corporation to, honor in accordance with the terms thereof,
without offset, deduction, counterclaim, interruption or deferment (other than
withholdings under applicable tax law) under
58
all Plans and administrative practices adopted thereunder, including all
employment, change in control, severance, termination, consulting and unfunded
retirement or benefit agreements or arrangements that have been provided or made
available to Parent.
SECTION 5.18 Resignation and Appointment of the Directors of the
---------------------------------------------------
Trustee. The Company shall take action to obtain the resignations of ▇▇▇▇▇
-------
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇ (the "Company Directors") from the board of directors of
the Trustee (the "Trustee Board") and to have persons chosen by Parent (the
"Parent Directors") appointed to the Trustee Board immediately prior to the
Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver by each of Parent and the Company on or prior to the
Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval
--------------------
shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
-------
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) Governmental and Regulatory Approvals. Other than the
-------------------------------------
filing provided for under Section 1.3 and the waiting period pursuant to the HSR
Act (which is addressed in Section 6.1(b)), (i) all consents, approvals and
actions of, filings with and notices to any Governmental Entity required by the
Company, Parent or any of their subsidiaries to consummate the Merger and the
other transactions contemplated hereby, the failure of which to be obtained or
made is reasonably expected to have a material adverse effect on Parent and its
subsidiaries and prospective subsidiaries, taken as a whole, shall have been
obtained or made and (ii) all the registrations and amendments thereto set forth
on Section 6.1(c) of the Company Disclosure Schedule shall have been made and
the related consents, approvals or exemptions under state timeshare registration
laws or, in states that do not have specific timeshare laws, related real estate
or securities registration laws, shall have been obtained, other than the
registrations and amendments thereto set forth on Section 6.1(c) of the Company
Disclosure Schedule that are (A) marked with an asterisk and (B) which the
failure to obtain the related consent, approval or exemption would not be
reasonably expected to result in a material business impact on the Company.
(d) Third Party Consents. Parent shall have been furnished with
--------------------
evidence satisfactory to it that the Company has obtained the consents of third
parties to any agreement or instrument the absence of which would result in the
representations set forth in
59
Section 3.1(d) hereof being untrue (disregarding any disclosure relating thereto
in the Company Disclosure Schedule).
(e) No Injunctions or Restraints. No judgment, order, decree,
----------------------------
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the Merger,
or (ii) which otherwise is reasonably likely to have a material adverse effect
on the Company or Parent, as applicable; provided, however, that each of the
-------- -------
parties shall have used its best efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(f) Form S-4. The Form S-4 shall have become effective under
--------
the Securities Act and no stop order or proceedings seeking a stop order shall
have been entered or be pending by the SEC.
(g) Stock Exchange Listing. The shares of Parent Common Stock
----------------------
issuable to the Company's stockholders (i) as contemplated by Article II or (ii)
upon exercise of the Adjusted Options pursuant to Section 5.6 shall have been
approved for listing on the NYSE, subject to official notice of issuance.
SECTION 6.2 Conditions to Obligations of Parent. The obligation of
-----------------------------------
Parent to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth herein (i) that are qualified as to
materiality shall be true and correct at and as of the Closing Date, as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date), and (ii) that are not qualified as to
materiality shall be true and correct at and as of the Closing Date, as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date) in all material respects.
(b) Performance of Obligations of the Company. The Company shall
-----------------------------------------
have performed in all material respects all obligations required to be performed
by it at or prior to the Closing Date under this Agreement and in connection
with the DevCo. Distribution.
(c) Regulatory Condition. No condition or requirement has been
--------------------
imposed by one or more Governmental Entities in connection with any required
approval by them of the Merger relating to the transactions contemplated
hereunder which, either alone or together with all such other conditions or
requirements requires the Company or its subsidiaries to be operated in a manner
which is materially different from industry standards in effect or which is
different from the manner in which the Company currently conducts its operations
on the date hereof and which materially adversely affects the business,
financial condition or results
60
of operations or prospects of the Company and its subsidiaries, taken as a
whole, or their businesses, other than their commercial finance businesses,
taken as a whole.
(d) Resignation and Appointment of the Directors of the Trustee.
-----------------------------------------------------------
The Company shall have obtained the resignations of the Company Directors from
the Trustee Board and shall have appointed the Parent Directors to the Trustee
Board, subject to consummation of the Merger and acceptance of such appointment.
SECTION 6.3 Conditions to Obligations of the Company. The obligation of
----------------------------------------
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent set forth herein (i) that are qualified as to materiality
shall be true and correct at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in which
case as of such date), and (ii) that are not qualified as to materiality shall
be true and correct at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which case
as of such date) in all material respects.
(b) Performance of Obligations of Parent. Parent shall have
------------------------------------
performed in all material respects all obligations required to be performed by
it at or prior to the Closing Date under this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, and whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by March
31, 2001, provided, however, that the right to terminate this Agreement
-------- -------
pursuant to this Section 7.1(b) shall not be available to any party whose
failure to perform any of its obligations under this Agreement results in
the failure of the Merger to be consummated by such time; provided,
--------
further, that such a date may be extended for not more than 30 days, by
-------
either party, by written notice to the (x) other party if the Merger shall
not have been consummated solely as a result of the condition set forth in
Section 6.1(c) failing to have been satisfied and the
61
extending party reasonably believes that the relevant approvals will be
obtained during such extension period or (y) the delivery by Parent of the
Closing Extension Notice;
(ii) if the Company Stockholder Approval shall not have
been obtained at the Company Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth
in Section 6.1(d) shall be in effect and shall have become final and
nonappealable; provided, that the party seeking to terminate this Agreement
--------
pursuant to this Section 7.1(b)(iii) shall have used best efforts to
prevent the entry of and to remove such Restraint;
(c) by Parent, if the Company shall have failed to make the
Company Recommendation in the Proxy Statement or effected a Change in the
Company Recommendation (or resolved to take any such action), whether or not
permitted by the terms hereof, or shall have breached its obligations under this
Agreement by reason of a failure to call or convene the Company Stockholders
Meeting in accordance with Section 5.1(d);
(d) by the Company in accordance with Section 4.3(b); provided,
--------
that in order for the termination of this Agreement pursuant to this paragraph
(d) to be deemed effective, the Company shall have complied with all provisions
of Section 4.3, including the notice provisions therein, and with applicable
requirements, including the payment of the fee referred to in paragraph (b)(iv)
of Section 5.8; or
The party desiring to terminate this Agreement pursuant to clause (b),
(c) or (d) of this Section 7.1 shall give written notice of such termination to
the other party in accordance with Section 8.2, specifying the provision hereof
pursuant to which such termination is effected.
SECTION 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company, other than the provisions of
Section 3.1(z), Section 3.2(f), the last sentence of Section 5.4(a), Section
5.8, this Section 7.2 and Article VIII, which provisions survive such
termination, provided, however, that nothing herein (including the payment of
-------- -------
any amounts pursuant to Section 5.8 hereof) shall relieve any party from any
liability for any willful or material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at
---------
any time before or after the Company Stockholder Approval; provided, however,
-------- -------
that after such approval, there shall not be made any amendment that by law
requires further approval by the
62
stockholders of the Company without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time,
-----------------
a party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.5 Procedure for Termination. A termination of this Agreement
-------------------------
pursuant to Section 7.1 shall, in order to be effective, require, in the case of
Parent or the Company, action by its Board of Directors.
ARTICLE VII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to
Cendant Corporation
Six ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
63
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇
(b) if to the Company, to
Fairfield Communities, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
#▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
SECTION 8.3 Definitions. For purposes of this Agreement:
-----------
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person, where
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a person, whether through
the ownership of voting securities, by contract, as trustee or executor, or
otherwise; provided, that in the case of the Company, the Trust shall be deemed
--------
an affiliate.
(b) "material adverse change" or "material adverse effect"
means, when used in connection with the Company, Parent, an Association, the
Trust or the Trustee, any change, effect, event, occurrence or state of facts
that is, or would reasonably be expected to be, materially adverse to the
business, financial condition or results of operations or prospects of such
party and its subsidiaries taken as a whole.
(c) "material business impact" means any change, effect, event,
occurrence or state of facts that, individually or in the aggregate with any
other change, effect,
64
event, occurrence or state of facts, is, or is reasonably likely to constitute
or result in (i) loss (including a loss of a benefit or right) or damage that is
material to the Company and its subsidiaries taken as a whole, (ii) impairment
of or interference in the ability of the Company or any of its subsidiaries to
conduct or operate their businesses as conducted or operated prior to the date
hereof, other than an impairment or interference which is not significant to the
Company and its subsidiaries taken as a whole, (iii) detriment to the Company's
good standing or reputation, (iv) an increase in payments due to any employee in
violation of Section 4.1(xiii) or Section 4.1(xiv) or (v) a material delay in
the transactions contemplated hereby.
(d) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
(f) "knowledge" of any person which is not an individual means
the actual knowledge of such person's executive officers or directors, after due
reasonable investigation.
(g) "VOI Laws" means the applicable provisions of (i) the
Consumer Credit Protection Act; (ii) Regulation Z of the Federal Reserve Board;
(iii) the Equal Credit Opportunity Act; (iv) Regulation B of the Federal Reserve
Board; (v) the Federal Trade Commission's 3-day cooling-off Rule for Door-to-
Door Sales; (vi) Section 5 of the Federal Trade Commission Act; (vii) the
Interstate Land Sales Full Disclosure Act; (viii) the federal postal laws; (ix)
usury laws; (x) trade practices, home and telephone solicitation, sweepstakes,
anti-lottery and consumer credit and protection laws; (xi) real estate sales
licensing, disclosure, reporting condominium and timeshare and escrow laws;
(xii) the Americans With Disabilities Act and related accessibility guidelines;
(xiii) the Real Estate Settlement Procedures Act; (xiv) the Truth-in-Lending
Act; (xv) the Fair Housing Act; (xvi) Regulation X; (xvii) Civil Rights Act of
1964 and 1968; (xviii) state condominium timeshare, and seller of travel laws,
(xix) Federal Fair Debt Collection Practices Act and applicable state debt
collection laws and (xx) any state laws concerning construction, escrow or
surety bonds.
SECTION 8.4 Interpretation. When a reference is made in this
--------------
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this
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Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means, in
the case of any agreement or instrument, such agreement or instrument as from
time to time amended, modified or supplemented, including by waiver or consent
and, in the case of statutes, such statutes as in effect on the date of this
Agreement. References to a person are also to its permitted successors and
assigns. The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute or
law shall be deemed to also refer to any amendments thereto and all rules and
regulations promulgated thereunder, unless the context requires otherwise.
SECTION 8.5 Counterparts. This Agreement may be executed in one or
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more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties. A facsimile copy of a
signature page shall be deemed to be an original signature page.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
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Agreement (including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Section 5.7, are not intended to confer upon any person other than
the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
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construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
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interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, provided, however, that Parent may
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assign Merger Sub's rights and obligations, in whole or in part, under this
Agreement to any other newly-formed subsidiary of Parent with no assets or
liabilities, which is wholly owned by Parent or by Parent's wholly-owned
subsidiary, as the case may be, in which event the assignee shall be considered
Merger Sub for purposes of this Agreement. Any assignment in violation of the
preceding sentence shall be void. Subject to the
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preceding two sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of the parties hereto
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irrevocably agrees that any action, suit, claim or other legal proceeding with
respect to this Agreement or in respect of the transactions contemplated hereby
brought by any other party hereto or its successors or assigns shall be brought
and determined in any state or federal court located in the State of Delaware or
any appeals courts thereof (the "Delaware Courts"), and each of the parties
hereto irrevocably submits with regard to any such proceeding for itself and in
respect to its property, generally and unconditionally, to the exclusive
jurisdiction of the Delaware Courts. Each of the parties hereto irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the Delaware
Courts for any reason, (b) that it or its property is exempt or immune from
jurisdiction of any Delaware Court or from any legal process commenced in any
Delaware Court (whether through service of notice, attachment before judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (c) to the fullest extent permitted by applicable law, that (i) the
proceeding in any Delaware Court is brought in an inconvenient forum, (ii) the
venue of such proceeding is improper or (iii) this Agreement, or the subject
matter hereof, may not be enforced in or by a Delaware Court. Notwithstanding
the foregoing, each of the parties hereto agrees that the other party shall have
the right to bring any action or proceeding for enforcement of a judgment
entered by the Delaware Courts in any other court or jurisdiction.
SECTION 8.10 Headings. The headings contained in this Agreement
--------
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.12 Enforcement. The parties agree that irreparable damage
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would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CENDANT CORPORATION.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice Chairman, General Counsel and
Assistant Secretary
FAIRFIELD COMMUNITIES, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Executive Officer
GRAND SLAM ACQUISITION CORP.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice president and Assistant
Secretary
